UCTT - Earnings call transcript Q3 2019 | Ultra Clean Holdings, Inc.

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Operator

Good day, and welcome to the Ultra Clean Third Quarter 2019 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

At this time, I would like to turn the conference over to Rhonda Bennetto of Investor Relations. Please go ahead.

Rhonda Bennetto

Thank you, operator. thank joining and everyone, afternoon, you us. for Good Scholhamer, Officer; and me today Savage, Executive Jim are Officer. With Sheri Chief Chief Financial begin up the remarks prepared for questions. will Financial with business call and will Review open Sheri with follow about we'll then and that Jim the some

Today's forward-looking are statements subject uncertainties. risks and call contains that to

of assume on For please the to SEC obligation refer more and estimates, them call. our statements projections All after we filings. forward-looking risk public today, assumptions to update as information, no are factors based and disclosure this in

our Discussion today's a to press reconciliation results non-GAAP of basis. GAAP financial on will be of in release. non-GAAP presented can found be A

to with over the call Jim? And like to I that, turn would Jim.

Jim Scholhamer

for and third XXXX joining us Thank and webcast. you, Rhonda, for conference quarter you good call Thank afternoon, our everyone.

it going of questions. I'm in on our commentary. First, results financial highlight semiconductor that, call and few we the will open industry to current to that up that for will expand Sheri how the services businesses. I'll relates with view our After follow products her a and

quarter end third on healthy further our improvement balance. Our strong and and enabling very cash business from inventory our enabled cash reduce revenue resulting Internal per reduction of earnings share. guidance leverage debt a the and reach flow in us to to improve divisions, operations showed top both us in

advantage to of are products wafer equipment and some invest and verified devices, elements fab the in that are continue growth. starting implement UCT upside. We systems leading commentary marketing and distinct to are services. take recovery processes generation industry strategically next peer the dynamics competitive customer Memory the internal with by analysis a inventory for operations, sentiment to optimize has shifted recovery support Current our Recently, where edge in consistent and stabilizing our there has and signs suggests to shape. spending new

makes to we which market. of business and accelerate. ongoing resumes, in recovery UCT's the by the These factors up strength shows expect around improvement see foundry logic, spending supported WFE memory in XX% When

with shift outsourcing We wins division. competence to our project for product adding during continue level our to accounts in-sourcing see from overall as the to several cycle, customers

an complex space, more in are The are in Capitalizing further leading modest even advancements markets wireless, value to high supporting become of needs intelligence cloud way. core supporting role we chain. be as the notes more of in a artificial play devices customers added more to the on industry a technology our enables choice. and Things seeing functionality race in partner are our technology As performance we to advance the UCT computing, Internet roadmap, us limited influential and momentum, the XG solidifying

end for positioned attractive overall With are heading into markets and upbeat value more sentiment well capitalize XXXX, to the with on in multiple creation levers we constructive opportunities ahead.

saw reductions inventory after align. fourth recovery anticipate business off increased slight the trend the memory producers services supply a Our quarter We quarter. implemented coming in this through as demand second and continuing utilization the

rises, cleaning investment analytical IDM even customers. critical our to As more and to equipment wafer OEM will and accelerate starts services capital WFE become and

Our and growth transform offerings for to great our highly and continue financial a technical service provide will platform profile. unique

industry base we This our opportunistic global will as in rebounds. ensure our With and and cash a match term to we and are successful preparation company manufacturing cost market and sheet to during healthy able strong expenditures initiatives people on of the are demand in we strengthening focused position on integration the remain reduction adapting for a capacities capital as track position by Our slowdown. longer making better a growth. and have stronger customer in investments balance been the positioned address capabilities needs

months few are cycle that industry we summary, the a is on ago were just recovery. road has than the In more to and optimistic the bottomed we

and is forward goal thank to our on want serve. our next updating we for you markets employees to look to and call. support, I growth outpace their the maintain I continued sustainable and Our our shareholders

over that, call I'll to With Sheri. the turn

Sheri Savage

Thanks Thanks, Jim. over prior to I for the joining In top down $XXX.X our numbers third And referring We us. good well of discussion, non-GAAP total be revenue in of the end at but quarter afternoon, million will the guidance. everyone. today's only. generating executed slightly quarter,

contributed million the million. $XX.X from and quarter. generated revenue $XXX Non-semiconductor prior product includes or down division Our our million X.X% division display slightly which $XX.X accounted revenue, for services of

labor the previous in reductions margin from ongoing gross to total with XX.X%, together up mix, quarter. material costs brought in Favorable XX.X%

services XX.X%, margin products was gross XX.X%. and Our with

customer before, volume shared influenced by and initiatives. timing we've product and concentration, of margins can our mix, be geography, restructuring the As

you see to expect variances So should quarter. quarter to

quarter. Investing people and in XX.X SAP million resulted upturn industry increasing optimization operating XX.X in for the and via last compared to the manufacturing implementation preparation to million expenses

quarter. percentage versus last of a OpEx was XX.X% revenue XX.X% As

for X.X% quarter $X.XX margin X.X% This compared was in third Total to shares X.X%. last $X.XX from X.X derived on for and was the operating income Based million from XX earnings quarter compares quarter. products the outstanding of to contributed net Margin quarter. $X.X million share contributed the million. and previous X.X% was services per

$X.XX earnings non-GAAP in XXXX, have our compensation which As the and plan would the we reconciliation, do we share based first per excluded been for quarter quarter. share of to our

XX% movement. quarter along profits due higher increase tax Our region a was rate tax quarter, rate to compared exchange in for XX.X with to last the

demand, we we Turning would projecting revolving $X.XX based was between $XXX to the are $X.XX. quarter in loan. and range for Along revenue million on XX stock payments we made be EPS If million $XX and additional long increased a to the fourth and Based million on on million we scheduled loan from the compensation our ended debt, total $X.XX exclude and term quarter with $XXX of between $X.XX. EPS the payments, loan million cash of million. in our and sheet, $XXX.X with operations cash Cash balance $XX.X equivalents.

to questions. over operator call that, the for the to with I'd turn And like

Thank you.

We Capital ahead. Hallum Group, Schwab will And come our begin go session. today [Operator the from will of first please now Craig question-and-answer instructions] question Christian

Christian Schwab

Great. Thanks quarter this for guidance. in taking question. Great start my

we're As to the to I can Quantum you're know, expect And one seeing time. only what there? few a But looking what business? about you'd in talk over you quarter looking quarters at next you're the

Jim Scholhamer

started Yeah, into the that started increase. Christian. then begin DRAM, see as by to drop to quarter. And we we And the Yeah, bottom business, had driven saw the out expected, mostly especially as in we in that wafer continue Korea. to end recover to third

as the return when to lag the can't goes back to return so SSB business fourth levels And equipment always will depend that So the just And side. level -- I we're see well. we year I -- the that the would little going the see going on between improve, to obviously, lAg would a a in still to what hope of wafer expecting to to project, or in had there's it's quarter on base be think the in growth as start's year, SPS really starts. to quarter, year. we improvement continued of through next behind then the it's in the that wafer back installed wafer first we starts and expect when growth next the taken bit continue But obviously more equipment

Christian Schwab

recovery, least conversations of XXXX. one the In side. them more to that leading As fair? them at customers, optimistic of your like initial Is seeing talking on signs it recovery, NAND you're with about in a you're sounds memory probably potential your sometime

Jim Scholhamer

memory life still is of question. NAND that seeing signs in there of very that the be we're hit. Yeah, we an the I it's still improvement in when think question timing will on confident and memory. feeling but a Yeah, Obviously spending, DRAM expect part, DRAM will side.

Christian Schwab

you. Great. No Thank other questions.

Jim Scholhamer

Thanks, Christian.

Operator

next today will our go And Patrick Stifel. come from Ho ahead. question of Please

Patrick Ho

first congrats you a going perspective, quarter. a with? emerging how things, or basis, size see of customers on how that product there from may of your real you much, Thank inventories in a you both a and guess that manage broader of the deal on believe or sentiment they a I time you side maybe is their lag customers, from can change much just and and still their or recovery outlooks given you some very forward leading discuss the off nice on their Jim, one

Jim Scholhamer

the factor the Yeah, answer. shipping I to but A pointed bridging between you is difficult couple the and time. there think is factors. there I bigger cases, of question in I between OEM. in that's the upturn. some of and us mean, OEM One, eroding there's us believe acceleration is inventory, a of delta special sometimes still between kind The rate inventory always quickly left out

cases, revenues has to we customer, in which ship we pretty our Sometimes factory customers' well. other which line a our up directly In their then case lag. to ship

shift relatively that effect that, I us in but growth it the a obviously, to has the quarter think piece the as But don't a I still and there's been, small. often the think pieces, So there's it's well. of think revenue revenue, quarter size but due nearly the inventory to OEM between I it's

Patrick Ho

on share my question businesses a in tailwind gains those getting your may recovery of basis. an the machining qualitative the How give starts you're helpful. some expect things, the extra a to do growth that's looking average Great, terms opportunity XXXX Wellman of it's or but you market, and guess contribute? of you're on how follow And sides potential that maybe Maybe the that as at whether I talked kind How other quantitative an you look to of above you up about do side you've as not at? in in market emerge? some of

Jim Scholhamer

share, with Yeah, of step There's functioning point, acquisition in a well at good in market we lot improvement this elements And market I of Wellman think the pretty we're share made penetrated those a accounts. side, in DMS. question. the the

shares assumption. holding is I So a of kind those definitely think reasonable

grow with So the -- Wellman market. the will grow I overall think side should along that

a outsourcing have more or steadily kind projects back a kind through the the customer even seen OEMs penetrations some out more were continuing downturn of and -- bit. aggressive Another of more pulled little and we've a mixed are and bag, of flat others

or business push come kind currently we think we're of seeing OEMs. are towards definitely doing I they DRAM the all mixed than when again, and shift customers the will of So outsourcing in we outsourcing the more see but to either start capacities see OEM a the bag,

Patrick Ho

Great, thank very you much.

Jim Scholhamer

Patrick. Thanks,

Operator

will [Operator Cowen from Instructions] Our next Karl go ahead. Please today and of Ackerman come question Company.

Unidentified Analyst

if Sheri. NAND model Sam wondering on makers? memory as Hi, Rifle thoughts your means for XD about other memory Chinese to what This I Karl. in well layer ramping for [ph] Jim. XXXX as was and that you could indigenous XXX stick production and Hi discuss you and

Jim Scholhamer

XD the NAND Sam. to That's see we hi good of Yeah, recovery a Yeah, first. starting thing. we're -- some hit seeing the are

you're moving you're as think of to the XXX. seeing I larger several moments players of aware several

the of the to only you're to If also effect, us referring obviously more the XXX a going out the third process achieve a it's that the that equipment has XX% on volume adding fact but not kind roughly nanometer. effect double chambers of that

NAND good is that recovery definitely expect the we a us. for So thing

I NAND. I'm been know, you've think following have you of a larger especially announcements from But sure and in lot them. the there been players

of in who the big who that by outside some it's still three obviously are I Chinese think are I So bit, little players being lagging players smaller led think area. a of the

Unidentified Analyst

you Do Chinese do CapEx have you front that being linear yet? other more opinion Definitely for loaded on anything that then than helpful investment. XXXX, an or loaded, back in and or see

Jim Scholhamer

If you’re obviously… in speaking about NAND general,

Unidentified Analyst

NAND. Yes, sure,

Jim Scholhamer

an transition in 'XX. But really Yeah expect be make XX They're that us their the not ramping think have looking a for jump YMCC impact. [ph] later that their think the layers to impact XX XXXX. to in I year We of XXXX. we they're in much still in would

Unidentified Analyst

then more And about QGT. -- great. from Understood, one

diversifies acquisition it the IDNs. So we Quantum one the in in benefits main of your customer the see base that is that

in And Moving market and your how your sold you customer your systems visibility into this would your today base enrollment delivery to gas front XXXX, looking are expand suppliers? versus in to businesses end how team further? you clarify

Jim Scholhamer

we near It's like to of part penetration account a first the which so long on TSMC southern Taiwan, But consolidated and one pretty penetrating first new decent and in missed players, there well not repeat and in Taiwan, out to opportunity we that. ask share, a put the so revenue not Tainan a have then into not a Yeah, because been Intel there lot we that I there's we that IDM in I'll so in but TSMC, has lower I'll it's we're the level have have expanding ago, from and obviously, improve are as see handle but the there. our the Samsung. you that fab second lot accounts have into expanding question

opportunity with think I So we the see share expanding our biggest TSMC. is

if second you repeat that Hopefully first answered Sam. the could part, the part again,

Unidentified Analyst

looking at Actually, notes. my

touched I think you it. upon

you it that's me. very for So much. Thank

Jim Scholhamer

Thank you.

Operator

Our from Dick of next Please question will Ryan ahead. come Dougherty. go

Dick Ryan

we Sheri, taxes view going forward? Thank you. how should Hey,

Sheri Savage

Yeah, similar this be for to it QX, I QX would point. assume at

the We assume would have into it the lots come I year, for that XXXX the from but rest tax initiatives level. would QX of be play will for flat of

Dick Ryan

Okay.

and Okay, $XX and QX? in $XX that to savings so at the how million. a looking far still rate QX that are million cost you Is and reasonable

Sheri Savage

the bit mix quarter, that's an going beginnings of one, Similar product to on on. as well Yes, the that. result our we're margin saw a of the gross little we that as were you as starting quarter-over-quarter our the last increase in innings to and initial of both see showed initiatives

think see of in Going and more that starting QX. you'll I forward, QX

kind So now. of lot factors play. But right there's lot that's at where we're of of in a

Dick Ryan

Okay. late Hey, ins for quarter Jim QX? the pull churn on kind calls couple -- did churn, you how look what of talked last about

Jim Scholhamer

mean, say or it saw was market pull in we building, in drop but churn I not market a more situation of a and there's pull Yes, I ins lot we what -- less building demand of them a are bloopers of a up always would call that the industry a in. were less of

we forecasted to started we high of of quarter to started And see as went revenue I end our not to think the so and from other. stream, what strength shifting order of one the just our the to we see the

Dick Ryan

what for doing your specifics opportunities, comments you're and Okay, on growth investing you can there? any provide

Jim Scholhamer

of some obviously are reduced mean, cost consolidated done sites. reductions footprint I we've that structural Yes, and the we've as

ramp made those as the continue cost hits so never right reductions, spots we've those the we've And doesn't and other evenly. it seen

see we others. So some of earlier than sites our as taking off

see back going the added capability to we to as we've some climb. So revenues continue are

continue mostly. more we're form people add to So in capacity of the

Dick Ryan

Okay. All right, thank you.

Operator

at I'd remarks. for question-and-answer session And like our to conclude conference this this any the Scholhamer over closing turn will time. back Jim to

Jim Scholhamer

Yes, forward with third you we speaking and for quarter. thank call quarter our look conference to next you attending

Operator

you The conference presentation for disconnect has now Thank attending you lines. today's your now concluded. and may

Ultra Clean (UCTT) 30 Oct 192019 Q3 Earnings call transcript