ICHR - Earnings call transcript Q4 2017

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Operator

Good day, ladies and gentlemen, and welcome to the Ichor Systems Fourth Quarter and Full Year Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference, Claire McAdams, Investor Relations Council for Ichor. ahead. go Please

Claire McAdams

afternoon call, Good and you joining this for Ichor’s Thank will and be conference afternoon. conclude we which shortly telephonically available today’s website you. after thank for on replay

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

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

certain measures. be to release conference press this and Additionally, of call we GAAP during measures earnings non-GAAP a comparable financial non-GAAP most financial financial our their reconciliation these measures contains will providing

Chief we the and begin On CEO, financials Tom? Andreson. for open the first After Jeff the Jeff remarks, me Rohrs. to over go of then Ichor’s quarter will prepared quarter now a today Tom outlook fourth and XXXX. the for will call and the our the questions. review turn call over the line I’ll will are of Financial with Tom with Chairman Officer, Rohrs; Tom business and

Tom Rohrs

per year-over-year growth. growth of conference all our sequential The another new fourth was of quarter was fourth you call. Xth The straight for Systems, and thank for our quarter joining quarter revenue Ichor for our and XXXX earnings Xth the quarter XXXX revenue for Claire, both growth of records consecutive quarter revenue share. setting us and QX you, today Thank strong

total core of a from reflects in of increase X% our revenues shipments of Our key XX% and QX trends were QX XX% revenue from our Overall is for which with business, year. last customers. $XXX up million line up

year, growth full XX% were year-over-year margins as growth with evident to of business. net than doubled over our revenues, core our This XX%. revenues increase for with rate Consistent grow about XXXX growth three-year earnings objective our growth XX%, our more and stated is earnings in the XX% EPS compound times For earnings XX% our with revenues is growth. faster up in our an expanding Since our revenue trend. net longer-term compound of three-year X and revenues XXXX, in than rate

growth were IPO results objectives XXXX laid profitability our a well demonstrate out ago against and and executed all these clearly of of that year strategies. our during have we All the

With spending expected is in strong multiple patterning led equipment to to grew semiconductor of deposition consistent tools, breakthrough of expertise Our and our performance in systems X% Since by fluid call, what forecast benefitting customers’ XXXX XD be The by incremental the the expected from segment. equipment very growth from differentially on processes tools differentiated this focus And tools, leading from are these fab trends used XX%, industry We expressed XXXX we These XX% and etch up dynamics for gas XXXX future. memory be our systems to today liquid result towards skill and which in delivery we last tools. and liquid levels. delivery as a CMP are range improved up spending wafer lithography ideas wafer have have the and our do we the NAND, fab our and and again. FinFETS. are well. a gas with believe set once XXXX,

delivery this our again to business logic proportionally device categories. good our leads that for news three are which fluid major amongst party, However, is our me is since foundry believe joining both bookings business the and weighted quarter these

– strong our me, business. excuse spending in to strong addition tailwinds In for continuing providing our addition environment continued to spending

our We are believe that growth strategies several the Ichor earnings also to continue with executing drive drivers that rate us faster revenue than and well industry. encourage against specific can at to growth

delivery IPO continually strategy to existing roadshow position we chemical first The This and communicate we at expanded taken customers. private year companies. share have at from our liquid was grow businesses our as have smaller our

last our was more second to grew by and year, position XXX% strategy The largest our revenues expand And fourth at cap third than we customers. semi new at customers.

our to the our had we market would acquisition. private we financial to long-term buy our in pointed expand capabilities good systems to towards profitability opportunities out of Third strategy IPO, that delivery and which through fluid time target At was move companies, served our our model. add

Cal-Weld led to long-term new has acquisition capabilities, opportunities acquisitions combined by been the improved also and incremental recent our with Talon gross Innovations our strategy to quarter. gas publish our acquisitions strongly in last market our business. key and Cal-Weld share Our model Both that acquisitions up both our of profitability. our in supported financial of footprint markets to for bring accretive working. an revenue delivery, operating are increased and our us were core is incremental and accretive is to and improvements These expand Ichor earnings business These open and margin our evidence Talon acquisitions margin customers.

progress as margin against over We the make improved have in gross started our fourth quarter already this to model XX%.

gross to deliver We margin expect XXXX. to incremental throughout improvements

meaningful significant increase product largest new consistent as this ground Andreson liquid we our applications with delivery earlier served customers. been we as and results added module, the we our our to capabilities, to as as our win COO; to the such CFO; calls, a our that organization. Last because was we opportunity. This product after XXXX, and and will capacity, markets. business previously delivering have to solutions, expectation a strategy we All proprietary Jeff new strategy Haugen quarter, our busy Member. new to with products, growth adding achieve contribution our two have and customer. delivery our XXXX. us business and with I A-team offering help liquid strength adding Kevin fourth market to prior Marc IP future with additions one capacity of Along will base and our added Board added incremental own these key make in Canty on opportunities support hit a our recent made module in plans. And my go contributions our the offerings expand our running, we expand is commentary with revenues the proprietary three Our earnings to beyond new customers this can customer It Consistent

profitability. year-over-year We’re with gross operating extremely well positioned deliver to in good margins is in outperformance a to and the expansions revenue start. very XXXX, both off continued growth XXXX and

As quarter-on-quarter to spending, annual report we XXXX will you with million saw modules, $XXX that our business do This see expected. indicating capital our goes two into a million in This XXXX. where from to am a operations details for pleased liquid our add revenue of growth showing of delivery March are Cal-Weld. areas without spending machining, our and to growth revenues, and am our in that, are play revenue In momentum to Talon, optimistic core business of while forecasted more note result It continuing financial of $XXX trends will capacity. January, Jeff and QX includes I’ll XXXX systems. is weldments, and the times preannouncement provide saying to the for be of an QX. is turn in full not gas I And and also fat, as and that positive delivery of quarter. very we million of our strong capital consistent XX% that strong very that while quarter in shipment QX $XXX capacity current increase all to It core continuing our call results we including to plans the great inorganic both out with outlook. customers, going our our about I precision organic important strategies dive looks we in pipeline over incremental

Jeff Andreson

Tom. you, Thank

Before the impact exclude you measures intangible metrics identify from P&L the of the today nonrecurring quarter compensation I Fourth amortization are I’d the These discussed share-based of adjustments. items revenues based. acquired XXXX. increase comments, assets, third XX% my unless non-GAAP remind from in charges measures begin discrete GAAP of quarter like to million, and the and I expense, tax measure and fourth $XXX.X were XX% as quarter

quarter. revenue and in acquisition contributed approximately $X Talon the closed Our million in December fourth of to the early

increase Talon. the of and by expenses million driven margin quarter, basis were gross points higher XX QX third Operating of margin Our both the but from included increased and the XX.X% Cal-Weld $XXX,XXX from Talon. $XX.X contribution primarily

the rate for Our quarter X.X%. tax was

expense tax a deferred GAAP impact allowance of to related tax million the Our includes our favorable assets. U.S. our valuation for release $X.X

in we and XX.X% EPS tax law associated was assets the and liabilities. new $X.XX. Additionally, of of change deferred related income the GAAP $XXX,XXX our to recorded tax tax a of with expense Net revenue

on support from and financing $XX.X million sales cash million Singapore, in and provide to million, million cash $XXX.X approximately primarily in additional $XX.X This expansion flow Days comments acquire increase days. and and $XXX guidance. in the Capital million quarter in from of anticipated of I’d $XX XX generated the the totaled to projects a million Talon. our included new to Turning increasing level XXXX. year grew of quarter the $XXX the third $X.X quarter. of to to to million full improved inventory shipments Portland. for and Inventory Talon. XX debt our million the capacity We like expenditures $XX.X some investments at sheet, from balance first higher Malaysia outstanding free was used third of related increased to

to in of expect of share range range revenue million the $XXX per $X.XX earnings with million $X.XX. $XXX the to in We

the a Cal-Weld We primarily result the of acquisition full the fourth by included expect compared in and Talon. fourth $XXX,XXX from margin acquisition. XXX as to as approximately of points, quarter to the quarter expenses basis Operating the effect Talon gross improve

in at quarter, expenses the approximately $XX full of run for Talon we rate acquisition. operating XXXX, our reflecting new Looking the expect increase to million first our the impact to

add on basis to profitability we planning modest increases to The in XX% Interest million an limited quarter. ongoing the Beyond XX% QX, support rate company’s resources we number regional of to incremental the a to level experience. of on depending expect the approximately as increase be to expense of will quarter, we tax will each $X.X are growth. see range

the benefit of the is is maintaining holiday well in are XXXX, this Singapore. through increase as we lower an our benefiting While U.S. That from from XXXX. rates tax as place tax in

in XXXX. to take we X% approximately Our cash be Operator, are tax rate will questions. ready

Operator

Thank will you. [Operator Ho question from The Stifel, come Patrick first of Instructions] Nicolaus.

open. is line Your

Patrick Ho

Thank And you very much, and year. congrats Jeff, welcome Tom great the on aboard.

of Are guess, they helping those in see that from your product you terms added between your The that product first now in process. at integrate the now in being do acquisitions Cal-Weld, solutions have synergies the and that as I companies? potential company both still as it’s terms you you, offerings Talon what I provides? you of question the very made new do right both XXXX revenue interest? in in those I of early develop – well kind are of various how And look know customer But core portfolio the

Tom Rohrs

for acquisitions, first Cal-Weld Tom. you everyone we’ve beyond that we you With to are that the five bought numbers Hey months, revenue are approximately Patrick, it’s we and levels and when seeing hi, Cal-Weld at very Thank now we the them. gave owned much. already originally regard

overachieving couple might mode the a part, we’re two just are companies from of what’s think one our this important I of I supply, So times, Talon But of said and for is, standpoint. that a a already big customers. both revenue and in kind Cal-Weld most have

especially And as in now, so at big growth customer. from demand right seeing Cal-Weld, one the we’re ongoing – that

from outputs Cal-Weld. supply significant big the that to a customer, Talon with who currently there’s a second is However, we real and opportunity both also customer, now and the believe

adding I get both Bottom of both as be can to and you and necessarily So take as advantage will certainly we that. to underserved both think that But big. capacity be they you capacity. want the disproportionately think plan means will point, serve don’t want to over that, that is growing add to time, we at those markets I they twice do revenues of this we line entities we

Patrick Ho

I as terms have these terms that’s tool your supply And record mean, closed the of you’ve as are the to follow-up Great, equipment Talon, we’re parts question well demand and maybe the Jeff just you at with both M&A these helpful. this a my continue deals inventory talking in some got time. for levels kind different that pull? for of what the in chain, as – shipments shipments managing you manage of Now record meet How deal can you do management? of levers about of

Jeff Andreson

you’ll mean, debt flow. Well, and inventory with we’ve inventory, and support in I our in see invested that cash specifically customers levels. and the revenue acquisitions to done we

that Our generation focus be cash stronger having we’re feel inventory pretty capital that on in need. we But that, because our it going to we said put have flow of we firm to going XXXX, than in turns. is maybe XXXX improving some the was some we’re all –

potentially adding additional addition, – In the powder. we’re of process and in debt some dry the we’ve refinancing

Tom Rohrs

when Ajax, companies we we bought these should XXXX, we standalone Patrick, bought which them entities. add, one as in that don’t also thing and I run

to a with their take organizations both either of or folks and our use of some and the Supply that our into ours, supply functions so larger But the play the operations suppliers. put folks complementary doing that, as both where Canty, force that those and will that, in. executive, report R&D And both through opposed in also represented and size through benefits, our places is, their number our allows revenue good instantly in their second organizations had will terms say, not folks of it of same some but Cal-Weld us through Talon VP one, areas going to will as in integrate kind serves we functional materials have in we – Kevin in those being R&D as supplier a their obviously to at of The they organization. with leadership the stream are align it. sales keeping there smaller with size which grow their only by of able report We a success We with kind of, Chain. insofar report the just And individually chain very we’ve almost marketing. at base

Patrick Ho

Thanks lot. and Great. again. helpful That’s congrats a

Tom Rohrs

Patrick. Thanks,

Jeff Andreson

Patrick. Thanks,

Operator

next question The Karl you. Thank Cowen. from is of Ackerman

open. is line Your

Karl Ackerman

Hi Jeff, my congrats you at extend I Ichor. want to and new role your opportunity on to

Jeff Andreson

Thanks.

Karl Ackerman

margins. question for A Tom and on Jeff

the impacting degree that a the we by your exhaustion how I you are your the captured While is think model. I In event, spending. manufacturer, see on flexibility think margins financial to investors understand of a misperceptions of are virtue shock contract some the WC your one stock were to of

you the So from in remind financial completed? any the you are you us there of your labor could have synergy could to guidance whether your acquisitions assumptions additionally, speak flexibility costs? cost And recent

Tom Rohrs

Yes, I’ll answer one that for you.

couple – cost. I to know a of costs times you we mostly continue should we decision, overall. primarily, last So variable refer there – this a year, the things that And are made about a at that have our we’ve

spent automate as volume variable are we et could outside the margins. We Most the which and to cetera. maintain better costs a those per easily with revenue gross know variable. drop haven’t capital can lower we And our the in event, and of processes, costs some part huge of the drops happen, amount proportioned all of

three And But a we in, of we lot the will decision made an we years downward bit is much and of the a have last have in but of there’s that never between to deal God, we bandwagon don’t what definitely necessarily the the cycle have of had a we the exercise the pay in direction. be we functions. probably of growth we Thank of as of that With a haven’t great on in industry the some So a overhead matter that there then new harvest. and to operating or those amount a for yet our price customer-facing so, of not exercised flexibility leader And amongst of little already, because would acquisitions, to that. lot us leverage Most setback those, the those or leverage through in revenue, in to get activities. the we’re says obviously, joined operations. haven’t you of see there decision, another because that’s fact when cases, side. is of but management engineering with some duplication We’ve regard materials regard them are left operations. is are describe still some as some Certainly, in also the for some now, the semiconductor. we synergies

Karl Ackerman

seasonality I months? that should XX about your as a as semi-cap. the for margins, a target recent how margin the toward in we next misnomer model mix XX with months that. these product follow-up, Understood. new appreciate of know over you But linearity sticking richer to drive somewhat I is a I think guess, acquisitions

Jeff Andreson

Hey Karl, it’s Jeff.

put I’d haven’t long-term revenue I’d that the model. business "a they’re pieces really when proportioned look say we at say continue about, maybe the to track. on accretion number We talked we’ve we’ve they’re done other annual" you quarterly smaller slightly and acquisitions as an of the the grow. or on versus our

So say good we those XXX% I’d away. we’re might really not But see progress. right of making

would spending and in say would to We that XXXX. have expect environment the is I provided plans Tom that hit and remains try good models, the those probably year XXXX about that the same. for place I

Karl Ackerman

Understood, thank you.

Operator

is Thank Sidney you. The from Bank. Ho of next Deutsche question

is line Your open.

Sidney Ho

where in quarter-over-quarter. QX, Do year similar more what market strong follow-up color taking Can base you that, your question. expect And had by you from that driving year? as Can this you about QX? pipeline? on is a some into – public XX% customers. for key some dropped pipelines shared heading The seasonality quarter give comments my optimism a business is last your us your fab equipment Thanks wafer to the to talk than just you

Tom Rohrs

Yes. Those Sidney, are hi. questions. good

my in we’re I NAND, seeing I strength to also but alluded this now, that think seeing kind XD DRAM. in in of we’re comments in continued right strength

We’re logic. in on the seeing beginning in foundry coming side strength even and

about business And hitting why seem driving a they business, is terms so a across that our not of categories, from and core it of happy reasons think that. the to device all so standpoint, even like in device but demand – up high we’re one on cylinders, I does more different is I’m our going far I’m the say

of our essence, You both And agnostic service, versus to gas a platforms we’re know by with really customers, their logic foundry. slightly terms for versus as of delivery. in as one being that of memory big every in is we whether result, versus pushed or XD DRAM demand us,

to as play how agnostic those slightly We’re out. things

QX, to quarter to see you QX. now. great. regarding a just to wouldn’t my I nothing last now. third question seasonal wouldn’t well We’re visibility downturn believe QX. would them right see as a in happy going so as regard see right nothing now There’s the in doing right is really there’s be I seasonality, to I downturn I know, that And that your predict But necessarily To that not me there’s year, lead

I And tackle so saying this we’re the to we more second point. getting our the concept visibility at we eye which enter little why I it. good I very half keep QX – And We we’ll doesn’t when out, why think seasonality than about used feel in to, get comfortable the very into is of felt a picture.

first the of we think of our be signal out in more that expect lot part certainly thought balanced they reasonably year customers given last you XXXX to have perhaps I this kind year. However, than of the who a referred to

Sidney Ho

that about supposed other have know that in have, pretty And your each up both then, I I your you every especially is as and market give be of talk you to don’t once past, product well the side the chemical within aggressively market. to question could the year, but a new as quarter, for data ramping kind talked helpful. about deliveries was want gas share you delivery Thanks. hoping I year. That’s the size this us chemical maybe in given

Tom Rohrs

that Sidney, show a road markets also rather especially December, what, openly markets since you in share this, do IPO those grown all on we in tell let’s our the And the – grown. I’ll talked those dramatically. ago have year Yes. of about have

the it’s go And seems getting me numbers head, maybe for and top but better idea we’ll can I to our call. back anything – a more of and we in little so it and tackle of mean, announcing do to to ahead know that us like – a another those ourselves before we off homework publicly,

Sidney Ho

Okay, Thank good. you. sounds

Tom Rohrs

welcome. You’re

Operator

we you. from another Cowen. Ackerman Instructions] Karl Thank question have show [Operator do I of

is line open. Your

Karl Ackerman

had usage. a cash question follow-up simply just I Hi, on just

is like leverage Now before prioritizing maximum Or confidence ratio year? in you the there target Talon acquisitions? asked you you of a busy a you are capital your in at achieve are generation how integration asset? looking about forward way, exceed given found thinking another there Cal-Weld, higher the bolt-on threshold want this is process cash a to going not synergistic And maybe and you to highly would event of separately,

Jeff Andreson

take mean, of I’ll the of leverage level kind maybe the a percentage, comfort mid-Xs Karl, would as our leverage, I question. as multiple a as the think EBITDA. in I be

would And get we so I comfort there. think

right then plans. disciplined answer that’s and well. always been approach of I I’ll of to don’t well. And we’ve so to in but that, we leave very that’s Tom M&A. as the capacity out think how we’re gate, you’re disciplined helpful We it our our about prioritization pretty as pretty – a accretive invest talking

Tom Rohrs

Yes.

our and acquisitive. consider incremental that And not this valuations, fan work will using remain happy using two, dynamics for opportunities very stay environments. we fluid am the the cetera. per dynamics the fluid I this at using to especially equity will big We’ll equity, point. works And one, continue Number to I continue on a well and earnings accretive of what at we et share in think well. from will emphasis with be results. away to point, to gross the we continue we’re which with to margin we’re our our and So number strategy look

really the I’m where internally. that cash generating now position And we’re growth, we with a are of at happy quite ongoing even going to a start bit so

You’ll see that quarter-to-quarter.

million You QX we – of where $XX cash. it definitely generated started in

will definitely monies and prices activities don’t dividends. for in I buybacks point. don’t We foresee use I that – don’t share this at foresee these largely at M&A I

Karl Ackerman

much, appreciate Very it. you. Thank

Tom Rohrs

You’re welcome.

Jeff Andreson

Karl. Thanks,

Operator

Instructions] from question of is Tanaka Capital. [Operator Graham next you. Tanaka And Thank

is open. line Your

Graham Tanaka

Thank you, on another congratulations great quarter.

Just cost ask wanted to about you pressures any may see.

talking capacity. lining about You’re up

think And start I about supply But make you relative wanted had what pricing? about suppliers. sure of cost from Thanks. – internally. I kind your you’re to talking alternative to that pressure you might see

Tom Rohrs

Yes.

We’re overall, and gone growing last than amplitude. would can having with again – this said right quarter considerably similar very, say obviously good growth kinds Having year, shape that, very in absolutely – chain is now I pretty very last better a attempt that rapidly throughout I the market, I is of QX supply in through a and the And entire the during of confidence capacity. great understanding big say, year. also of of think have you added deal folks which a was, capacity as to also supply I very it chain have add lot and quarters thing added

immediately it to put I be through kind So just I expect that use, that our year did was I think and And ready to capacity adds similar capacity be a all that improved certainly I – own in and that. this that in and to we of to year we they’ll the way that something now, place say, much ago. confident good last feel terms from, we’re those to, built of right I add – would that, spoke adds, about very those year would

repeat in So that’s to your regard chain. Could part the second question? supply you the of

Graham Tanaka

to pressures if I pricing? cost that does And anticipating pressures. Thanks. seeing relative your just – how want to any contract understand cost you’re what look or

Tom Rohrs

interesting capacity. higher right in no probably I are strong. are contemplated, time, customers ship working right time, any and discussed, sure always in deliveries relationships be and overall the – and you hard the an of that dates end entire say, real and we and relationship that trying from both sure delivery extraordinarily on with cost OEMs just kind calling hitting the with capacity different. deliveries to cost. within just satisfying to fundamentally emphasis satisfied kept would an are the somehow users the that And are than we’re OEMs’ tell as the all business is ecosystem, and card thing making now, to perspective, I’m on building are There’s ongoing It’s that Yes. we are very with customers the has make now

Graham Tanaka

I just was wondering that other rising be around? any reflected if is Or way prices not might the possibility and it your pricing? component contract in there’s

Tom Rohrs

that I’m to Yes, speak can’t to not precisely. Maybe the that person I best answer question.

Graham Tanaka

Great, thank you.

Tom Rohrs

welcome. You’re

Operator

concludes Thank are [Operator and you. This program, the today’s Instructions] and And great questions there for may today’s time. day. Ladies disconnect. queue this in in at a conference. you participating no you further thank gentlemen, all Everyone, have

Ichor (ICHR) 7 Feb 182017 Q4 Earnings call transcript