ICHR - Earnings call transcript Q1 2019

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Operator

Good day ladies and gentlemen, and welcome to the Ichor Systems First Quarter 2019 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 call is being recorded. I would now like to introduce your host for today's conference, Claire McAdams, Investor Relations for Ichor. ahead. go Please

Claire McAdams

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

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

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

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

quarter quarter call and Tom me and results Ichor's will today the I'll provide After results On second Rohrs. turn questions. first the prepared Financial regarding the call Tom then with our Tom? Chairman Rohrs; and and Jeff will now initiatives, detail to open President Jeff remarks, Tom outlook, for are review will line further growth our the guidance. our the we of over CEO, Andreson. and Officer, Chief and begin with

Tom Rohrs

to call. strength to quarter conference operate profitability downturn. the and our in Claire, Ichor welcome you, industry current with Thank and first continues

with the are and most better decline think represents reporting. came the above this first indicates of where our X.X% $XXX at peers This customers two of of above quarter, than revenues midpoint what a guidance million. things. we expected from The quarter in fourth We

weak spending corrections behind that gains First, market second, inventory share us our and largely enter environment, to offset as QX. we that the the are helping are

that customers strategy to outsourcing of spending. a also weak reduce are our not industry results period a Our demonstrate during their pursuing

the quarter, our on continued strategies progress of During gives grow the our our will This make first. share be to half increased within meaningfully the markets. we in first confidence served executing stronger revenue the our to us levels second compared year to that

of that these per current expenses quarters. still our half. $X.XX variable two Our we demonstrate our business cost I levels. first resources the feel as midpoint, well financial over on and operating level strategies half. quarter be structure, will the adjusting we to sales manufacturing business the expect weakening reduced and we leverage revenue were of in earnings With revenue we’ve second shy rebounds the profitability solid balanced have second a as last between our the in increased in and to operating position share, our right $X.XX the done at but demonstrating we sized executed Today conditions

as spending we to compared to our quarter. forward overall of look level similar believe wafer the We quarter, a second soft reflects in results favorable revenues the As fab the trends continued expect equipment we this first environment.

reports For or about are indicate spending bulk tools for in while of new the in us, system deliveries X% modest and the behind example, quarter. believe industry declines we process revisions second downward so sequential of that OEM continued industry recent

the half. making quarter-over-quarter one are up quarter we gains witnessing headwinds Offsetting $XX million two share in sales business on winning our track last revenues we're market achieve customer a million particular, of Ichor, to drop we lithography are $XX remain gains in for We to and markets. significantly to pick incremental about as before incremental our served of second their For quarter. this in said each in revenues the these year

-- Our digits gain quarter. incrementally to the contributed contributed incremental our in for revenues excuse date first me, gains date the single to

order see to progress remarks. digits in comments and move meaningful quarter growth the our of prepared really revenues there. from of double year. from and much we year. expect the we will second a need business WFE leverage see during into we spending back the we half modest despite his volumes components XXXX, We in through a don't second through our be recovery gains we as the incremental see discuss Consistent to by lithography to On quarter, will operating with of sales last for driven stronger the share With for our but market half significant inventories weighted in our in trajectory, our this to share accelerate could of we EUV are strongly to and also record second into remainder in tools in meaningfully weak the expect by heading continue to this, levels improving Jeff of progress later tools the starting replenishment to our will back see position deposition top Therefore, QX. where XXXX. year environment half preparation gains, begin not confident in for process in only for demand of in bounce etch

to given rate a much be cautious, a conditions, factors of current indicator positive optimism our exit continue financial year revenue we these remain as contribute should stronger period all to for our ahead. we that performance this While run business

navigate as business strategy a our So XXXX, through we environment challenging in unchanged. is

key that will delivery to other industrial business than faster are most technology. concentrated semiconductor our grow supplier continue we businesses a and that very customer well-positioned through with are We equipment We believe fluid semiconductor cycle, the accounts. on

help of up We for also footholds stronger billion have several a $XXX which spending year of opportunity markets, in add our share will that strategic to drive total Ichor. increasing served

that our on our own the annual growth grow as with WFE the outperformed expect rate we equipment share have Over gains and last XX% execute forward. years, for about to continue growth wafer XX% rate we fab market four we than opportunities looking will of we fully faster the annual

aspects to call contributions Jeff, to year leadership markets and highlight promotion continued the I'd and execution a promotion and half. now of will My role, initiatives has R&D this appointed. financial the sales CFO like President. This over on financial company the our the the the Jeff's marketing, next including business, within with as in and capabilities to as Chairman past Jeff is and to and the his turning expertise a served company operational phase of on Before a over to be operating new operations. through improvements managing important for will and continue Financial strategic successive focus in new operational growth. Jeff's until responsibility In significant company's executing is leading CEO Ichor results. He recognizes Chief for factors his serve key focus of all Officer growth

will on I progress concludes business of such, prepared guidance. the have and results our first our an QX details initiatives our made financial highlights the quarter before with As update provide our Jeff he quarter of in key Jeff? first some of our remarks

Jeff Andreson

strong strength a President. and And my our been It's becoming key seamless the already progress team Ichor, of in I the so to with by role. to here meetings for in I'm at encouraged finding I’m our a take in the encouraged Likewise, Tom. relationships our me transitions leadership customers by CFO strength date with customer talent and far. collaborative collaborative you, also nature of nature the in over Thank

note specifically of Tom us, customers. the and spending related bulk systems, to is $XX targeting As than In earlier here and behind downward million industry incremental two date expected -- market delivery gains. the our gas in machining. in revisions gas year to recognize achieve We're share largest won to XXXX very meeting business, made the pleased systems we I quarter and revenue that Tom first same with the of delivery progress we're [indiscernible]. we’ve wins precision at the we $XX share mentioned chemical revenues our mentioned, components incremental of weldments delivery on should this track the from with were to share million

The with half of in over represent customer first process expansion we're weldments are qualified in what late in several and we weldments in for of phases products. business, a our parts on was first on in for shipments year. with well fourth of plastics one win new qualifications shipping several We quarter came both Malaysia awarded and the first been in and more. completed chasing waves These our chemical quarter delivery for have QX. In the occurring now second the have QX, and began the

cycle time And our effectively business in our compete the expansion in cost side this machining weldment to us region precision delivery broader a other will allow business. has longer disqualification chemical Our market. more segments of the of than low

to share new the year. a delivery expected seeing that revenues delivery remains wins, of to for first is second additional delivery the In chemical some or up in proprietary module revenue some While module. liquid we've we with chemical picked our in The largest are delivery for modest meaningful half growth the business, liquid revenue driver proprietary quarter. begin our expected the second business incremental our liquid are

our begun half. LDM second of ramp expect levels revenue in more meaningful have revenues we We and the see to

lower memory We impacted continue IAN spending year. strides our of negatively expansion Engineering be while business this our geographic strategy solid in to to make the continues by level

extension of we supply make directly an efforts OEMs. us progress our see but our LDM in largest Japan, partnership down agreement Korea innings, market continue OEMs Japan. a in to using our with We're on existing penetrate the customer double the to quarter, During will Korea. in we first period early slow additional and to that Korean to we completed product our on in continue to large we're the In a opportunity enable agreement to

second And These third largest stronger our backend to discussions our look cost customers. R&D for and platform initiatives incremental customer both for platform I'll gains forward well bring now a the you into our progress. each new position strengthening front, are customers. the financial our to second discuss revenues share our making the year XXXX. gas these half To we with I the across progress in from we’re will innovative delivery an of outlook. improvements board revenue half. with and second technology stages and and combined with the performance our summarize, quarter solid us quarter into on developing On initial are loaded on This updating

I'd the to based. intangible are GAAP the impact First, tax I the you discussed unless expense, our acquired non-GAAP balance sheet metrics measure measures key schedule share-based as the flow nonrecurring Investors as discrete by would section adjustments. GAAP also and of remind assets, well and non-GAAP like that compensation website. note identify on geographic our and and charges and today be These amortization items I revenue exclude that of measures as would to like region P&L financial of can cash found results summarizes metrics

and from First of were down the quarter year quarter one revenues quarter X.X% the $XXX from record XX% down ago. million fourth

revenue Our $XX.X of Operating payments expenses compensation, while first due forecast of primarily lower a mix XXXX a decrease higher margin, margin represented employer for Operating XX.X% quarter operating we taxes a gross from quarter decreased point the and of due as modest flat gross a and fourth level variable slightly was well volume. an the increased in declined the less increase NRE. OpEx as funded fourth X.X% product forecast increase expenses favorable slightly of fourth driven customer quarter, of than relatively by in from slightly quarter, to timing XXX of the from margin result as had million basis environment. lower of the to

first million. $X.X in interest Our expense was the quarter

a adjustment of the for primarily quarter result a lower X%, lower as rate the one-time slightly as rate was to forecast. tax tax a rate Our compared well is

income net X% share revenue. of was per was quarter equal $X.XX. million of First Earnings to $X.X

fourth use $XX.X early the on million call. and $X.X $XXX discussed profile was the at negatively decreased increased $X XX quarter. balance of last of million reflecting decreased quarter cash quarter, million debt the $XX.X for from $X.X days million was million Now Inventory flow the quarter, day I earnings sales from days XX repurchases first million and impacted from year-end million, also expenditures quarter $X.X in to turn to X% capital in shipment end. million a outstanding the share a will Cash Free backend a reduction of loaded in of the our down in $X.X quarter the by to fourth sheet. which

turn to second let's our Now quarter guidance.

in for is $XXX forecast QX. revenues range flat $XXX minus is of the X% or million million, Our to which from plus

quarter demonstrating increased sales systems new than tools contribution to system the in shipment, QX. Our market our an revenue guidance gains that better for is have for new compared forecast to second process share

but per the share guidance higher QX. earnings first in of to of operating tax to profitability XX% compared a $X.XX to rate X% quarter, reflects similar compared $X.XX Our with

commence and We half we're year. improvements gross second ready in Please open expect Operator, the questions. operating line. take of to in margins to the the

Operator

first And Thank our Deutsche Bank. with Instructions] question comes you. Sidney [Operator from Ho

You may proceed.

Sidney Ho

opportunities? to to more -- meaning be color. such in come kind for 'XX be getting flat Are little first questions. My will is the is into increased flat gains Thanks half incremental range business a over half half. confidence core Do us half, from a share talked first second taking you strong you you be what thinking, you’re business new the expecting the the of and in core my to question revenue going the mind be meaningfully to a the thing to just about

Tom Rohrs

exactly Sidney. Yes, basically that's right,

revenue We minus expect or be plus the to flat. core

to systems. out -- about is and down Applied we and for along last X% used we bottom. there I line QX term there's a the of bottom like quarter company feel would this about be you what going past know was I see a X% bottom guidance the we down quarter about at the not We translates don’t -- think noted And bumping for exactly lot up Lam's don't point. think that growth but think lot new that the to we're the still we that along this of is I into bumping probably do,

is that. is had revenue year the that bumping bottom for We and last to quarter way ASML people a a along know a you bit year half. us. know ASML the couple down to the was and the There a ASML of One are is, good describe I second exceptions think expecting in for quite in good it. quarter, I second that with strong a first So most mentioned

start earnings, their you actually had some tool making will the listen If be in of improvements produced half. to first EUV about to their in they second that talked release the and

So we and to larger the $XX significantly Again, the the core that the bouncing fourth think second be gains. majority majority bumping in third the see $XX second but the will tools up at the revenue, a process targeted along half quarter with we million we revenue million, than then will ASML bottom the of will that quarter being show significantly then being the larger of in than the and third. quarter share

what yourself So you idea you when might and that can ramp of kind an like. of draw look get

Sidney Ho

Great. follow-up That’s normalize previously talked by is, to you QX. end helpful. customer the of inventory levels My expect you question about

Tom Rohrs

Yes.

Sidney Ho

happened. [indiscernible] Jeff And actually that comment think is, I

Tom Rohrs

Yes.

Sidney Ho

into QX largest that I’m to talk asking follow-up and mix a you your think like of in curious you Thanks. just maybe there. any seems I’m linearity noticeable And normalized you end as pickup customers? the other any still your the into customers Was if maybe the points as very as markets? April. of the bookings, about at inventory look it because are can there data well are out

Jeff Andreson

Yes.

which levels So their overall they upon things about of believe of news. a every think product, course we on that's all run for say by in excellent those obviously upon in going the different the where depending they customers have very line that to and inventory of different products number individual and run every product have them is the product carry a corrections basis. because depending are every inventory customer way it's And not course, its

but general, get where should again taken out place inventory of It's And inventory. situation have about or which at where and X% means than than because not some sweep seeing shipments down that better get talking be others taking so well to of in of more or others if corrections down better shipments not in than a X%, Lam's we're those are lot going X% X% we're a get our better, theoretically as that once. be happens clean everything a

that's or shipments we ASML down a told and down quite told be are They’re we be second Now you that going to bit important we actually be their X% gains -- headwinds flat are therefore product, our as you for not level and they they quarter downward the do on to as flat. X%, why to a expect share in QX. to bring those improvements so their market this back going also us

Sidney Ho

Thank you much. very

Tom Rohrs

You're welcome.

Jeff Andreson

a our about mind couple are weeks And just Sidney, bookings, had you question of long. bookings in a then, keep

about or remains So a it's last on kind a it visibility it's the that’s was backlog -- their strong of of year what a not … indicator huge business anything,

Sidney Ho

speakers]. [multiple Okay.

Jeff Andreson

the in … quarter, last sorry.

Tom Rohrs

Yes.

Sidney Ho

you. Thank

Operator

our from Tom Diffely -- with next comes Davidson. question with And DA

may You proceed.

Tom Diffely

I $XX Is a that afternoon. of a $XX the about first million dollar rate to that one by of guess, run you end good Yes, that million talked expect year? is amount? incremental, you the the

Jeff Andreson

that amount, dollar will level be that, the of at at higher meaning year than the a obviously. run That’s end a the rate

Tom the it's in it single talked of year So it's being through and in we kind ramping said, and double-digit. then digits about

So pretty the fourth to will then that level heavily you than the was back weighted be half quarter a that will ramp through infer higher a from exit much that year. the can what at the and

Tom Diffely

structure is the meaningful machining? when look panel and business Okay. between and difference adding, weldments gas you’re at new that you the there And then work a precision margin in

Tom Rohrs

the the XXs low -- and will than gain and later in at business around And XXs panels, talked the I XXs, year margins our somewhere we’ve precision the all about in those. probably even be the general, so, say somewhere today. around between in higher machining weldments or the obviously some the and would mean, and low in LDM LDM, gas machining being weldments but of Yes, seeing I the share in you're the is the they're precision that with

So us. that incrementally accretive will be for

Tom Diffely

logic Okay, difference is serving? they’re meaningful system great. you segments there, when content I the mean, different types you there And then end different the that and that on markets out memory a different look at sort foundry, of have

Tom Rohrs

No.

they and Lam, that of tilted most across well I towards and lower that it's used or largest are logic known of a course obviously Applied argue kind ASML believe Lam Applied then then little as memory So would and towards is board. has Applied tilted customers a our three Lam And more the bit with people quite ASML foundry. than

that industry skew towards because would logic I excuse -- the over a closely. So logic the towards we might with industry foundry, added say pretty all probably segmentation have and just follow in, me, memory would

Tom Diffely

Okay, facility good. penetrate And then finally you buy you local have you ramp an talked that the there Do you have or opportunity Korea. or how do market? about in do to to company

Tom Rohrs

are would a called this will we business, the increase -- a for we with capacity. basically It the at to IAN an did I has say Engineering. It We footprint. to that year-ago have there level in time grow to investment significantly us of clean came room. that a a acquisition do

Tom Diffely

Okay. your Thanks for time.

Tom Rohrs

You bet.

Operator

Karl question next comes our Ackerman And with Cowen. from

You proceed. may

Karl Ackerman

just design some had adoption can as gentlemen. from If back equipment as incremental a prospects the you, I suppliers $XX [indiscernible] Thank I color wins opportunity go expand Japan this Korea. million and targeting the two. year [ph] of to of and well Hi. in all the I previous appreciate your on question, UV

a when in revenue or and subsidiary previous from see a more something that we meaningful event? expect XXXX the question, Is equipment to Japan event of of to XXXX back Going should Korea?

Tom Rohrs

The we now think we certainly a to is take actually I time, moving And quarter Japan a very schedule. Well, we amount of year. of now we're to kind said, in was an you had reasonable while recall second right knew this going on but have agreement, are what close this of -- we're XXXX the if event.

we we revenue beginning such. question qualification the seeing start kind meaningful. seeing in and XXXX what So of start in are Korea is now revenue different believe doing units will as so of is some amount is more the we we of

then need to that up million we basically out. you think $X I we bought, front company and an recall for earn the bought

that talking acquisition a were bought achieved or revenues we double-digit we it's So that well, that people their in wasn't about it's forward. spending dramatically. as of little a will timing be that the correctly the on terribly dropping not -- good kind we, and -- large-company, said, bit revenues blunt, memory just Samsung We May be very a move although them about just maybe year-ago on June we year-ago a pretty as when began to

hit revenue of to a think smaller revenue large we is on had as them. but a continue of there's we over And is customers, ongoing couple $X the there, level I so the billion not Korea couple revenue with our first revenue main we stream And there customer of thought, they’re and customer, reported, potential to at a are calls. took there the it it including well. from work customers get customers as And in continue finally we our

Karl Ackerman

That’s helpful.

Going question, in will Sidney's core that flat business I back you be to mentioned XXXX. think the

Tom Rohrs

Yes.

Karl Ackerman

logic But, toward spending and I recall than they’re guess, memory I if I foundry. more think correctly, levered

so intensity XXXX? the And and your and or the producers Greenfield conversions we as take XXXX do chemical in memory capital demand from to gas perhaps shift how investments modules of about

Tom Rohrs

a of Yes, things. couple

where or down as with you mean wafer First more began. be down XX% we equipment said equipment than year is Wafer is it of fab all, fab so we know will that. this memory and the flat when flat, from associated year-over-year

the quarter I flat recovery business. through point and far that were didn't core don't where thought the we as in imply want and So see fab year earlier moving a at year-over-year first the from we in to second half be big as we the recovery starting time some there as might the in equipment had in year wafer this

business because some in fab most that in wafer case. total see half. numbers so, And that that the ramp, for to WFE whole included back about that'll some their year also number probably original too. I the core for the So will equipment will the I of increase downside lowering we clear think become people believe be if I clear and wanted be

our the same. that, to is connect tool the and said and rate, difference. having foundry front, logic a per memory on will, those not and huge So you There's spending if tools back about the

And not and if worried vice is versa. if say logic it's not is too so we're we're worried and high memory low too

and someone just also factory. is buying tools are it's and it's We to Greenfield not in or whether we’re a the equipment, or concerned happy too putting if process technology more add-ons current improvements whether

All of is tool a it the on basis for less us. or more same

Karl Ackerman

will I Very helpful, one, Tom. last floor. One may, cede the and if I

market the or softened, of do deals today? you. half how stock And that ceded has Now you just think the the secondarily, valuations were prohibitively we were somewhere about buybacks they do elevated? think is bolt-on Thank level are given

Tom Rohrs

side, year shares the about of we back overall bought on So a price $XX. average $XX of -- million about price at just buyback last

at kind or we do. them. the perspective, deals what will, that we the reasonably are passed the ratio M&A -- P/E like company, below the while that P/E We industry, from XXx, is reasons lot a interested from tend P/E at what the event. P/E to year that And a things regard talk to asking really me of right else to honest our talks economics to And you with see private little top are ratios With and of and field by share to where deal are recent a a people everyone being per a that's financial the And not a a a we people and ratio. deal because we say EBITDA one we people like if the have deal call about ever And company, are we've list no look capabilities, I EBITDA. in P/E P/E be When the tend terms for this our have one's earnings been how a to of guys we’ve is in is a times to doing? of people willing equity a is at paying in see, tough honest year pass lot things to public good that’s of earnings everyone this of about to that's X.X deal of different. somebody perspective we in we and what successful. depressed so see be pay consummated So look XXXX in the would an years XXx all and of asked talked knowing the EBITDA P/E company about bit on. in of and you in is on seen of that's my XXXX, on because or deals from now XXx If buybacks on very

Karl Ackerman

Thanks for the it. color. I appreciate

Operator

And our next with Ho question comes Stifel. from Patrick

You may proceed.

Patrick Ho

can been bit of made into color you faster gains carryover maybe whether thought expand your opportunities you’ve the precision Thank also, little Can systems to Jeff, you of than much. or -- may that about million and you're in talked most to terms from or you machining. market a weldments you’ve how Tom XXXX? of some you give to seeing of guess, very you’ve where delivery the $XX XXXX talked $XX broad-based the fluid million, incremental I the that have about in surprised, past gains in very it's

Tom Rohrs

tracking so that’s think well. Yes, I we're the quite I we than guess, thought may weldments. one surprised, I'd say was area initially be faster actually moving

will QX. another that's I little little that forward a in the end a of we a share that very the I actually gas more it's have feeling more wins had lessening even that, good within kind bit the be back but some think still quarter be from strengthening there a in very little weldments and that of area say probably this we’re panel I'd piece executed go brought as customer of end. that and a we that weighted been you in would qualifying but of our this bit base that strong I but XXXX to heavily accelerate seeing that additional and today even stuff, to spike, share through that, a positive on that pull back the won we and say said bit, course, very going

we're So we with today work initially and at seeing to saw the really are I continuing entered year. more we in we're actually we're opportunities than as where and we essence would say, actually the happy opportunities,

Jeff Andreson

them etcetera. Patrick, precision just come that machining of -- they the in strenuous. try precision the the qualifications will, I as but time just late process within would add the passageways, qualifications just machined a within part work the there you the gases the and parts, and It's different more inside a of actual machined make precision takes are critical myriad going especially all around say the is a sorts process there on part. little the precision precision just bloomer are measurements little And beating through contact qualification if that not coatings to gases more special you probably more a with on the all,

Patrick Ho

its Great. XX% That's has well as Gross helpful. model around resiliency level you the Maybe shown question, right deliver pretty revenues your follow-up talked also as this to held have in the ability about past declined. my in have profitability. actually margins

basis that mix issues or absorption basis? look the impact difficulty] on forward gross margins margins we a to there going still be going forward like on at product [technical are forward is a and on things going gross As a basis, going biggest influence

Tom Rohrs

product obviously swing within mean, I Yes, you mix can quarter. a

think doing they're our that. we get we have operations, in we then, and this one swinger fixed gas -- the driving -- be cost -- the goes have call it going we to that leverage, that margins is job -- largely but gross new not and lever share as kind us. with infrastructure a to of we We at people process these look we've improvements but could focused at higher today. so, for also the up, really our going be of between within and core -- things we are of market known And and high done a generally good gas, like direct biggest business it back gains on I labor to continue Getting lot chemical questions than if once are grow the earlier that’s -- to and you

well. as accretive be to going that's So

Patrick Ho

very you much. Thank Right.

Tom Rohrs

Patrick. Thanks,

Operator

Bolton And from our comes question next with Needham. Quinn

may You proceed.

Quinn Bolton

a got the think question the sort Hi, just the wondering recently the call of weldments business? if you wanted that’s competitive the guys. ask gas weldments I through half side business, bumped that a Q&A. business competitor been then on landscape weldments apologize asked, I’ve biggest and Jeff, to [indiscernible] in congratulations what panel of your promotion. question. has first acquired about conference at but a And way from the I Thanks. on follow-up got

Tom Rohrs

Yes.

personally spent a reasonable aware to -- are amount company And nothing the of other talking has would know Of There from reasonably deal. couple previously. I there and well. spent with course view that We of do we that them a had perspective. we that are are it with time our people had and of things important how

welding a the And that couple advantage beginning that but with operators low are requirements it's things is flavors. and done [indiscernible] TIG is to very, space easy One in welding, very hands-on weldments there [ph] called force is skilled the technical do. more taking in there difficult we're of labor And this number there's kind and hands-on that understand different machine to more terms now the in of So which is see it's there. what come and to the of orbital it are the to we it's do. largely of make is pretty of customers simple, then what weldments idea and

decided to we to is we we not capacity do to capacity decided orbital And opportunity the chose of $X would've M&A. was saw then had been orbital we do We been if -- probably purchasing welding $XX mostly what that. we're United it ourselves there We $X capacity million, cost about capital. believe, low for the labor so to to capacity XX% what take the bulk will, What labor the of million which Malaysia. add of million, if And would build add in Malaysia knowing we through able of is gain you end our where strategy have will for States. about by put that can we became we share it in in acquisition, we is costs and do welding, when weldment the an been decided the have dominated the

could price work chose We make seeing and customers are competitive. be our that the we little to instead of and being even put where a we way for more So in wanted still weldment things low-end compete more our these money as to margin capacity area self the to it. building in buying

Quinn Bolton

module to Thanks, the said there first of of business. liquid script like delivery sounded said you delivery and at to you may the starting your lead believe ship Tom. some And prepared be sort then question, it expansion that customer that the second I out in you're

that or still with if the the being you clarify, shipped Thank manufacturers device Just tool multiple customer? wondering lead what sort to the now of you. -- could is is ramp

Tom Rohrs

I time. will of of a with is at with and through the will suspect news a customer new And be start is appetite way it and In which the qualifying takes that The It's big year. customers, end almost customer lot the lead third lead up we the end the tools. quarter little of a still bit good being customer. could a big it fourth

And so, don't the case -- and that with first it strange town, little is. in a normally player but this best go isn't normally usually it's the answer in you

and it this of that about we're dealing concerned happy it. most question, not we're about answer for to will so we means But customer. year one And be your with the

Quinn Bolton

you, Tom. Thank

Operator

[indiscernible] And our from comes question RBC. next with

proceed. may You

Unidentified Analyst

two And one the taking on for first just to biggest two. had I as Thanks relates customers. it question. guys. your my Hey, is

more Lam my layers transitions, from from they’re spending So understanding earlier. benefits the that probably is manufacturer

saying comments Lam picking be of we that half And that going do compare kind they’re to start in to is back your heard XH. about now similar, how to the going so comments even then up though from I

Tom Rohrs

they’re picks the since we probably their all, I'm our very, because will correct seeing the -- be benefit we Well, will tell plans that it will in wrong going And of to seeing the do first happy peeled And if half I definitely would we from yet. that you they half. first hope very build comments Lam have up amongst keep absolutely that about And will of it good if Lam and up I'd benefit. be I then to because the be second to in picking are start the business core etcetera, we Lam eyes start that I insights etcetera. kind only into second actually not

I has I second you're Lam hope So and a hope half. great right

Unidentified Analyst

And $XX of people what be -- already Okay. so of you expecting me then can it's of think -- the in Got think help or through have I around may are do [indiscernible] it. take I you down maybe most more billion, in kind mean already to kind expectation, there, less, not terms having billion bit front I yet. people than because by to that they though even people their that, a $XX numbers be even think walk

Tom Rohrs

Well, whatever upturn bit math more be little believe, exactly number you basically the -- core where the will on other half I think half then, down second WFE is words, -- today. a math, do is no is than that exactly do when everyone terms if the there $XX of half if it billion. little I if second bit to first the $XX below in scenario, the in will the a billion, is $XX.X And or billion be I business the in equal

ASML, the half, roof to in least are of hard I because a But in kind the some beneficiary an billion. WFE think going again hope be in we at Now the will and be of they the blows in it's I ASML the hit wildcards the of $XX second for of half uplift once absence numbers that second that.

Unidentified Analyst

just -- know And your I numbers in [indiscernible] then Okay, perfectly got it. one that don’t for of fine. is terms last me qualitative

a full-year. you look for XX% customer So said that XX-K, when the your at I about Lam is

that March than So Lam are in March at do look -- or June -- you quarter, imply saying that you that Lam you was in June, I basically think to addition that guidance? if less and

Tom Rohrs

No.

it it's be wouldn’t different much -- Now actually.

Unidentified Analyst

Interesting.

Thank Okay. you.

Operator

And David With our Duley next question Steelhead. from comes

You may proceed.

David Duley

my wanted revenue half, to kind them answered. taking of address here. of questions. the second been for issue half first have Thanks Many I But

this two $XXX a And in you’ve $XX million, to million million talked like $XX You’ve about of first so $XX first the happen guided to going is $XXX round numbers. quarters revenue the so half. to basically opportunity, or or million sounds like million half it and incremental that’s for

the you're my that half. would or about first in million in to we that say, so Is by half. the to? the would That leave, like up check ramp grow And revenue in that math. the think sounds let's market I’m the versus second these second should trying $XX gains share your referring half XX% way so

Tom Rohrs

does low exactly way, you're double-digit first and the right mean on track. it a little the the necessarily, mean. in it's single X quarter I second side digits half when Well, first you’re quarter. right in And and the that’s but what doesn't the and but on That that -- exactly said XX does

be actually revenue. XX from numbers, plugging you would number half of that XX, you said incremental those XX, or half if the or subtracted the So, or we'd then as was any it be XX that first into that the second

David Duley

think this $XX wouldn't wrong, little of revenue I’m million, is so to but bit if me part correct the a million be the don’t I And ASML $XX higher?

Tom Rohrs

part of no ASML that in there's number. No,

Jeff Andreson

Yes.

David Duley

more of first higher second XX% you that’s Yes, have then the half than so should half. if they’re sort growth [indiscernible], than

Tom Rohrs

are correctly, to Dave, but a yes. not I you’re in more in want overly we think, but any the [indiscernible] don’t light we be specific, little front, specific,

David Duley

I the Okay. heard to this about so And haven't guys I talk you question. [ph] wanted post before, just

As structure, variable? your comp think you overall percent far you is is percentage fixed what think do what as and

Tom Rohrs

Well, we very I highly material variable. content, are mean, if the you take

variable either the give need but percentages, the are, run is not pretty operations you rest you that going it's business. or to be to words going to I’m fixed and infrastructure exact Another the XX-ish

in broad numbers. -- So

David Duley

Okay. Thank you.

Tom Rohrs

Okay.

Operator

And our next [indiscernible] question from Capital comes Management.

proceed. may You

Unidentified Analyst

annum in again, in what rate year add ramp, trying Hi, to you this as to [indiscernible] really The the but share XXXX. the markets in might market gains per importance a guys. Yes. a at get

Tom Rohrs

the I [indiscernible] going [ph], to we specific. to release, not Graeme guess, know Hey, you’re trying are be

if quarter I wouldn’t to double-digits XX, hockey will and going will what be kind big a think down. in kind seeing X grow quarter I pretty imply is gains. in for top single-digit of super it's stick the second you those new say, the alluding -- is and somewhere of that we’re see you rate the we’re you It's know of on between it to that shared it's and is, that and ramp, in then fourth first and kind going like quarter. strong a to grow the third quarter, exiting But of to

Unidentified Analyst

what Are and Okay, picture just or … Korea maybe might then big next be any detrimentally you to there year. changes And for and great. a -- other there feel for Japan year, next get incrementally mentioned big

Jeff Andreson

will picture fully fab spending. I $XX be very to well, the - after -- strong rebound to expect what next fully it quarters we within Now that next year change of see slow core a by means to And but expect significant, that then if we very equipment see by down and it back X the very, literally be don’t that. is have big year the you wafer been mean calling I would not, think big billion goes business or and very, that very in

Unidentified Analyst

Great.

gains And so you would next year share as well? expect

Jeff Andreson

the this rate coming million. those of X. end gains and we this obviously, run gains to be of of the expect by Well, already made It's than multiplied out a year, higher Jeff we the year, lot going said that would shared $XX

we've and top have to that gains hard we that. of work every we So to to on through carry see would will them additional very expect to continue share reason believe

Unidentified Analyst

Great. Right.

question, you versus increases purchase else? but going Just more price steel wanted pricing ask materials or an a type whether its in [indiscernible] of how is usual your to cost increase Thanks. and for anything terms

Jeff Andreson

are not we particular. going us. any, not steel up for It's -- I seeing Yes, in really

I up we’ve not are were from are isolated tariff today. should the -- been commodity, We insulated, say increases reasonably pricing till the a And now. bunch of well from seeing

So that’s a good thing.

Unidentified Analyst

you. Thank Great.

Jeff Andreson

Graeme. Thanks,

Tom Rohrs

you. Thank

Operator

next And from Sidney with Bank. question Deutsche comes our Ho

You may proceed.

Sidney Ho

follow-up my taking one. for only Thanks question, if

If at gross on back last [indiscernible] know you I time questions Just want levels. this to earlier. margin circle these revenue were

you level that you don’t us low-end XXX target machining, Your which They now? which are. weldments range, mix and And was between fixing product can at these precision mix -- to help and I long-term higher. in of these know a basis of XX%, is But your forward that how the going gross but now what bridge is gap see I points with reach. are big business the today, above margin again to revenue gross what more a do [indiscernible] follow-up is and XX% then margin to looking kind maybe believe the

Jeff Andreson

us haven't get of on get point that. some the precision half billion just machining, that to we weldments. hair grow, have will gains overhead rate and target And was into in higher precision the at we but see few of other run honestly, our kind in there's in similar in we that’s been a margin going of those as that help some or levels, ones of than model, and some We’ve to Gross rate obviously affected businesses this out in share and And the hopefully. Yes, a lot bit a a of revenue higher we lever than like-for-like Sidney, going do got a back, more there's our -- get our different those When a of first of less I that lot machine we a you got total machining by content. increment. pieces our a little of the with that so and back mean, recognize back are of it's and $X last gas weldments of we're plastics mix fixed those when pure a sense have we market will were moving almost there in a under kind days margin put the then, year. the bigger

kind margin $X gross rate, if be So next in run would would we hope that that we’re time at that of billion we range.

Tom Rohrs

Normally are the particular than couple squeezing hit that headed to time case is same reason the on business your the higher more growing, way when the you more the are to analysis done more margin on that do sorts down, out the how a the it's there is etcetera. right normally is I amounts levels certain is. etcetera, levels, productive time Yes, asset, the we when to the you how real etcetera, way tool is But of through you it a property, so it's you I up your way just regardless crazy up that. try of of you’re of you kind much said on you’re way on we than down all of think grow And size question. were the were of that over those level add what terms this, And revenue behind in way on could certain Jeff of when things, headed last as going costs up, those be that higher of all And down. actually of add items if loading is loading, that up. particular we And are good and been. with but those stressing did output fixed saying all of organization think the as they the on at levels a be about particular and is we of I all will and had while margin half on levels slightly now was about

that would they're higher so is the it's fixed quite costs. all be we higher they the normally said that margins basis with and be, items would And simply because us have the say aren't that high when of that would to surprising and a points XXX not as below done, some ones

So, Sidney, makes that I think sense. some

Sidney Ho

Thank does. you. it Yes,

Tom Rohrs

Thanks, Sidney.

Operator

our and for ladies I Q&A to Rohrs back This you Tom portion like today’s comments. closing concludes gentlemen. to turn would the any of Thank conference. over call now

Tom Rohrs

very the we and again once on call this Well, quarter for August. thank our call you updating to quarter, you on much in joining second forward us look

Operator

you today’s all Everyone day. you thank attending This may gentlemen, program, does and a disconnect. have conclude for great and Ladies conference. the

Ichor (ICHR) 7 May 192019 Q1 Earnings call transcript