ICHR - Earnings call transcript Q3 2019

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Operator

Good day, ladies and gentlemen, and welcome to the Ichor Systems Third Quarter 2019 Earnings Conference Call. [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. Please go ahead.

Claire McAdams

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

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

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

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

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

and the Chairman today our Tom quarter our and questions. outlook, begin Chief fourth Officer. for with Tom Rohrs; provides Andreson me guidance. Larry are new Financial Ichor's initiatives President, further results, line Sparks, After additional we recap then Jeff the prepared strategy call of open with quarter will and our and detail then the and will On the Jeffrey growth before CEO, details third Larry provide regarding our results of will our remarks,

over the call I Tom to Tom? turn will Rohrs. now

Tom Rohrs

across revenue of $XXX from aspects were expectations. of business. we the call. end Total sales are improvement quarter to XX% our all welcome and and Thank our you, Claire earnings QX up second incremental high Today pleased at report with earnings the of million to our

XX% Earnings second of were per quarter. the share $X.XX from up

for delivery panel grew of increased sequentially weldments the each gas four chemical customers. our our business. precision revenues and machining and for businesses, Revenues Our for for top

a shipments, The an all on as the in of EUV market over our as of result $XX primarily across came incremental increase call. revenues gains and million we discussed product lines last our our second quarter share

of contributed for a the the in shipment beginning growth overall to business, spending also recovery in industry our Importantly, QX. our

At beginning strongest time, our like ago, and that terrific I April, comment my years pleasure the afternoon. the gears with been three engaging is of the company. goals we team would leadership press this primary on issued our this and Since release, Jeff build became switch one to January. IPO nearly assume President Jeff of for Andreson It business CEO announce running been the duties to doing will possible my in job second to a has customers. has and this

organization of our with Ichor the along Just team, that than work has ever. executive stronger made

Premier Heading to into management XXXX, Chairman. as and semiconductor position to Executive a I Ichor's strategies with our solidify the continue Together, senior the team work will on work we'll Company industry. Jeff equipment closely in as

Jeff as to industry start gratifying a turning the of reins recovery. over very the at be is is It CEO to the

about strong industry. QX for our QX. up we to to other ago. The what compared our significant expect revenues growth we of outperformance well is in revenues forecast Our incremental million over equates over $XX the to At ahead expected midpoint a of XX% quarter guidance, our suppliers compact reflecting the of be outperformance, QX

top more incremental chemical weldments all quarter, will gas of fourth four and revenue each We'll revenues from machining to delivery, panels, the across contribute have business precision growth. our During and of our aspects customers. this increased

investments expect current being growth us spending of stronger spending revenue the considerably early and to and level beginning environment. It clear in is memory addition, capital QX our And fourth in driven logic signs in lead the in also is quarter. reporting, equipment recovery a that the strengthened been by of incremental year has of have others foundry As a XXXX.

operate Looking industry we the with and downturn. strength can back shown past have profitability over that during an we five quarters,

will communicated We while same our to through the on executing also we customers, that fluctuate markets. have our cycle with served our of business share time, the along strategy our expand are at our

we guidance to is the Each midpoint our per have we the is in share $X.XX leverage. our and which in That in XX% fact off XX% increase expressed downturn earnings of with a from evident quarter, revenue. that earnings earnings of confidence $X.XX would operating significant by at a increase emerge QX

trough higher our percent per double the with low stated QX Compared profits grow XXXX. of are quarter, QX to revenue, the forecasting to of midpoint than our than earnings XX% from revenues, increase and share, high consistent than objective to XX% the more point revenue our earnings faster the in guidance we compared to is growth in point

call last a of Ichor, take the communicated earnings my I to on want to with I reflect messages, moment which since following being CEO IPO. So our as have this consistently

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

through our acquisitions. served expanding and We markets strategic are accretive

our offerings, expand to base. and our continuing are We customer product

our strong on enter we and earnings have equipment we to job revenue message, delivering initiatives, execution a to period delivered our sales. grown and our against done expanding each we strategies have I served our feel our -- the on new have of cycles revenues count as outpacing semiconductor of faster can grown a markets, growth executing than believe revenues. Through we initiatives the faster I industry, our you continue and through are Ichor strategic solid of share deliver on strategic and

with now remarks the prepared to guidance. CFO, our to of initiatives. progress financial then, third I'll And our Jeff? update on details turn third quarter key and Larry over on results conclude in our the Jeff provide QX made call our will the an business Sparks new our quarter

Jeff Andreson

provide our I before I'll progress our an share turn Thanks, few over as the market against you call initiatives performance now gain well on as operating update comments to Tom. Larry. add a our on

to We're revenues which over to haircut about QX were incremental In million our million. in as for another the $XX we expected a gains, QX. million $XX expectations $X see bringing total to took from share August, market continuing the year, up

However, dollars that of we QX. now than will expected the for for think of slightly higher $XX couple that be at million million upside

these of incremental million from to XXXX higher After as gains. share gains, $XX revenue our $XX exit from several XXXX our entered our quarters million straight be than about we rate annualized revenues will share revenues

are the now and their now us, are the and customer will demand early revenue our with place, that we for experience as delivery of seeing ramp. business supplier a behind is system shipments, gains largely of fluctuate growth, gas manage which the we weldments delay stages in resumption are largely and Our now at transition

precision having of In these customer about machining, now talked qualifications. the we the times, final cycle longest stages qualifications are but multiple in we

these contribute to revenue qualifications will expect story. our growth XXXX We

module. growth largest our our remains The delivery for driver chemical business proprietary delivery liquid

result partnership. the Our innings this in we it the see and revenue that a second while partner in of half are early we as product, now Japan in of will XXXX actively optimistic the is first still marketing is

delivery We Korea. South fourth is largest unit milestone its Korea customer first the company expect module This pleased to the beta achievement to an quarter. in report footprint very news we in the that for to to are in our liquids expand exciting ship our

and To XXXX. our Meanwhile, of module we continue revenues improved approximately has to stronger summarize, with customer ship initiatives additional initial well work incremental million our incremental for liquid and OEM manufacturers. position in well our gains growth delivery in with closely XXXX, share contribute on as $XX performed to qualifying a has revenue

engineering progress flow generation to group. gas good these, of and make on continue of panels fully next technology acquisition development integrated control we a our the Beyond have QX our and

and We beta have to have our XXXX. continue dialogue to customers, by mid-year with available units expect

addition this this panel value and will capabilities our generation margins combined add adopted. operational The next to technology, as our of is with gas expand serve expanded

would our QX like to welcome outlook, Larry I QX Before the to our discuss call the over to results turning to first and team. Larry

a brings Larry and amount tremendous experience. operational financial, industry of

he for ground a the only been for hit he’s While us month, here -- about running. with has

on Secondly, headwinds quarter. margin the some color to the I'd third we gross saw in give like

the inventories weldment our their a our resulted which our expected, release and than began pace with faster customers higher associated of During in overhead of rebuilding parts. a costs machining quarter, unit parts faster at per these

had Our gas was each of lower expected, a higher panels. mix we a shipments mix of and bit of than also these

costs As we look our additions, adding the mainly begin we capacity we recovery to cost as improve and see to industry as expect structure be as variable fourth will of quarter, the continues. leverage we fixed margins to

fourth to discuss Larry and the I'll for over third our financial now to outlook. quarter provide the turn call our performance quarter

Larry Sparks

Jeff. Thanks,

identify you remind measure is discussed of that items intangible of to and today charges share P&L unless are like amortization impact non-recurring based. adjustments. the discrete non-GAAP acquired I expense, metrics the I'd the These exclude compensation tax First and assets, measures based GAAP measures

geographic on a financial balance results region flow found as like by be the our non-GAAP also key metrics that as to website. can revenue note and I'd summarizes our section which schedule, well of Investor and sheet GAAP cash and

the from were revenues million quarter of from the quarter XX% $XXX and of third third quarter down year. XX% The increased second last

from our earlier, quarter. of the Given declined third discussed margin the headwinds gross quarter second XX.X%

in spite expectations. growth we of However, of of end good expenses at revenue maintain operating high control the

we OpEx of team. IP QX, engineering was we as associated at flat relatively included million absorbed completed with the and from approximately addition purchase that quarter $XXX,XXX second a $XX the in small the also

to second Operating the margin similar quarter X.X%. was also at

quarter in expense $X.X million. interest Our flat remained the third at

X% full The as holiday. was tax income adjustment forecast, quarter a expect to we the income. for a Our tax benefit more to now in of have pre-tax Singapore, was an where our due of we benefit year rate

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

our quarter, Cash will I $XX.X positive $XX.X operating of million the $XX was offset million. the partially from of sheet. balance cash by which second million on decreased to primarily to flows down due million pay $X.X turn debt, of Now

from of the of XX in days a back the indicative heavily XX Day run sales higher entering of weighted fourth prior as end outstanding result quarter. quarter, quarter, the days revenue rate increased

quarter quarter further at Inventory to Inventory from improved million X% $XXX $X.X million second or end. the decreased to X.X. turns

to Now quarter our I turn will guidance. fourth

of to up is $XXX the for is to million in range $XXX forecast QX. XX% which million XX% Our from revenues

of earnings result $X.XX as improving control and of reflects revenue share operating per while tight maintaining higher margin, of volume gross expenses. to the Our improved profitability a operating guidance $X.XX our

expect sequentially $X.X to million. interest expense approximately be We will down

tax shares approximately in the and our expect rate will outstanding million. approximately fourth quarter, $XX to be We be X%

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

Operator

from question B. FBR. Ellis Craig Your comes first from Riley Instructions] [Operator

Your line is open.

Craig Ellis

on congratulations Larry Thank you question CEO congratulations on the Tom, announcement aboard. and you've Jeff, and accomplished taking with company. the all for the welcome

quite Great. lot going guys. on. a So Congratulations

Jeff Andreson

you. Thank

You're welcome.

Craig Ellis

Jeff, your may I to my up. the sounds first It delivery, dynamics. and and some some be comments of on activity weldments some things that gas the prepared that So remarks the like precision wanted around from product just question follow lining machining, up of of with

stronger have were machining comparatively XXXX into versus Was So what precision fair of weldment conveying? that delivery. a we you and heading gas read growth calendar

Jeff Andreson

panel No gas is our businesses. core think kind our rate I other as same about that growing of the gas, our our business

inventory don't flush the as that a kind I that same gas color downturn, about to going that expected. know our to higher higher in sooner kind started all just the you those to saw of you us on are of initial in point. was But And we obviously panel, costs talked we we was up of I kind which we think than higher overhead had referring than are in of had little growing expected. was took see have what wave we're just out think, quarter, specifically kind relatively the of businesses QX, to with that and an we've

LarrySparks

So mentioned those said I quickly the the be we've product this and things, we that strictly board to machining kinds the would the come we two share of be that calls have amount And products. different last precision recall, and on of new qualification effort gas of onboard one is think would of of the panels on of gaining types come terms first a of market you'll as we in share. had that previous for probably one would required result just or is things been

little ways, bit some little heavier share precision coming bit been machining, even in out a gains, market in gas, over months. our in in the So will that and we've a lighter but

Craig Ellis

is and [Indiscernible] message operating regard Larry very whether expense, and first clear but the we've good on at the got else That's as typically calendar look Thanks since, expense, financials we helpful look etcetera? some to you on much we and new think execution mind throw quarter, in the handled upward the I'll we quarter, bear to pressure towards anything you. French would but one need to operating With as the forward to put in for we year, adjustments it's guys. there guidance,

LarrySparks

So Jeff. go ahead

Jeff Andreson

here just it’s month Okay, been so -- I'll just jump in. maybe

right. So obviously you're

employer upticks has tax that usually it. see the You back, come and

that we're as we thing our looking is emerging phase, also other at we're growth you know get an The through company.

it So our QX add words. may I right that we we need other we're is, that be things think now. OpEx assessing an the when it, one other message and in But because it's to that'll than add tightly Sarbanes-Oxley, of the we in still effect have that, control

but Obviously some there little uptick you of go be so will fees. big the fees, mostly fourth around more little be So audit may of audit as get a bit uptick, I you on types a an in things. those an but In see QX and quarter, upticks. uptick, wouldn't modest get the a you there

Craig Ellis

guys. Thanks Got it.

Jeff Andreson

Thank you.

Operator

Ho from from is question next Patrick The Stifel.

Your open. line is

Patrick Ho

congratulations I in much. also very like And you've also your testament you wish CEO. period to of Jeff, time. success to Ichor to a upcoming I for you want Tom. The extended extend is as best of you my done Thank of role the an And what

Tom Rohrs

Patrick. Thanks,

Jeff Andreson

Thanks Patrick.

Patrick Ho

since through operating gas both structure, In downs, have, fixing and can there's model terms in further? the Do of it you and you've that them further believe past OpEx resiliency the a shown optimize a but were Are the machining sorry you've make lot core both ups delivery of moves this I'm of in there models. those the business. systems into ways those optimize to through effort weldments has the put come of you acquisitions work precision lot your that maybe flexible and additional you to terms panel and

Jeff Andreson

its Patrick, Jeff.

and we it's a good out whatnot. question. downturns, add that will grow initially of we those I when we're we're the this really and in we we've bought got as And as structure people we leverage optimizing see obviously, of cost to did time So to tell would you starting businesses to than out spend them. better

pretty couple of them now, years so happy at. where had we've they're a and we're So for

growth and margins you we've precision incremental know some of you the higher so than the And always are said core machining and associated model with average plastics our weldments business so know.

Tom Rohrs

over differentiation. machining. the There's so integration, precision even vertical another those we element to time with the added additional Patrick, additional expect especially which of but some value weldments is gas both Also the that into business, more leverage panel

advantage kind adding taking So, value of more to journey we're and forward looking of just we're these with of beginning and more that. acquisitions, the

Patrick Ho

saw systems. flow Right. delivery for question, strong pedal really about that capital XXXX? you of Those That's from my talked there And content going for or your to customer or they are going has up a to intensity systems different trends helpful. order year. generation any probably the their quarter benefit be next this increased Is gas volume follow EUV as in the are in next terms for systems just

Jeff Andreson

they there's you it’s the That's two tell for a our some Jeff. there some expect would we're customer, quarters to also generations. ship obviously question. but is, and So, the higher can't EUV. been it We whether typically that’s note see XXXX good between tools. going two contentionship lead our specifically has Yes, -- go to, in is you about know that we what time would we And as also volume into I before

typically. around some five prior to ship six months their we shipments or So

Tom Rohrs

tool it in the young third shipping fact the -- some and the in heroes spoken in with quarter, on here over began that, working the guys new quarter of the that. We was

everyone EUV through ASML understanding sometimes introductions, This smoothly know the a don't all in the of significant you tool As these with that original was go revision and EUV well the watching terrific. into. coordination, and really is performed products

quite So it. pleased we're really about

Patrick Ho

best again And wishes, Great. Tom.

Tom Rohrs

Thank Patrick. you. Thanks.

Operator

is Co. Your Quinn Needham and from next question from Bolton

line open. Your is

Quinn Bolton

we flowing some of inventory I of higher get this understand phase you through congratulations. through you that XX, your start you around then, quarter, peak on contribution margins of down And the know the to the there had you the and do upturn, goods next last to reason from levels that’s since margins, get group I'll machine a that the cost weldments over Is hovering XX to think before step margin revenue, or of longer four previous peak, some five related parts gross higher, term question back those but wondering already is number, XX% I cost inventory look of the quarters. think if the had is sort the initial precision quickly were can't offer you not you acquisitions. And of how come wanted back guys, meaningful the why and just get I that a to just flushing any at if back Hey quarters? over a cycle, but product have two higher upturn? you

Jeff Andreson

there. mean I levels, it get change the we well. -- that we mix would as will would will to to be Well, back be I we if helpful think Obviously think get to those

little quarter it a the into degree. third normalize Your longer, was bit a And will first we in little your bit first a some long overheads. question and leak quarter, of it businesses, fourth different the bit the see more probably little some how I take we to may will have to of but in it's average, take what kind saw on quarter, types

Quinn Bolton

going of obviously spending, the very great a foundry fourth I second strong in logic and is also the just on a be We've you foundry side. quarter XXXX. seen end a think looking know there uptick to question And Great. at

look business you a in of side of you you QX pause and of or see think business do, sort the a of potential to think QX the you and offset combination pause share if business? half logic any foundry recovering can see any out you or in the memory do the you the might side combination, on As foundry do first XXXX, of that maybe gains logic

Jeff Andreson

a but strong So, the customers, of what seeing We we quarter get business a seeing early the recover we're have logic all some or I into of is something, first But quarter. get quarter. don't carry guess the visibility the to pretty this past in some see we're foundry it memory as well. seems we signs

would on then that if think -- we So we'll going foundry relatively think I memory in does flat so an XX is to recover, to and growth year-over-year. agree logic annual basis most if and general see XX, people be

Quinn Bolton

Thank Great. you. Okay.

Operator

The Bank. Sidney is from next Ho Deutsche question from

is line Your open.

Sidney Ho

you. Thank

me all Let three the as echo congratulations all well. you to of

with you we up the just to normalization assuming on do products, cost how of question. of? other How the in margin charges would revenues follow in want are that the Moving should product is one mix we change. margin level gross In should been situation doesn't high gross question, any be words, have last assuming -- in aware there much where and the think to much I expect an really flush to in and a improvement you there don't QX, through time the same the

Jeff Andreson

improve had you we onetime know see you don't. the any of don't this an specifically off customer's our in think what Sidney, know in the We fact this, next there had you level that factories into I say charges would expected. pull than margin so it we guide earlier will of are quarter. I as other QX we No, call than inventory don't

goes quarter-over-quarter. the get and we've the and just commented would I as to obviously basis. P&L higher of accretion we'll it the is level, that that the so the start think rates up on you for revenue we going QX, to overhead kind then, I already there, slightly on continue incremental our QX And from the some improve you'll see be normalize there'll what that through margin OpEx tell recovery it better us goes, see to

So..

Sidney Ho

My gain opportunities. up share question Okay. is on the follow

you imply million, That I year. think around $XX the million mentioned QX. $XX XX for million would somewhere in

we right, the about, more is forward As ramp? next slope more is you or the is up into there to think the and impact year, is like seasonal should question about it of more look the

are talked next areas to as a you what just the of the share to the have opportunities. pushed year you year, the different the profile and gains or in are this you that of follow got that four in areas half share XXXX? Can us help And past, change five that, what gain how seen out may areas about understand,

Tom Rohrs

One the are to There and is, up. that first small Sidney. we and number knew quarter of share a going gain things. Yes, using couple your the then ramp in was start

fourth XX So using XX which year. this quarter, for is the XXX for obviously did million we is the times your more million number than

So we we've wins -- works continue already just based on had. the

We from to gains. those revenue see will continue additional

on activities that we've of the inside reason mentioned because for little I it's those been, gases the in flow and actual qualifications precision the getting those the the products. that have understand let's control say the on since chamber. of slower of challenges you wins vitally important why mentioned already can the the And that I of just a machining, terms

very is item. this a So critical

And scorecard that to hit year. next would and the so, we yet, have of not really we expect that seen see much

helping of do through that be when forward. qualifications, to of gain hard There's the to with gain more downturn that really going And share. addition. we importantly, the has the that, we've stated it downturn from as pleased the said and have us B, you really because I after and final share that we've don't quarter. of yet, product the product working so I well, the lines, lines. the you'll but mean part We've A, impact it. we ongoing we've and doesn't kind hasn't had answered been and that's And said done also of amount it the suspect across to quarter that Having working was, in the So some revenue a people would see downturn initiative on of hit line time question the more. I'm share just different all that effect was think the in the to precision already be I gains captured slightly, the haven't all basically strategy across beginning but gain there'll it spoke that separate during more the the work machining is we terms been move we're it of guess our come, share some

I out we million quarter spelling be won't think you. XX We know know, quarter we this be you it saying, etcetera though won't next for million XX etcetera.

was I that for in our think was on success. a terms then you measuring managing initiative up that good off speed both you to and it, was, in really exercise it what to know us and of committing and keeping ourselves good

Sidney Ho

Great. may the here. question last Appreciate it. That be

in I timing think terms beginning current capital seen memory what gives can you of the expectations longer already indicated investment. of And you a that that? in in perhaps you is orders, your of showing that your press of time What some color of us in release, little recovery the your give lead more that or in the you've that up is products? confidence

Jeff Andreson

customers the a simple closer is mean yes. answer we're you as to know. in as acquired we business the little So memory big Korea, we -- a I

three first last what we the as did if quarter, we was in two business added seeing. And or probably quarter. know it so there's way And talked as that times about the were by we've you

XD been has They're in definitely bad. timing the to been it's NAND. So particular tied memory

So NAND stages XD we're is seeing now what of investment. early

Sidney Ho

good Great. guys and results you Thank that all and guide on you. have. all the Congrats the new also roles

Tom Rohrs

you. Thank Great.

Operator

question Ackerman is Cowen. Karl from The next from

open. is line Your

Karl Ackerman

since the initially gas headwinds I few it's Tom margins I as been that endeavors. your quarter, on time plastics influence. you gains the you mints all are Last in ballast would quarter. first. business know certainly margin. the some I the Hey, new your of your same good great wish on fact your may, getting how share if best December at Larry, future positions some a of spoke and afternoon. you spoke And A as you Tom, question to in the IPO to at about in guess and congrats lower mixed the about from margins add well well gross

a I various So XXXX? for have maybe the subcomponents view how a formulate follow provide then December as early on as color margins in and bit well your just up. more quarter And the they

Tom Rohrs

Yes, mean. I

me him. just go a time cover and one I So at let hopefully,

plastics distribution our to level not our is as to recovering going the gas our So we're business from is on be now business. still view seeing

just So to coming in is which to to It's but quickly degree, well headwind quarter more stages in side. of gross the fourth is as the are that still helpful see the place some early to distribution that margin, growth on normalized. happening not we not starting back as revenue as the gas

the things things are gas our higher, know average when about have that mid-teens margins and you made we lower. in we distribution were point the think is I are

faster, is a gas our So incremental than when for is machining. highest on weldments flow grows it's less probably through and particularly little our flow precision

begun. have those of all So

not to the our weldment, to positive are gross Now beginning grow, new one. we through shares But it took a the year, to one but margin. be much at us from they incrementally the maybe anticipated to transition weldment the to starting as supplier get are another little of while going as

growth, higher we revenue those. come two see through as accretion with margin quarters so the and we'll next from And

all So that questions. I these answered hope

Karl Ackerman

was on and of of weldment ramp recovery predicated plastics does, the On a from I share the It Tom. memory portion dependent market. outsourcing, million incremental or on gains, XX initial the believe

larger you days we that is much just than say or should the when see And So size the opportunity much ramp ago? year? of business weldments next same is it expected the XX would

Jeff Andreson

it's So, Jeff.

to foundry So The large logic. that component today. plastics tied of is really is

business So general, LDM drives in is to our that's what a logic particular customer. plastics tied

tied space grow. be have components to some NAND foundry so and manufacture gets and some parts more applications plastics businesses helpful piece that on XD that plastic We the memory other will we in do are Our going. that'll other are at stage, when

the very portion made to which of ago their On it the business acquisition our Cal‑Weld has customer, largest weldment on know a we side, primarily in was focused heavy when several years you memory.

goes, quicker. grow business weldment weldment have a as balanced that, said So second adding grows memory customer our across by business largest more that that much now as we Having will more we applications. position, have

Karl Ackerman

film more, China Thanks big X may. fund on phase and cleaning I [ph] focus will testing etching Jeff. if equipment. revealed Recently, One that machines and

Etch unique improve and or as your additive or equipment ability your and supply own their I'm curious on processes model your to within see Technology develop chain, existing equipment well manufacturing yields to their year indigenous of whether desire how Thank development is position China two? Given the team you. on next you the their to CVD as

Tom Rohrs

to on, question. And a current tied different of is to lot there's try and to wars prioritize ways go the answer and a geopolitical that Well the trade tried it and lot going countries of whatever internal their manufacturing. different extent about that to

right a good a there at doubt be manufacturers where think of very Japan. I now to inside we're stage that case, there's are seems of and that couple no the

to capabilities the the tools that very space them done which not and are semi lot so MOCVD bulk has of of had tools, some a we expect One see edge that. of interesting to

with I you, be honest small. be that pretty expect to to Although

capabilities our module. but liquid think the The in has tied interesting could not We the into they space. are and good be some -- really we have clean clean delivery space, second really the through today don't products

company stock ways of again, little successful kind us. space splash many that nice either. a an But had large interesting those market, and that's in the particular this So not they are on to

they can, Chinese to opinion their two as it'll equipment spending don't be fabs will So the think compared but the reputable much fab. much that they is, bottom line my the all of in as a use companies of

flip story, there's a there's in think one replace a based coming I side meaningful Korea product product goes helps Japan of on activity going is between dramatically Larry, Japanese kind that, try based beyond and into for coming today and of lot product type to any in into Korea. American the this us to that semiconductor, trade which with even to probably and Japan. which is This a actually more war Korea of

is very more large and share where opportunity this for and very as materials you share. So less we great have have little we for opportunity applied Electron a where know lambs Tokyo a product

think over in coming this from will an indigenous activity tool supplier. far lose I we whatever an might So China away edge particular from

Karl Ackerman

gentlemen. you Thank helpful. Very

Operator

next Mitch question from from RBC. Your Steves is

Your line open. is

Mitch Steves

Hey the tools? equipment pricing two any guys, component just Really my meter there to so question. is these it kind higher creating the sort you story of and taking for levels, just or cost had when of of thanks kind just pretty the first relates story to content high a products. new XXX go below end one change Is when

those end that And of of think you then secondly, quarters. do for recovery gross guys a back kind remember again, back table, the Is there's term kind can and high the there got teens memory higher the a half couple you assuming long a of of margins get in we on target XX? that

Jeff Andreson

Yes.

component costs in without not there's you goes of different discernible products. difference go a It all, for our First saying. to as nodes

and As curve, back you are be as component develop to any maturity down people mature. lower getting grow and costs you march going

is, here etcetera. sudden going it's of something that comes be oh are X nanometer a know But to and shrinking not all you prices

much wouldn't So too second about worry your that. I question? I What was wouldn't.

Mitch Steves

so Second that… was just margin, missed I gross

Jeff Andreson

Let answer way. me -- this me let it

Let me way. this it answer

says term XX% to we that we've the that XX% improve the So we We're been our long goal believe will during things certainly And of as and gross have business is margin. that. upturns bunch margins changing on. a model not business a working model,

and As call I is it start to happen a hit why that'll margins before, improve term we which long time scoreboard model. over some will said the

XXXX have ago did we some jump two huge fundamentally, To And high of a years very was that in almost be now, margins. quarter in first blunt, volume.

I think quarter of XX. XXX in of we did XX quarter the and first the XXX in fourth

and something as And that amounts was lot of Labor so overhead to lasting. etcetera from of stretching came incredible just etcetera, that a absorption, opposed long

know. Having you

still XX line we're business that to and towards of that So correct, XX is day. marching every the is bottom the model

Mitch Steves

XX more XX%? revenues that's we assume, normalized million is going if Okay, be to a one is million just there increase XX kind really of or let’s OpEx some increase And just that small helpful. to say is should or one, or

Jeff Andreson

I we're get some talking compliant to say fourth and the if would higher look quarter might high. at year. we think, SOX that mean, I the at as in you're numbers I way looking Well XX too at we ERP about end become year, have potentially the we upgrade, in next to point

Mitch Steves

it. Got

Okay. Thank you.

Jeff Andreson

Thanks, Mitch.

Operator

Next question is open. from Tom Diffely from D.A. Davidson. Line is

Tom Diffely

to Big fill. projects going and to shoes forward. miss Yes, congrats we're good to going Tom, street afternoon your And everybody. talk industry

here. it the $XXX questions a gains, $XXX to million the when to at that faster? confirm, going guess steady state point ramp is run or you now I you does expect What natural other the you think rate one the couple get ramp slower your on from first is that forward the million ramp just of business So do rate, to there? share ramping of of up business do with

Jeff Andreson

Tom. share You market been telling mean of we've the about gains,

Tom Diffely

Yes.

you once in is know So you that those share market get place.

Jeff Andreson

think I panels with flex going to with the now side some year, they're we're be going. the we've in may but so at early Yes. mean, won and point ones leg the There floating now the I market gas won, I on market. think, the I they're another mean, pretty place. on in we We're those.

signs particularly, And when are when occurs. the there bit weldments certain think that sideways, think growth in see machining think precision some we helpful be the versus see early that little we that'll of I faster kind of recovers, of we both memory run components we'll said, and a coming memories in I back. like spending so when

Tom Diffely

decrease driven then I just the programs to just four, market Okay. want And ago, five and million of it initial confirm not losses that quarters projection and was increase? then subsequent in the drove from declines back XXX the

Jeff Andreson

know about is then it. machining longer answer some talked and Tom the say already So I'd lot the taken trays. component of yes, and you a us precision to qualify just It's

delayed, some time was than this progressing our last on and of but much that call. those, working on that still decline being actually better we're just So,

-- year too we're three other really you happy we're as liquid Success pick the know to seeing then in is Japan and And the to module achieve as next months of other the said a customer we customers first we little qualify our part of versus so that'll is wanted delivery business this what lighter that year, LDM partnership. with our theirs. Korea, additional in that steam progress starts the our of up in

Tom Diffely

look a prospects Okay. up your market nice to next you be the I the it several guess finding employees? And then of you to at ramp over tougher ramp quarters, a are when

Tom Rohrs

bit. little A

is this country. same level there's where than situation or X.X% know able these opportunities Singapore And at that You we're at more probably bodied in And unemployment a clearly so. lower there's days. workers

success of of harder, very but the little ways And bit all satisfied have time, a doing place this at the having people right getting we're the of at terms in we it's So in point with it. time. with in right we're the

Tom Diffely

was Okay. were And to of during you skilled that the half maintain other the you kind of the that slowdown, capacity welding able needed?

Tom Rohrs

of a never properly. the processes when Absolutely. running people during the ratio. There's important of. those getting take. same for people with a They dollar and who materials – let to number not who processes key very headcount are slowdown who Absolutely. degree go are of don't the we're in And certain and people the slowdown dollar engineering we are we to we and -- Reduce

Tom Diffely

and thanks everybody again. Congratulations Great.

Tom Rohrs

Thank you.

Jeff Andreson

Tom. Thanks,

Operator

right. All

is Line from Next open. is question Gus from Northland. Richard

Gus - Q Richard

for Thanks my taking Yes. question.

mean, bit of it about them into to upturn. of as your Can going Going little normalized a run from you share into the customers in February gains. little think you're appears their a rate to inventory, your and customers with and that desegregate their when where of they're are downturn, you you guys bit that you're outperform. underperformed an I hard sort normalized It's talk shipments? to

Tom Rohrs

ways, customer are. little of terms in is to down, going a inventory hard And Obviously this. inventory you about know talking understand for just where the the as bit the were we levels ask it's many folks would were exactly I We us customers. where Yes. in

And normal Having would some it them some of is said of be them we they that, some rebuilding inventories. didn't. we and knew that

And of of talking very ratio this, small think it might amount build However, will to go that deal inventory. going change, quarter into our we extent will product don't things ramp I we but what were most and is, the we a a their are will into great where onto rebuilding right just that anticipate about go shelves. and the now percentage quarter, of shipments, and this this continues,

to the their of the we will most go I customer. out product to shipped think them into tools and

Gus Richard

we’ve products. then value Got it. about Tom, And talked added

of could through. Now kind I was if just you walk wondering

we new expect hands, you content. value of added more programs you might getting to ramp when beta testing know know them when into and You start expect margin with those, customers higher a

Jeff Andreson

Gus. Jeff. Hey, It's question. Good

available of designed be then and won't mid-year until cycle it's prototypes into a first are products long Our getting with those about that customers.

can and we've some that capability and buy you it novel may we've lead sell believe added degree. about talked journey, that some is be that year said our year components today. pretty there’s That a before with Having we to to more big that, next machining, we to weldments our want this. customers. don't bubble, I So approach of It going have because several to because to it's a

So on focused we're that too.

to next we actually sites manufacture that also other that those position we're to we're helpful panels, values we also our while which about will components at talking increase generation on So margin. panels, our gas gas starting manufacture to the be can

Gus Richard

Okay.

-- per So to the going drive going just term, content term to drive in near to box. are to value Longer you regurgitate, you're going per you're box.

Jeff Andreson

way good a that's Yes, about. thinking of

Gus Richard

right. Thanks Okay. so All much, congratulation.

Jeff Andreson

Gus. Thanks,

Tom Rohrs

Gus. Thanks,

Operator

I'm questions Tom Mr. this would further like now turn to conference showing time. no at I the back to Rohrs.

Tom Rohrs

Ichor suppliers like us here. also their contributions thank on for customers call to joining my during shareholders for thank I'd to our this Well all tenure quarter. And our and and employees, you

update QX quarter, you'll quarter. thank And have forward Next you on you. and our we'll Jeff And Larry results. to great look

Operator

your today's conference. participation, for and a and this Thank you gentlemen, day. concludes Ladies wonderful have

disconnect. all may You

Ichor (ICHR) 5 Nov 192019 Q3 Earnings call transcript