ICHR - Earnings call transcript Q4 2019

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Operator

Good day, ladies and gentlemen, and welcome to the Ichor Systems' Fourth 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.

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

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

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

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

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

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

me their Andreson, strategy and On will will recap will quarter quarter results, our call results our our our of of the begin and questions. we After with and are then Jeff for details Sparks, Larry with guidance. provide outlook, Larry CFO. the prepared fourth and remarks, the CEO; today additional open first Jeff line

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

Jeff Andreson

pleased quarter. cash in $XX ended year up $X.XX Earnings business. million the quarter per quarter ahead we from total of $XXX Thank revenue and a XX% QX over free generation up you, of of flow with XX% improvement our incremental Claire. aspects $XX sales flow across with to for in expectations from third of the the generated report strong all cash. are the to were were call. and million Today, earnings profitability cash quarter. million of the third Welcome We growth, our Total share

$XX reduced by net the we free debt cash full and of over generated million. XXXX, million flow our For year position $XX

During our Gas in across demand among strong also the increases of our QX, businesses. systems a we precision delivery significantly we each chemical and and in customers saw of across and growth largest ramped saw delivery, weldments strong machining. all quarter,

achieved also across We share compared our $XX product the each we million year our expected gains the what to revenues of into market stronger from going of We gains ended from share revenues of level discussed we've a quarter. lines. with the incremental

and The XXXX, in reports a beginning strengthened foundry accelerated XXXX, along with continued spending, in and the beginning memory. an recovery increase with initial in and indicate of the started has The Recent flash in outlook. in XXXX, late quarter, memory. results industry and foundry logic evident upturned of in logic conditions we industry strength QX which spending reported into into last improving recovery and which industry is our on in in signs

million. currently In of January, of of we outlook QX sales in with outlook million our revenue provided range, end first upper that $XXX be preliminary has ahead well $XXX expectations. toward a the for strengthened expected range quarter to the the to Today,

Our sequential significant spending outlook industry overall outperformance the year-over-year environment. reflects and to compared

demonstrates also outpacing revenues. significantly growth guidance earnings Our in our growth in profitability,

overall drivers this believe year expect continue outperformance Now to relative the industry. year. trend we outperformance the our through why driving like this review for to factors We I'd are and the will compared multiple the there

The share gains. first is

year of share for our updated XXXX we revenues our incremental We quarter the and from gains, expected you progress. range a came with into on market each

million These on in had progressed year, basis revenues as incremental of of XXXX. leased tailwinds alone a a ramped run business around and our level we these $XX As through reached an expected, million. rate QX the annualized $XXX add like-for-like

XXXX both year-over-year with continued benefit from expected also and XXXX. ramp growth of the lithography will EUV in the for We shipments

increase gain expect Furthermore, share revenue to delivery, area relatively with growth also see customer within additional see a each share In and story. our opportunity underserved Asia. base opportunities we largest to will share gas gains in we XXXX our business that we our of contribute our in customers

continue across we finalize machining, weldments, to In on qualifications work first to see quarter. quarter to our base. next customer begin our qualifications expect we additional precision In this and revenues

will served for delivery area Another outperformance our driving processes. the our the penetrating opportunity of this remains in largest or in Module, the with chemical Delivery relative Asia, new for driver majority Liquid customers, in delivery. business factor XXXX Asia our proprietary in for vast serve LDM. wet largest business The chemical be those in especially to market The success growth of is customers

penetrating In in very new of working are But the customers. quoting well, applications still already. are is partnership Japan, as innings well, several early we our we

Our goal have contribution units meaningful XXXX. for a region delivered from in this position to us that is first beta year will starting this

region's recently the footprint our shipped is OEM. and In unit exciting Korea. company LDM South strategy our our achievement are the we expand pleased to to that an beta first to Korea, for largest for milestone in This we report

customer continue qualifying LDM on we additional closely our the work with Meanwhile, at to chip manufacturers. in our initial OEM U.S.,

Our -- as one for our well increase our operating markets, model order of drive the our drive towards expansion in increased proprietary of of to longer served LDM share as the to is content engineering profitability. just Ichor, example and term levels of strategy product to IP

very gas We next generation are potential panel. our excited also for the about

delivery development this gas We in continue progress proprietary good make of and the novel solution. to

invest area We available our having mid-year. beta have acquisition for units as continue XXXX this technology a drive, flow we fully by and And group. of integrated in engineering to will control we in

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

starting next headwinds, with margin outperformance of gross be per recovery margins the the In The during of our stages higher driver overhead early the XXXX, relative increasing some operational second for will evident and our unit faced leverage. in industry we half gross costs.

anticipated, and expediting but as associated fees. enabling QX, much increased from These steep cost with cost Margins hiring included as QX due in such to started the factors overtime, increase to output. improve not as to

margin forward, improvement through expect with a and drive We XXX operational along continued year. control expenses, improvements, leverage in QX improvement basis strong Looking points of thereafter. will gross about continued our believe we these the of operating

with period compared our expectations at Consistent the profits QX growth we than stated objective look earnings to revenue, expect, grow year. more than double in as to our revenue, compared same last we to faster the to

performance in profitability in year-over-year for We be also expect this our to evident increase XXXX.

offer on to my I our additional turning CEO. Before to recent few on details fourth first want and results a call comments transition to the for our Larry, quarter quarter over outlook,

offering leading With industry time along differentiated initiatives expand positive is trajectory of a with period of a entering the market, strong growth technologies, strategic expand XXXX, our be our to very and to exciting our proprietary and of to Ichor. of it share our in the served

I'd equipment mentorship I like semiconductor the support Ichor's work continue tremendous to closely to together to on acknowledge position, to strategies in I the Chairman. our Tom Tom executing from received premier and a and industry. transitioned Rohrs, company will Executive who's as solidify

Larry?

Larry Sparks

Thanks, Jeff.

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

the our during such for and GAAP that can line to like non-GAAP this non-GAAP very conference note, section reference Investors including items summarizes schedule, operating in R&D of and call. be helpful which also individual our results, SG&A, a found as, financial I'd for expenses the website

of million $XXX.X XX% a fourth increased quarter quarter of revenue sequential XX% third growth. quarter quarter up of Fourth our the from This straight and revenue XXXX. was was from the third

still the expediting fees with Gross over quarter the and margin in XX.X%, output, ramp Jeff an negatively by impacted hiring described was cost time the from steep QX. in fourth earlier. as increase But associated

and new ramp over increasing basis X% improved operating to operating execution, XXX support QX With points to margin expenses development X.X%. product

interest expense the Our expected about quarter fourth million. declined $X.X to as in

to rate have where higher tax being the in revenue holiday. tax quarter X.X%, of geographical Our mix due our Singapore, for we a was

was be of to $X.XX share. the years of continues to range rate net planning XX%. XX% in million tax the revenue Fourth and of for next $XX.X per over equal to quarter income of Our the X.X% couple

increased flow average, sheet. I result were the $XX.X Now, days, an XX of the improvement during cash in balance in XX rapid sales revenues reflecting turn as million generation the a strong ramp year-end, to free higher compared to at Cash than days will quarter. fourth were outstanding in to late quarter. Days QX the

in to support quarter fourth strong further increase levels, turns the the X.X. in improved while XX% to inventory business increased levels Inventory

will to Now, quarter guidance. turn first I our

growth sequentially, quarter At XX% for $XXX indicates $XXX to year-over-year forecast the our growth XX% of sales QX million, XX% XXXX. outlook the Our is up which first XX% revenue compared to is of revenue to QX. range the midpoint, million from of and in

during operational XXX% industry to in per Our of to ago guidance earnings leverage than range earnings XX% share revenues this strong $X.XX rebound of XXX%. share, $X.XX the be in year expected spending. up XX% per the higher to period With to reflect

earnings result profitability increased Our guidance improved of gross volume higher and the a margin. operating reflects as revenue

in As Jeff we the described, we the range. historically through, returned QX, about more gross by to XXX improving as typical in basis flow a margin XX% margin points see gross

also achieve continued through margin improvement XXXX. We gross expect to

of the $XX.X spending well in in QX, see as QX, increase as fees, level operating increased variable XX% result as a in expenses increase related audit of of expect largely to result employee levels U.S. seasonal an as typical a to taxes increases sequential We a about non-GAAP the in over million and profitability. compensation

$X Together, fourth these little expense over compared add to operating the are million of expected a to quarter.

expenses XXXX increased of the roughly spending for operating of to given products $XX to technologies. and fluctuate development related expect engineering continued level amount this the We proprietary of million around remainder

in outstanding in reflected of rate $X.X to tax EPS range diluted guidance quarter. the the expenses around interest and the $XX.X million $X.X of for are million, approximately range the quarter shares first million Also XX%

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

Operator

set Thank the you. line of come Mitch time, questions. The conducting question-and-answer a of questions proceed Capital with Please At your Instructions] this [Operator first of Market. will be session. RBC Steves from we

Mitch Steves

you guys can't great, customer had this Hey, to call top guys. question. WFE Obviously, a XXXX, I'm being are – XX% you gain trying in my guidance, get guys going and some year guide just understanding great it you then a there. so have markets. about some annual or to give for Thanks to a where taking share fiscal XXXX, for up, talk trying realized an for

you there Just and kind trying the view in qualitative to can to revenue XX% a year you going should you're quarter look March? like growth come as is consider So, line. what looks seasonality give any off, the us what on of guys full understand like the

Larry Sparks

out and good year outlook fairly Yeah. a quickly. front foundry given that question. of back be what the Hi, maybe We see indicated but maybe half second Obviously, Mitch, they half guess. also very and loaded, largest through logic the a others would it's came strong us had year it just year out the the next in that obviously, have come I in might We customer WFE, maybe few the the Yeah. for strength relatively our pretty for of to believe, difficult half of the mean, areas. offer said, I to – understand I'll front-half year. figured

a a So, or don't we anything that. one we relatively fall-off see strong QX-to-QX so is, QX, like see

is relatively see front half we the So strong.

improving. initial of waves the Korean still obviously, we year, call, half we can talked directly. of as about think the through spending is In on our we're that see that memory our operation back seeing We the

that as large into half impact have half. the that will the a second think second continues I on

some Given because have they there – outlook, think of initial largest where customers that through, confidence that our continue wave that of we're will seeing is today. the I

then We obviously our from also largest is EUV, benefit and third ASML. customer

they're of the kind grow. year progress and So, quarter-over-quarter kind of seeing

half little they're rate share go. a run helps as plus have we'll back already will our more that the we this our the where's back-end loaded, that get gains So expect year, in year, a bit to little probably be largely we with ones

our which slightly is front-end an So, front-end really might half you be loaded. our half of give customer, business over it has hard but or indicated That that help? absolute, largest to

Mitch Steves

helpful. mean, mouth. it's your I don't Yes, just want put I to words in

is EUV. benefiting guys Lam correct? I you making if I'm like probably that should sounds from Lam's the message you a it qualitatively, assumption is little correct. bit because number mean guys do I Am getting are better, right, the So

Jeff Andreson

the gains. the second take that'll EUV share first this reading through So I -- in similar year, larger yes, that, correctly new with I than that then to of think the year half for of you're year be obviously build kind a share to up and the the gains ramping the of while then and half years, just the

Mitch Steves

Okay. And just one. my then second

kind XX% number it out XXXX guys to of of, a or have customers wins call revenue something it material you out I Is take a new further and be any AMAT there you're to for kicker Is magnitude up new and guys, to outside now order these for of going the -- is how X% like of for guess, Lam as just revenue? say you really percentage players. So XX%, two of to should or enough any sort been obviously, can you much in us sort of about talking 'XX? XX% give small of

Jeff Andreson

question, very to quantify. that's difficult I Yes. good -- a

but Japanese, we innings. that the the color, we're the some one give tools. think it Obviously, large we I be some we very early quite a had material win more in can if of OEMs processing positions in of our won web through very, Japanese little could you or if have Korea

in said with I prepared remarks, As Japan. we're partnership my in really our happy

takes last couple XX% largest and level, degree having our so of support of two said I years, the back really as you with our the revenue that, the that quite So of down lot you percentage to if of surpass bit customer, well. a that's a look will of ASM over come third customers largest some growth kind the think, see to also we and has it and

success will to in grow -- category Mitch. hard kind but and then but a is turn needle other what it's think so now, see Korea I that in Japan the we'll where of And bit, quantify

Mitch Steves

Got it. Perfect. Thank you.

Operator

of of comes questions. proceed with set Please Sidney next line Bank. Deutsche your Ho question Your from the of

Sidney Ho

Great. my quarter guide. strong Thank you. And I'll congratulations add and to a

month are how guidance. -- QX how that? of initial that a you you And gave or ago Curious, a you operationally, risk? bigger have clearly guide, impacted think get making guidance But changes concern. -- any better things terms you in you directly you prior to gave accommodate size since the becoming what when In ways that about do to And gotten you coronavirus that may the indirectly?

Jeff Andreson

question. Good

know. did very situation -- some fluid now in had have the don't a just So, you is employee coronavirus we've let we an -- right base obviously. What China, we to

restrictions to put we've a we've thing did protected a China, as that's we home to employees on that. travelled ensure our anybody and we was asked them to first that, week, like The stay and company some travel for and things

employee our base So is protected.

at New I we it, a week, We for the look think, as front-load a our New Chinese by to Chinese now, right material full flowing. for receipts they've extended Year we keep Year factories week. the so plan

some larger I degree, in by delay three it's us a four range revenue this. accommodate that to now, are have some or quarter, quantify can We suppliers have right -- But that are this hard impacted materially for we it. say, to so we would shipments.

aren't demand our any reduction that, we customers. Having from said seeing

can then kind these So, build of in take ramps. obviously they everything will we

it's material, If stage, new obviously we hard you or to and would know. let news get it. we this for you at tell So, it's us size

Sidney Ho

Great.

maybe as up, follow the So to want follow previous up just my with question.

that later year? strength kind in quarters? show up that one of higher quarter talked sure you if show that be look and some expect at will you're about be in the the second customers' first of you will business strength two if quarter, tool even in You will revenues in strong all next But mean flat. I the to not QX, the the shipment Or up or relatively your to in seeing goodness

Jeff Andreson

I customers. our by But what four to Well, still that I'll about -- time. tools and we between will talking our before answer want somewhere be I suspect ship. specific that lead would panels too I weeks ship about don't gas six

it's six lead too. somewhere EUV in And some business, our almost quarter probably for four components of certainly, see With will of of So, in hit it's next weeks time. that example, our what side can to months then in a level quarter. in customers the materialize six we that obviously

Sidney Ho

I in more. if Maybe squeeze Okay. can one

On your see last throughout mix, at the it's QX were the time great But a That based about margin in revenue year. prepared margin line, relative level? context we gross on improving how to by and think your and Thanks. basis remarks to similar should about and about points the expect put an at revenue normalized gross you the in of current level XXX be talked the great. some maybe the would in you that level headwinds continued in improvement of also you past, improvement

Larry Sparks

that. take I'll

I we still is, this there we've things obviously that in coming done XXXX, is So online One added think, a not utilized. fully year. capacity few that's have that's

So impacts that bit. a us little

at say is and still levels not second of plastics our XXXX. The it is that margins business revenue thing in the was

So, to we're and product specific linked very mixes. is still – that to memory customers business and

seeing we're businesses of that's margins business last can reason we couple be improve our comes improving we in that well. which XXXX, have we still that the why back gas is memory do should as other lagging see quarters, will confident and ramped through the behind So, that say as one because feel

that thing here the remarks, is. I'll we which mentioned just The last reiterate in prepared

of that holiday season doing including to which it it products bonus we higher get expected, customers, to takes around We of on programs type whatever pay are normal holiday is included overtime just levels top the things.

QX, to been the the – our we works hiring unemployment do its go way see the companies. outsourced I as think, – as of But out this of normal will factory in do mentioned, of sort the QX. with using in by general some We're have had will labor We which some marketplace, that a our doing difficulty of drive in much areas. recruiters. still cost, and we'll just strength that We've pretty we expect have be at We've we in QX that trajectory. now come some key a up things

Jeff Andreson

then, And I Sidney, just might add.

really of the we You mix, It's gas lower. margin And versus our out-ramps the gross panels mentioned average – panel kind business and of side. component ramps. products gas side strengthening of is kind ramps these come of into when the and that our the

growth bit then go in by So will levels of of side out as none a replenishment you year. build, component too. little assume and our little Once can and be has inventory some almost into that through as Right words, the there that on. helpful, customers other business, well we the is get that the we're and is in kind now, inventory going tools we to of building what

So of the to inventory. the is side for replenishment a material not at there component degree any customers our business

Sidney Ho

Thanks congrats. this and Great. on

Jeff Andreson

Thank you.

Operator

the of Ellis your Company. Craig next of proceed Our come set questions of Riley from B. line with & Please question.

Craig Ellis

on executing wanted congratulations strength business of to I for Thanks in a to Jeff, the to the remarks. the and revenues. such taking prepared some Yeah. ask strong questions question and your follow-up

that year? different share way those in a panel like or of a from through relative factors I intention million you won't XXXX. of gave repeat the as about them that list Are $XX next-gen were down in mid all. outperformance you than last that? magnitude us betas to calendar should mentioned really things order But started nice that gain them going magnitude. long year's on in could think the their we You your drive with question hit Was gas is

Jeff Andreson

just to you we on more We thought we in we was it market so of year, thinking, quite single because year. downturn I and magnitude. XXXX, were versus guys material want away every provide this share to XXXX. wouldn't I updated you to them you a it – in because was in listed walk with Yeah. wins were important very clarity Last quarter our order

wins. This year, share another round have we will market of

this talked liquid stage Some either that be that a year that of XXXX, Korea will XXXX. for likely in delivery the late I in the and XXXX, about what Anything talked my Japan the remarks about. prepared I than do more in will we be lot is is really setting of in some

will about as more So not XXXX. to all yet exactly. it But drive, we to needs in get of affect what XXXX I talked gains go place share again into

Craig Ellis

your and they be you How how what on then That's following-up milestones the just from would working quickly steps evolve? points in What And Can beta? out helpful. there? can and Japan help the after are both you Korea. us and could things watching understand, just shipping play

Jeff Andreson

Yeah.

typical I nine think, FAS that. XX you ones, think more months something a like months, qualification of months, nine six of XX months, to and probably a

year by a and transition they something could to So of They these. to time. qualifications and then long have a you liquid be They and think built be as lead it designed qualification, there'll delivery themselves run that'll from customer.

obviously, longer at And we're U.S. our at and to. had qualified we and adopted that's so that OEM to taken we're expected that's this customer than one looking proliferate

So it I'd say, of nine bucket. to in think month XX

Craig Ellis

helpful. see That's as Ichor's fairly year-on-year, variability you with that action is see certainly think mentioned then to unit lastly, in or work would can is that either And about drivers, change revenue there any there an Great. cause content linearly we we or one question way? should that or supplier. be we materials the coming growth shipments EUV The in European that expansion the of from a of rapping

Jeff Andreson

units complex pretty panels. complex much a we at build, than more gas are these to One, that our process

lead time lot build longer. their a to So, is

slightly they going first we’re year for ship map to we Because six for say would months calendar before but loaded a in last the year to the months five generally or customers. our to in tool. customers about months can our I deliver fiscal be So, the we anything is next of need, back-end deliver us, six

functions during step year. do see see we of increases, the So, ratable but don't we kind any

Craig Ellis

That's helpful. Thanks guys.

Operator

the of of from your Karl Please of set Cowen come Company. Ackerman & with questions proceed next line Our question.

Karl Ackerman

in largest please. two relative increase component called Of the XXXX I the be like-for-like $XX if your ask, you of out and Korean expand a XXXX South have and might that. programs module Larry in opportunity Jeff, and afternoon. from so good Hey, million late to LDM, understanding LDM in XXXX, the the questions customer were to what you the XXXX. is presumably better we Taiwan, customer to that just might

Jeff Andreson

it, I share if think year but gains would entered carryover. it, versus about you exited we about $XX the at. the specific that largest component the not won't about LDM you it's at I we what I in mean that's be tell million of

when So you lesser and of the I a it a the precision and machining, degree think think LDM. million, of panel some gas that won $XX some and is then of weldments business we to lot

So, I'm not to quantify it, but LDM the is not million. $XX the biggest portion of

Karl Ackerman

Got a business quarter year. line. back share below implied to it's top go hundred it. achieved XXXX, Maybe if see of at going incremental what some termed while acquisitions for to late $XX of and on to the in two points your still margins in recovery also in up the XXXX cycle nice moment, years margin gross basis and really this ago. gross were couple for a Obviously, on back good last these your gains But, improving, you've process. a made we million But like March we've the we

us allow margin -- comfortably more the machining? are I So, our guess to XXXX, plastics reposition I of as those be sacrosanct, profitable us perhaps yet gross probably towards we let's margin-dilutive, of of if where completed? okay, give model? say, Second, if maybe areas third, And integrating been revenue try precision then in long-term Talon might businesses are fully business your what about are process we have Cal-Weld would product and guess, not like within the all first, we and where level think

Jeff Andreson

in. one. One long start I'll Larry can maybe come and

probably Since we've about $XXX So that one the for of you'll million. kind back levels about obviously, of margin. added capacities gross – things you're then, XXXX another to of refer

think the takes that billion, into could $X.X capacity us billion the probably brick-and-mortars, in of we range. you So, have $X.X

So cost until that to into a that. grow it you has

margin like-to-like the in but headwinds. one see get then we'll the about right the businesses. is component back does, the half a -- growing which I'd talked outgrowing in near And it the And of business machining of that panel front XXXX to rate of and the to business, plastics kind is anywhere other higher weldments and year, of of that's So, the once we'll now. need accretion. not And -- of our business. precision now say initial gas Larry

Karl Ackerman

appreciate just really I sneak one I that. Understood. one in. last one last Maybe if may

right you. XX% Just tax mentioned Thank rate, do for the the I we for level QX. year? What think full is you think

Larry Sparks

is for XX% XX% think is XX% product range, on between think space, the and for I It but I and a is Karl. a good. depends I now pretty Singapore obviously We think between good. said XX% XX% the the but is now, U.S. mix -- good

Operator

Our next Ho question. questions your of Stifel. with line set come proceed the with Please from of Patrick

Patrick Ho

the into Japan and Jeff, with the to you you first Korea. penetration very maybe Thank start nice both on much off the some and congrats and of comments quarter. systems made about liquid delivery

volume believe two prefer differentiator own before buys? And how that put suppliers regions, to they two, key are higher it even who dealing been those door? you with what's in a basis know insular the sign-on supply. internal on local I their to one you the is As or allowed tend you very long well on have will do going-forward that guess take

Jeff Andreson

Yes. good It's a question.

in Japanese mean, with KITZ. were market very is company a a partnering one is the OEMs why I which in right. Japan. difficult to recently Semicon the and It's them. we've you're with well-known We've a somebody. company to So, It's tactic Japan supplier penetrate, taken of called

making progress. they're very so good And

easier and we're prepared smaller some been which it's much interest designed. is maintenance design. footprint, is, it actually a improved it or requests now as much brings Why mention, remarks, quotes, technology, call said my it's because And to really in getting there much is not as I it's more modular,

is a So bringing technology reduction forward -- and that's customers. which for cost the the attractive nature, on

and months in hopefully that get nine largest into think the so next I is, of the First on our up so, I and qualification then And one that's Korean earlier then, at to you XX or went level. month got think of how to questions and they'll recently went OEM tool, of as qualification to on you in beta a unit will it out the the out customer running very on said be tool. largest a kind then of go qualified these months. And the customer and

Patrick Ho

That's Great. helpful.

Jeff Andreson

So this stronger make -- the it's XXXX very and good much sets that we will up make, year progress impact. Korea, -- Japan hopefully

Patrick Ho

Great. a margins key given guidance of there improving improving of question the the And earnings model. and Larry you've in be for operating leverage. gross maybe will outlook to terms Obviously, a variable and follow-up some

going up and things, be mentioned, of Japan side I investments whether some given as you're of as well OpEx Can bit of of a you're see a the on of And Korea, guess gross On terms $X top it's that the to going new some on development. doing, it's investments of million the and you to that on in you'll that? manage you're how give improvements leverage the going metric you product color margins? little to How drive quarter-over-quarter, OpEx?

Larry Sparks

long not this that's money we other as We'll think, to I the but where need be a priority -- things high year, on benefits R&D, and only it in I spend general, QX. for we said, longer-term of has billion the in to in in XXXX. expect to $XX seasonality the the I as Jeff you this mentioned, continue mean, have range. taxes

G&A and the As that tightly. very, far sales as watching we're line, very

general, we in But to be. using system. start XXXX the be think $XX hit low that we implementation P&L's as the our range I where ERP million kind mid, that doesn't probably of will in of to keeping is till We kind in the want process of

need R&D it's be think we this place I to allows get investments us make right in executed successfully and absolutely that hopefully penetration there. the still the as we to

Patrick Ho

very you much. Great. Thank

Larry Sparks

Thanks, Pat.

Jeff Andreson

Pat. Thanks,

Operator

of question. comes proceed D.A. set of from your with Davidson. the questions Diffely The of Tom next line Please

Tom Diffely

Yeah. Good afternoon.

I'm it sticking through and so the how curious questions, balance So employees, you versus then cost to over cost a right now. train can the And how the running just with workforce find do you're flexibility get someone way having lower time that does long OT? an creating take replace they you

Jeff Andreson

a it's good Yeah, question.

is rate job. challenged is very say the we've rate But most -- we're pretty in pretty obviously, finding U.S. generally the been employees area I'd So employment unemployment a most that doing good low. and

These business. weldment can relatively need There skilled a example, is are there advanced the that experience. wielders, in of portion these certainly to just workers, is of up hand different levels that weeks, side also is skilled have on quickly There come for the workers.

side, machining of kind very, entry-level Similarly few very jobs. on pure there the is

with we have find do have to welders with experience machiners to So experience. find and we some

and we've fairly ramping well. So, been

not Tom, flexibility. time, we over have a need over do because we of to time, some eliminate certain We amount will keep will

the high some over certain now, it's So time, we willing of are to carry very, right level areas business. very in

Larry Sparks

think, of follow-on, just So, are Tom, that the hiring. our in out extent a the most I going to factories think -- I we now, all

really high, it other as time is do it, are which employee things, is mentioned two over So economics of rates of put the just but we the the too is strain the one on Jeff level employees.

are almost factory recruiters all the every other is they and everybody but product now, customers hiring bonuses and doing out we're committed we into and extra out to to the getting things. So hiring that, with we're it, need

we're level around levels involve temporary at to and more to getting headcount, not overtime, that some workforce some of view in normalized So today. to the sitting but does committed a we're clearly,

Tom Diffely

there. sounds a problem Well, high-class Yes. like that

So, Jeff….

Jeff Andreson

Yes.

Tom Diffely

talked well? about their demands At were you start a to your a just think the -- Curious point you build customers scrambling how, stage do meet at to now, really you we'll where get right lot shipments. inventory to you for customers' what as

Jeff Andreson

very I this Yes, would we of say would little that expect quarter.

as quarter that next to very we've I the been think of see is ramp to start kind alluding steep. we'll and

deliver is that tool. of put So we a on getting everything kind

eventually, and we'll at our capacity want their have businesses. customers catch-up to to that the inventories able we'll replenish our but on-site be -- So

second I but of this any think, in effect probably be the will -- meaningful quarter. So

Tom Diffely

Okay.

Jeff Andreson

Beginning.

Tom Diffely

If I adding added capacity were areas across there -- capacity? you where certain adding said Larry, capacity. that board been you are are you I'm the curious, you've just had

Larry Sparks

is some Well, CNC little brick-and-mortar, like increase things were fixed that assets that that, what when people buildings talk machine, some it's brick-and-mortar our on capacity. you adding for in but stations capacity and very there is of machining, we're welding okay, will but

Jeff Andreson

people machining. and I So, weldment in sort and then machines the think, area precision yes, across of board the

Tom Diffely

Thank you.

Larry Sparks

Tom. Thanks,

Jeff Andreson

you. Thank

Operator

Please Richard Northland comes your Our the next of line question. proceed Gus of set Securities. with of from question

Gus Richard

taking thanks my for Yes, question.

the a housekeeping revenue your Just one, XXXX? in quick share gain what was

Jeff Andreson

million that million, see basis $XX year-over-year going run the said for which $XX the million We increase we're about with to means, about of XXXX. a on full year rate $XXX of a into

Gus Richard

Okay.

in before [Technical calendarized which perspective. in can were in XXXX XX%, plug-in that customers, business you about XX% kind in this XX%, was Difficulty] of about your know, from number So down the share gains versus down big XXXX your

are gross if I for about front minus When who -- largest I loaded. your is to aligned does gross some does margin your So, profile. maybe your WFE little think me, mean, XX%, I up some looks plus, -- margin a it and slow there with headwinds half customer about set you mean, bit

mix, If half. loaded WFE little in you we when is tailwind more year, that I It's a second the in the logic, margin then your terms probably stronger half the foundry, of into in little for a logic if mix of the bit second your than do of memory bit from a think memory kind second there gross product aspect, but half. look about is the see mix, in difference and maybe

Jeffrey Andreson

obviously Yeah. gas margins the our different but versus I'd panel machining, specifically business. about there parts precision plastics talk gross business Well, generally -- say business. our I'm different going and the pricing, level as customer is not for weldments, to margin business of lower is

we've gross I we you think, see what improved is this tried tailwind, a from to margin guys quarter. let know will So

in margin to to gross the improve next And improve again quarter. for it given the the think levels, continue place to have we year. expect We then, plans revenue I

versus about -- logic who and the destined it's doesn't to between customer customer versus edge, all goes we gases don't end a more gas is, them matter foundry price a we our like We customers, customer panel a the or the on they many how same, the so. that for difference use -- tool don't

Gus Richard

business little components a weldments machining second going is like or of and margin content the half see in ramps your up a high like that? higher you Do bit higher memory as

Jeff Andreson

To kind is, gas business ramping, expect the delivery made mid-year. a higher yeah, I'd gas now the of, side component point our faster Well, is little is we probably -- to right we is business fastest. by of margin clearly say would our the grow our,

is kind from other it the some components a outstripping so mix of perspective. of And

once think and those get mid-year. the a inventory we of normalize headwind So I we kind as rebuilds that be nice would cross

Gus Richard

very you thank much. right, All

Jeff Andreson

Yeah.

Operator

the We closing have for Andreson end turn back reached I'd to Jeff over any session. remarks. question-and-answer like of now the to call the

Jeff Andreson

on our the their you the to for this I'd Thank quarter. and thank our employees tremendous and joining like in us call for Ichor, tireless business. of during efforts suppliers ramp support steep

look industry appreciation our flow to shareholders continued business their the performance and like thank execution Thank and We for our May. call to QX on you. updating you cash for I'd earnings strong cycles. our through in forward early

Operator

conference. today's concludes This

for may You your disconnect at Thank lines time. participation. this you your

Ichor (ICHR) 5 Feb 202019 Q4 Earnings call transcript