Earnings call transcript Q1 2023

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Claire McAdams

Good afternoon and thank you for joining today's First Quarter 2023 Conference Call.

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

These risks and uncertainties include those spelled out in our earnings press release, those described in our annual report on Form 10-K for fiscal year 2022 and those described in subsequent filings with the SEC.

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

providing financial be conference during will call. we certain measures non-GAAP this Additionally,

release supplement these the IR earnings GAAP and Our press financial to most each a financial measures. measures Web provide posted reconciliation financial of non-GAAP their comparable site, our to

our with on Sparks, additional our results a of questions. Jeff the business and remarks, call Andreson, and CEO; with first open quarter quarter our we second the our then of provide today and details me On will Larry outlook, Jeff for begin are line our and Larry will CFO. update will the After and an review results guidance. prepared

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

Jeff Andreson

And Thank welcome to you, Claire. earnings QX call. our

with Revenues midpoint from the lower first expectations a our the came Our XX% representing of closely going favorable XX.X% range of mix. due above at the million in quarter quarter. were of just guidance, Gross margin decline a the results were QX. aligned less of $XXX into end to pretty

benefit, the more midpoint. range will Larry able the quarter. closely margin per greater compared the and well offset share that reduction expenses FX about tax Earnings the of later, was operating which as achieved than to right due manage during XX% $X.XX quarter QX. was above at result, X.X% the our a of as And a operating to in were discuss expense We in

additional some as well memory outs of our order we customers were in quarter, with year-to-date. environment results as expectations, logic. QX leading of witness further our curtailment edge investments result as as consistent most a the through our cancellations spending We in customer while on push of largely the weakened reductions So progress has for incremental OEM demand

is of year unfavorable entering than levels. anticipated seen about customers typically mix versus as component our comprised work particular, we to and our had quarter drove parts, machine quarter. first inventory expected which the reduce the a we what of has the deeper largely weldments cuts represents precision and their business, which of for In the side revenue, our This

the last our recovery. panel In than time we declines a the our our quarter adjustments quarter this what our expectations builds sales closely lower With decline revenues in with QX, expected in visibility, a we second mirroring the expecting at current of to gas followed largest are system forecast new our by are XX% sequential expected customers. for business, for

in component the grow QX again marks Product quarter expected our and panel are the QX. the level in expected believe to profile the the gas with out mid discuss We trough Larry businesses gross sequentially XX% beginning in margins detailed to for bottom to guidance, with less expecting favorable both before second mix QX will this in the be will revenue in revenues year, QX. half. low recover our And as in we to and QX

spend. these equipment the We XX% fab expectations believe few is down quarter, be face the our aspects during headwinds, mitigate our XX%. we market now declines. these significant that significant of call expected by business at discussed to least help could market In last a point of within softening decline reflects at non-litho that a CapEx further range, understood part in semiconductor this the XX% in And total this is this the of to it well year wafer

These bright of portion a which a while include EUV is our small lithography still growing market, business this revenues year. the our spot in

our before. our end ever also memory market today sales approximately less exposed by that memory on revenues XXXX. investments Based market, We drove customers' estimate the of are we than WFE to in XX%

cuts XX% seen business is spending this this of of segment the the significant few marks to year. over a now years, decline that seen XX% levels While about our prior XX% from

believe we of is witnessed the side, areas and foundry in market reductions highly the advanced leveraged IMG part incremental investments And have and our logic aerospace. from comes the revenue, industrial The as this addresses most the such acquisition, year-to-date. important medical, the to revenue capital our portion of which also nodes. profile On non-semi

our While segments the weakness bit to still conditions. a previously that non-semi in seen small a in portion business, And expected better softness quite in now these we've macroeconomic the in of markets perform overall these were WFE additional XXXX. reflect some

logic node, investments. provide achieve a term, with will with inevitable, longer these the much low the Ichor ability environment of revenue in these improves, particular believe which strong recovery levels we that markets, In and pretty the is each especially unsustainably spending advanced to memory memory, when of

manufactured time, this increase products. in investments on existing content our remain on on technology to our support make proprietary products slowdown we roadmaps. share will focus new to both our and We for focused driving our the qualification long-term continue to as internally new During that as utilizing of of customers' well complete market products offerings gains share

the chemical panels, address as components silicon well areas systems our focus additional developing remain as the completing reminder, new web gas carbide global qualifying a initial solutions leveraging processing qualifications machining to for customer the market. key our customers and that As with of delivery generation internally qualifying delivery next achieving qualifications footprint gain growing developed our components, share, our serving market, of our weldment gas

good all make fronts. to these continue progress We on

components qualification begin of to integrated in gas we'll the existing these margin that incremental will panels manufacture These we thereafter. expect our shipping machining We be components business by will And accretive. be today shortly finalize midyear.

well. to these ship, in units We The next evaluation to engaged three with several two are customers. units generation additional three next months. that panel Once expect the gas we evaluation actively will be shipped ship we have now progressing

of first panel expect to these completion for of and expected each gas the With our we in qualifications, of successful revenues subsequent next XXXX. the half begin generation evaluations initial

later to will by production confident customer chemical slower chemical that we new delivery remain will for traction gas our year. that midyear progressing completed and We panels delivery The XXXX. our new a pleased business have our finally, products. delivery of gains volume report carbide in module this than at qualification are first begin but additional gain our pace we're market gas silicon the And and delivery

Before turning Larry, to over here when that I'll more revenues remind spending sharply today to tend rebounds. industry the recover everyone our call

As year the with see improvement our demand revenues material visibility, recovery, I QX of in we'd followed current of mentioned, we recovery. beginning see on the the customer a by in for end. bottoming Depending out a slope

our through meantime, developing products our products environment operational and developed our focusing with In are and the second new the align we financial both business in internally that qualifying needs delivering for recovers improving solid lower by the customers' the on results half, as costs. demand technology managing capabilities,

I'll And to now call Larry? Larry. over with that, turn the

Larry Sparks

Jeff. Thanks,

line helpful as non-GAAP Investors and during you very of site expenses charges items schedule remind a metrics R&D measures. measures GAAP There P&L and are First, reference exclude SG&A and that for such tax the I call. in Web acquired our the is These discussed intangible items summarizing the this including impact the for discrete of assets, would of non-GAAP results non-GAAP amortization operating conference individual like today and expense, non-recurring financial share-based section to compensation adjustments. our

Gross of quarter. less favorable above to in slightly the QX. lower were midpoint of of the at the from the range was of mix revenues down XX.X% the First quarter $XXX end revenues margin guidance XX% and million, due

approximately in of margin prior the a as compared gross the flow-through implemented XX% expected, quarters. improved over last cost As XX% the quarter two to to reductions result

at QX was resulting operating expenses midpoint the were operating X.X% down and guidance. below $XX.X QX. from were margin million, of The forecast at approximately XX% of

Other a and net income higher result higher million. $X.X than expense foreign million interest rates, $X.X due exchange. much was As of increased to average to at unfavorable interest expense

$X.XX benefit we net by Finally, and earnings expense approximately this our end benefited driving of recording above the the the range ended in forecast XX% guidance than share. per included up $X.XX, tax high our a rather at EPS

balance sheet. $XX Now and we'll at $XX.X available currently over our quarter on million have were just to was end cash million. total equivalents million turn and We $XXX debt revolver. Total the

with no bank any coverage below and our debt net have financing. remains Our we to liquidity ratio exposure risks X.Xx

cash CapEx. modestly drop receipts. a Notable were receivables working faster we million, to revenue. but $XX of quarter which of use the accounts in the higher reduced was frontend the QX reflects use inventory operations due and material both was million highly of in to of million balances quarter which of $XX.X negative was In Free cash from during payable, the capital, and quarter in of a million for flow our days for $XX.X result a $X.X cash reduce flows a weighted

guidance about at million, in minus approximately share. QX. revenue reduction second mid guidance to expecting in With continued to we guidance. we'll margins breakeven per low quarter QX just million of to Now the or actions reflects range of our flow in $XXX The cost level, improvements midpoint revenue the this are turn our decline $X.XX XX% $XXX million guidance range, through from XX% is a to XX%. and earnings gross under our plus which $XXX incorporates At revenue

support new the second to to we support R&D product quickly year currently time, maintain run recovers. recovery to levels half and be up expect demand OpEx environment our in critical spending when this respond rate our remain At to million, expected of to us the we the programs customer revenues. the to in of expect as to in quarterly operating that the enable We expenses investments slightly QX of will infrastructure flat relatively $XX.X continue prioritize

with expense for million in continued increases QX. And rates. quarter, our anticipate expense reflecting breakeven be in tax We recorded net interest no interest earnings, we expect the $X.X second will the

However, be the expectation move our we net of to recorded guidance XXXX tax on reflect year. a full taxes for will as the through benefit

this an million a already the $X in in of globally amount QX. was resulting range for tax of the this benefit expect time, to U.S., million. pre-tax loss expected A year, expecting $X recorded pre-tax the are significant we in Although at we full benefit year income in

cost volumes. fixed large U.S. of which including our in customer with A change the not interest expense, structure, does portion is

in expect we your expense to reflect the revenue model tax credits U.S. XX% be to should utilize And these We starting therefore, able return normalized next returning more as to year. volumes XXXX.

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

Operator

Thank you.

a We will now Instructions]. be session. conducting [Operator question-and-answer

Brian proceed your with question. comes Our Stifel. of the Please with line first Chin from question

Brian Chin

guide Jeff, for anticipated. off, Hi revenue Thanks us afternoon. the a June kick worse there. little few to Maybe, things letting you'd the than Good quarter, questions. bit ask for a

there, kind towards the you range a of your of look if companies provided. have of different kind of that end some peers at Although, out lower you're

and of the you'll peers sort will sort quarter of confidence what doing of it and you be well? kind here off your level to -- and in that and they gives for that to and inventories incrementally, of how into of and improvement have your their told that uptake picture of tie what's direct customers what bigger So actually bleed to you down burn inventory the June kind that half sort the take terms see amount of them importantly, off to about customers that want more are be? some start driving as that And your long where of sort second trough will

Jeff Andreson

Thanks. is Good would that Brian. talked on on I think tell about burn I What inventory questions. Hi, I the you chasing calls, demand. prior

It I didn't towards the may the hard quickly because off, think kind it second machine but of it large it resulted to there end it kind of think fell into quarter? was. longer pockets as some QX. just leak I half. be done second Do think turn by would be the It's in will a So of as end thing. of I the just be the that largely,

for example. half We the board. across at as bit recovery, strengthening we at have we've kind seen little the we don't logic Now, recovery across look for of and are segment. shipments a destined that get But seen visibility some perfect the some -- it, second memory, China,

kind the kind think of well. of on and about our is their on. customers call the I one some that And strengthening holding of memory talked view again we've think seen as of I in area, logic

second the So two of that I in strengthened QX our kind us pieces last those seen the larger the And and give outlook we've weeks. half. QX for several think are confidence over

gives So confidence that's to our being us about talk QX trough. what

Brian Chin

months full you what you a direction this about the Okay, of thinking year that's about sort like can the that maybe business ago? gas panel your of perspective helpful. from that and relative three And then sort sort say to do, of of business EUV expectations year

Jeff Andreson

I know. more as actually. a a pretty that think you jiggering, related. I would say solidly backlog, of little on it's but than schedule tremendous held amount been There's They demand related have

the of next schedule, So in fills that it's one anything it the in. shifts kind right

piece So good very it's becoming bigger the and from it's of business, today, it's stable to the us stayed a through see. so of for our beginning year

Brian Chin

the right. All Okay. answers. Thanks for

Jeff Andreson

You bet. Thank you.

Operator

Thank you.

Riley. line Our the proceed Craig next Please comes your question from B. with with of Ellis question.

Craig Ellis

questions. the with opportunity Yes, a silicon how some big two the as competitive your like? for thanks look now? wanted for What's just believe you understand industry? looks panels. to the question market out taking you that about goes to Jeff, back And of is next with three what's and the and start prepared that gas to carbide talk you I that years, the you Can in potential see market you remarks just that over landscape

Jeff Andreson

industry question. could I the not wish I silicon answer in I'm carbide. versed that

some are there focused it one market, the There largely customer. people at existing carbon with is sets. tool that this out there several are of silicon us, out companies or addressing For

so kind $X on an rate, it's look one, run kind of at we a would and year. $XX of And between somewhere this first as annualized say million I million

So these build of of up. each you applications, continue win of see they if you to kind kinds one that can

had couple in much pretty so early those. we've players that the conversations were on with of And other innings a

Craig Ellis

that next Got into question. dovetails it. And my

of some the that but cap a is been came that that of mature from recent areas have on lot is China, of of areas of particular nodes one up it's things a and couple silicon be strength area? So the the from demand mature carbide? Ichor calls companies The Is just that mostly, that's opportunity what existent flush might materialistic what like trend. is future a or in is have you global that something a to what exposure clear Can strong it question does out nodes? larger

Jeff Andreson

that the that mature through shares they new nodes. the tools. today. we they're those we think panel is I from most Well, benefit way with honestly, the of are tools, would Quite this I If answer gas new have follow

call it. get fair share we'll our, it, of So

exposure some I think if that. X are to anything XXX tool, millimeter, refurbished a But it's purely -- have these millimeter, we vary. They XXX less inch. of

and probably we if they're exposure. same have X inch so exposure get X of And inch, newer XXX today. kind kind the But millimeters, less get we older, of a the little we

Craig Ellis

And to then, Larry, Got it. hear. over flipping Good to you.

takes the given expect What business? cash resources side, And for in that the in you the earnings use gives second mentioned then that there what guidance mean of used you on XX either So you does talk Can generate? that first was quarter the quarter. million about the the have, you for to revolver? the or like some and supplemental do the

Larry Sparks

to I think we flow cash would in QX. expect generate

the you I quarter receipts current from significant, than was lot think if first think I quarter, that, won't payables of look you in you change pretty QX, a look and which drop at second our outlook, the if see other with there. the

work base. of and weeks we lot the back lot the went of that shipped had even five of of weeks, quarter, those customer a revenue I number, think we And at the inside there the a side, we end on the receivables kind a last though six of hit quarter. the churn was lot on

than little So receivables a have we normal higher see on basis, happening bit a ended and in you as QX. expect would up we with balance to

So sit I to expect positive we today. flow we into QX cash think generate where

Craig Ellis

going Jeff, Brian's QX do for for then if bottom. hear. And to a could, just the Jeff. view back last one one about questions of one I I'll Good to being

proved trend in the catalyze Just versus quarter, along V through a we your be or two would macro if that view would bounced were of discussing? the a U shaped the environment, bottom nice that third little given what such one factors you bit more shaped be state the a the things to and

Jeff Andreson

know the how I V don't would steep be.

the way we're kind to quarter similar I then think from it we're that two increase outlooks X% today we're having, quarter to four. a seeing quarter seeing something three and XX% the in and of

have -- long, to a time. seeing in further of probably WFE than of we're down, you'd memory of already long levels those to the again, long, pull lowest we're at today. But macro spend So environment kind have south the go levels

So better can second in hear nodes? half about So to those before from how they to advanced long the our as clearly, outlook. they have keep these feeling can more you invest down continue I'm

Craig Ellis

and historic a Yes, in agree multi-decade it's plunge that memory.

really for it. all guys, Okay, the help appreciate thanks

Jeff Andreson

Thanks, Craig.

Operator

you. Thank

next Our the question Please comes of Bolton from Quinn & proceed line question. with with Company. your Needham

Quinn Bolton

second quick QX, rates, XX Hi, I guys. math of in like Maybe just the question a a Craig's follow of seeing going you're want to half down do you're to how versus those I percentage up of the growth with QX, there. take but if smidge the just sure almost the of looks midpoint If maybe to X that just to over half kind in make that's half, be half, consistent flat first things? 'XX

Jeff Andreson

did You math accurately. and quickly the

I thought more equal. backend in that half the soft a see close be to they're think first as that we we pretty going loaded, entered this, to enough but we would

Quinn Bolton

Larry, revenues Got reduced you And as declined. then talked about fall the for through it. incremental have

You were XX% QX. in

it taken? QX. think begin little go recover, and to be revenue you of QX, But as fall bit of in see some you back through a QX XX% less than in given I start to reduction as do revenue the might the recover cost to XX% higher a you've actions we

Larry Sparks

Yes.

model. reasonable for think just year, we we've business, out the taken spending that what way assuming between our the panel in gas and XX% and half see mixed this of that's given back mentioned machining I think people where I out, reasonable today revenue the the and are taken of a we've we variable integration and that is

Quinn Bolton

business. then it. And the a on Got follow-up China question

talked have DRAM appears export benefited I I would you that the larger able your earnings see the about clarification OEMs. on. their as those controls they OEMs some think shipments clarification number in they're growth to tools to larger of of have ship of that calls a got assume around

Jeff Andreson

we've would I that it. say seen definitely. Yes,

some it has all seemed the industry. OEMs to so second come sell-through we And in know of larger comments have the to get don't but some the in information, half the get the aligned the made from by that. strength We with of enough

Quinn Bolton

depth I this for is the Great. did panel side gas that talk tool the Is Jeff, things? of type epitaxy But tool, etch or you an lastly, the missed you have And about on maybe a this or carbide? then of silicon perhaps more it.

Jeff Andreson

able comment that, if out you'd And did, been was haven't Quinn. on working we were to it I I figure who probably with.

So it's three. one of those

Quinn Bolton

I All right. much, Okay, fair enough. very Jeff. tried. Thanks

Operator

you. Thank

Our next question comes from proceed the question. Krish line Please with Sankar Cowen. of with your

Robert Mertens

Mertens for is my Hi. Thanks Robert for taking This Krish. on questions.

follow First, provide quarter level could business what changed then have some demand And just expectations one IMG sort you and the the visibility high I over How of environment's have? year? up? for past the your this you of

Jeff Andreson

Yes.

we've think of I a about talked I little don't be kind But you break what non-semi say their seems similar more I market. going with to entered grow. business, the a that, to more side We probably actually of we would in softening flat. out. what it would the outlook. expected in it more that's give the experienced -- say our to something to year in semi it had We I'll pretty qualitative.

that, have half second similar So side business of in is softening. going see them. the the said it's strengthening like the for semi semi business, their we're do business. Having they down anywhere but We the not

Robert Mertens

with months? any past And sort major then last it total second know I revenue how for changed EUV any would back timeframe where less change on was year XX% from crossed, the half? Has of coming business. just this side your threshold maybe think that memory helpful. Is you SKU follow in the there the few a than be no outlook the over that That's that year. up

Jeff Andreson

Yes.

I commented earlier. think I

the quarters, sure. no our and customers EUV I we're those first held report trend based the kind change it Our of in up half QX would would almost quarterly, here. even they're at QX, quite where on of don't forecast nicely. say them XX% I though in And for expect in we year from

Robert Mertens

it. right. Thank Got you so much. All

Jeff Andreson

bet. You

Operator

no floor turn questions I'd Andreson Jeff further this to at are to like closing There time. the over for comments.

Jeff Andreson

for I'd our thank customers employees, continue we environment. highly you suppliers and to this our on their as this quarter. to joining for like dedication call us support navigate dynamic ongoing Thank and business

include X, San June B. in the conference Our May Riley Cowen Cross X, the on on XX, June conference Tech Summit and the XX. in conference July CEO New upcoming LA investor in Boston in on activities Francisco Sector the York Stifel on

We quarterly also look early for to earnings next scheduled call our forward August.

our concludes that Operator, call.

Ichor (ICHR) 10 May 232023 Q1 Earnings call transcript