ICHR - Earnings call transcript Q2 2024

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Operator

Good day, ladies and gentlemen, and welcome to Ichor's Second Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to introduce your host for today's call, Claire McAdams, Investor Relations for Ichor. Please go ahead.

Claire McAdams

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

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

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

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

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

Andreson. with will call about results and update now Jeff we remarks, and line questions. our over Andreson, After the an for Jeff? our Jeff then begin the Swyt, details I'll our turn On today CFO. are Greg call will and business, prepared their on provide with me additional Greg Jeff CEO; guidance. our to will open the

Jeffrey Andreson

and Claire, welcome, our earnings you, Thank to QX call. everyone,

quarter. yielded increase. margin of revenue gross and performance modest solid QX, our EPS $X.XX. continued sales stronger first the of near We and in second compared generates forecast, business results the growth earnings model of improvement million in in typically And improvement top XX% income are quarter the Ichor's leverage operating pleased revenues to to with report sequential strong $XXX sequential end as margin an gross

continues fab sequential on our are our equipment the of we initiatives another similar encouraged in a volumes. improvement stronger for at third increase even second wafer half. margin the will expect profitability In recovery a forecast margins revenue we market, and quarter in focus to signs We gross strengthen early and meantime, in steadfast the that yet drive by for remain the

our growth the driving to and profitability cash also working carefully most While performance is the to margin growth, tailwinds in capital flow gross line. top we lever costs add EPS turn our significant to as manage sustain further continue corner we to and free

in silicon revenue panel will customer increasing that which carbide be offset is the From improving as in to a upticks second expect within second from half, every a reflects our The first stronger perspective, key only WFE. for emerging demand demand future lower demand confidence growth half meaningful but business, our we driver profile Ichor compared incremental half to gas this is in recovers. market an still to the

our return an key overall modest single-digit growth share that and industry. will for on overall to technology I'll Within meaningful the to revenue in inflections CapEx return drive views my XXXX, a more growth a XXXX and demand the growth investments indicating outperforming environment,

memory wafer logic, edge for more bandwidth steps. additional particular, in CVD. to steps per to XX% driving Etch estimated Selective and steps process epi, the The incorporate CVD, investments of FinFET, generation ECD close DRAM than AI, new device gate-all-around to ALD, XX leading enable growing In tools process equating more architecture and for require in steps an process additional latest per manufacturers the is to high etch, device clean as wafer,

spending intensity we our will investments will in NAND the deposition business application. etch do NAND are recovery While initial an beyond benefit greater expect given XXXX, seeing and we transitions, not improve XD further in technology for which this

which of of our need modest into business, quarterly continue build in systems the through be additional is pace panel the our that be XXXX gas gas the EUV support stronger half to we has put XXXX, few of second deployments year, the first will another driver into this as rate heading the slowed expected we capacity as delivery a to to to the second Our tailwind half, slowed silicon while And growth in more grow to expect and half to move return has growth. carbide in years. next place

as seeing Finally, well demand to gains well incremental return and customer pre-downturn commercial in defense as within in aerospace are our non-semi share markets. a base business, levels ahead certain we as as IMG's

for markets diversification expand, to and to strong continue these of revenue our a our increase each building and Ichor to industry potential applications as Altogether, for base. add Ichor's customer recovery the growth breadth opportunities As to continue we accelerates. revenue see story and

particular, growth Given strong see all we in deposition, well as EUV of and tough these our business. next through the we drivers, our for in markets could within believe etch non-semi cycle, served as WFE primary

like our Now to our on panel. proprietary I'd products including you gas pipeline, update next-generation

products growing margin are We revenue levels. similar progress improved our continue on steady make seeing this profitability the gross and to with impact year new in on our

I'll start with our next-generation panel. gas

on been our shipped last Most have of device panels tools manufacturer. have gas a customers' now to new panels, We shipped on evaluation with are that consistent which the gas earnings XX outlook provided these is our over I call.

panels to new X take These months typically drive Our profile. of contain gross evaluations our complete. gas proprietary expansion around to Ichor significant XX% today, XX% about tool margin will about compared which content

begin fourth remains So the be the completed earliest evaluation the shipments will initial quarter. production and in can

to qualified to expecting X months. been X next on X the are in now additional and applications have complete X We applications

in designed seals we these now are are since of ramp weldment continued are that new fittings our both we gas used our are began now qualifications qualified on into assemble. shipping we as the that in existing are we critical all existing gas qualified our gas components our for panels component today substrates all half gas build specific used As our second in can the used and be All business, and These used to next-generation valves. panel. new first products, These high-purity customers in panels components panels, well that at quarter. in have X as products the

In leverage X-month everyone any to near-term more revenues we within meaningful tend when to industry tend here forecast. our our that to in last a growth today, our summary, today spending recover sequential was I'll of now visibility, contrast pleased remind uptick outside to and firmly operating are our report Furthermore, to return In sharply that quarter, is when profile growth revenue financial model grow. generate business significant as revenues rebounds.

has half, recent due profile. second confidence stronger around to demand the increased the QX Our the largely strengthening of

what encouraged back $XXX by year to is QX to $XXX much ramping are towards as next stronger WFE million million move expected look we year. for outlook XXXX, We into be the plus in to which level revenues means a the strengthening forward we

increase, We make why investments expect continue able to business critical in to support to revenue deliver in of our be which significant is as growth. growth we volumes earnings future

turn I'll around further to call details that, provide financial our results Greg? QX QX and recap With Greg our to outlook. the over

Greg Swyt

non-GAAP emphasize Jeff. measures. To adjustments. compensation, acquired P&L that items and the intangible are would I nonrecurring Thanks, today amortization share-based discussed to and There of like the of discrete assets, These charges impact begin, measures of exclude results, our and tax in is available financial the information the our financial section of non-GAAP a for summary as and well website that summarizes GAAP balance quarters. cash Investors useful the last as sheet several flow supplement a metrics

year. million, at upper were near to which of the quarter than $XXX with margin Gross basis higher XX% XX%, and forecast period XX line end Second last points up was same our in improved from QX revenues slightly expectations. sequentially the

well continued produced our improvements in the benefit We as to are as factory products starting recognize of internally efficiencies.

came costs control QX at to little below QX million, $XX.X in spending. expenses to lower a and operating labor-related continued due favorable variable forecast than efforts

was Our for $X.X operating million. QX income

expense $X.X interest of was reduction QX. million $XXX down million of significantly QX $X.X net debt the of during expense from reflecting the our benefit million, Our

at income the resulting quarter. was per net $X.XX EPS our above income The expense impact tax net our within $X.XX. non-GAAP which had Our was on a forecast $XXX,XXX, share

free improved Now linearity our on QX. decreased of million $X equivalents was a to cash cash flow DSOs end and $XXX turning quarter deducting to flow million cash after in $XX.X sheet. to our receivable balance million, decreased and quarter, XX X.X. from million. previous $XX.X $XXX the from capital and the $XX the expenditures, at were turns million $X.X Inventory the increased million during days. quarter the generated end operations, and inventory quarter the of Accounts We from million increase At totaled

X.Xx. million million During improved we total loan to net a debt reduced to ratio by quarter with term debt balance end the $X.X coverage $XXX our and our quarter, of the

will million guidance our revenues our third the With improve in we $XXX to provide of expect a to XX.X%. million, will of range I Now the to gross XXXX. sequentially again of $XXX quarter margins XX.X% anticipated for range QX

We QX to approximately operating million. million, of $XX.X up expect our from level QX be expenses $XX.X

quarter. We expect fourth OpEx the a similar level at for to remain

expected we this expect remain Net approximately and expense at is it for QX million, interest to decline to to level $X.X QX. for

record in to of a $XXX,XXX. expect QX tax We expense

year, effective we are full of tax $X.X a slightly non-GAAP higher forecasting million. For the expense

update assumed tax to of models the range in Beyond for the should your this XXXX you beyond, year, rate as XX% be and effective XX%.

count of of QX shares. XX.X guidance a EPS $X.XX for million reflects range our Finally, $X.XX share to

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

Operator

Our Instructions] first Stifel. question comes [Operator with Chin Brian from

Brian Chin

DRAM also for us terms most foundry look low improvement commentary, of less? you you -- and market parameters put Jeff, Thanks around like? Are outlook? And digits some ask some going letting between, are of of that sort off your thinking more which or encouraged questions. by Maybe, advanced your can maybe a just single you say, in second half few what could

Jeffrey Andreson

bigger And And right I the other, well. holding data. on But than I'd moving the we start So say quite okay? that right seeing then, foundry all as is continue would to sure say we we would bring the to know also I seeing know I logic we're DRAM up that say, bigger the little market, to can it chemical remember, But now, a from one would some say say develop of another I now, business on from for high-bandwidth the think don't which impact we high-bandwidth memory. to what they But sell-through Brian. uptick we're the from would impact see probably and I along. see if that. activity. handicap, see And directly. we're memory, Yes, is gate-all-around going side is

Brian Chin

And just second half. maybe qualified of the that uptick in in terms

Jeffrey Andreson

have don't don't up the continued from the back in to the from because have I don't the ramp, have all -- half, XX% half first the I it's it's specifics, to half, half that the I specific it's but we think back know I sell-throughs. actually that whether front

Brian Chin

But it. Got that... like Okay. within it sounds

Jeffrey Andreson

Definitely versus up. significantly year-over-year,

Brian Chin

It kind think QX is QX I language correctly. over sounds you understand like up your also of if

Jeffrey Andreson

You can understand my language.

kind we're point think of high I this at digits. we're of single maybe seeing visibility --

it's -- inflection, massive I return to say a but not us. to for sequential So the we're wouldn't growth good a it's it inflection. call going

Brian Chin

a this tick achievable and factor. you of margin updates then panels making proprietary bogey terms reflected think But Okay. gross those upward in is about in when gross the progress Based the good there, of revenue margin some And an next-generation the a in in QX the year, little maybe QX that's QX sort potential guidance. XX% swing in you're and of think do maybe considerations. the by you on products shift of fact to bit

Jeffrey Andreson

not It's in at we so. we those growth I see you probably levels, revenue kind gross it mid-XXs we'd yes, would asked. -- right revenue of the or as It's margin. be say,

of a passive just is gas planned is revenue it quarters. are we I that customers' X seeing And lot there's with new panels. the have of And a for in as progress I'll customers, of we're Some but really the taking each said, a next and we of at about already small, relatively evaluation but XX the them XX quarter, it's revenue the the recovery new, deployed various more our stages -- there's from some mix, bit call continued products. and

So forward. it's starting to move

Brian Chin

any quick first know an is I Okay. time indication visibility maybe last of your beyond one that 'XX horizon. Great. But provide frame? probably your in thing. good do preliminary acceleration discussions just And half customer

Jeffrey Andreson

is of say or going part would will year. the of of large again, a belief would make flat kind this the the it's which a there's litho part remain relatively this hard it's trajectory early whether say, I to call XX% will been in plus I be consistently, be flat continue growth, a XXXX, that to that

timing Exact year is still next growth in confidence being the year early to too there. So a call.

Operator

Our Cowen. comes TD Krish from next Sankar with question

Sreekrishnan Sankarnarayanan

I have X questions.

little being Has next your Just how curious, confidence about growth Intel? a in kind next what you impact do Kind year Intel for year profile first the you that for of of a handicap said year. changed week? one, spoke bit last of growth

Jeffrey Andreson

-- yes, Intel talked pulling think I I Well, obviously, about back mean, CapEx.

I year, in some question not. half have impact haven't significant shifts The an But that from the fourth of was this I there. did? the that think quarter. but of that we it people could I the community, we already seeing about is, when think outlooks probably think in right any impact. will the not it we're has obviously would now, seen movement any incorporated analyst that impacted year, possibly indicate obviously the the think second But year,

Sreekrishnan Sankarnarayanan

way Intel let want just is XX% down gave I me year-over-year. basically Got which ask then. guidance, CapEx you. you a different mean I 'XX calendar to

still you next growth do WFE year? If bake then you think that

Jeffrey Andreson

direction is getting. we're the that That

I So outlook. other fab have would But same obviously, intelligence the say a as we market I companies hearing larger mean, don't have. by pullback we're in fab not many

whether it and maybe seen early. a comes too yet XX% a to be or So little little it's bit bit down

Sreekrishnan Sankarnarayanan

to And model? where they of Last leading curious seeing Jeff. X did get quarter I'm up Are from you spoke here, of of end you about this that to kind saw kind those just of then that? questions, you other about further? Do I some sticking ease edge. Got start out? some How it. think have delays

Jeffrey Andreson

customer. of think low We're the point. specifically QX any kind supporting grow the I again. of around that business, by was have been EUV And seeing our it say, I neighborhood think outlooks in our the of would I provided

kind that temporary, So in a a and half. it of the the we reflow first versus again I half think second see then was growth

Sreekrishnan Sankarnarayanan

question, final the then And it. Got Jeff.

we margin. higher look kind content component gas gross have subsystem the panels of gross XX% plus spoke have of if And new about XX%, some You suppliers, and proprietary margins. I at like should i.e., those,

how new these or themselves have just the margin With to the gas funnels think alone those? for about by higher gross margins

Jeffrey Andreson

obviously, XX% that mean, initial of about some XX% be to going internal have. to I Yes. around the from we on we're shipments content moving

will that to kind it into than bring the So of move components margin you But were it sell more end them similar if bracket the of of lower independently. most likely. structures,

Operator

Charles from comes Needham question with & next Our Co. Shi

Yu Shi

terms 'XX, pick NAND year. when what's it recovery, one, first The WFE you're on going to optimistic about getting latest first midyear, your what's that thought you're that looks see Obviously, thoughts? inflection in But the like half, second point. timing of up half, on the next any to thoughts

Jeffrey Andreson

I are geared we're that We our don't largely is inflecting now, it. all closer mean you adding around X it's the they'll going that technology start assumption think customers so once transitions. would for when it removed midyear capacity. would to kind I new see tell of or But it's probably I saying later consistently that from I say, I've been to kind now of a months be time or really

Yu Shi

late sounds like. it or 'XX, Mid it. Got

Jeffrey Andreson

would it's to Yes. so love because very it and depth we for that's and And very intensity sooner happen us. etch helpful obviously,

Yu Shi

Obviously. half other revenue Yes. question, I by business the customers' want of business it. because leads more the do it's side to Got ask year. your revenue about an the EUV because interesting your Then

want some by recall don't margin. lot the you in while Your clarify you the to but see any I you you sounds Chris, question year. the coming edge you to the I that. of to any see plan. way just a were the seeing like back saying and demand rest But EUV because it of But customers' depth with some you, a I also build mean improvement, are revenue leads inflection see the pickup probably do I really answered the

Jeffrey Andreson

Charles, over would half, say see question. I half we good increasing. it

we saw a down in QX, in and of think I little some QX modulate kind QX. it bit

-- it's the of the it's much, front quarter-over-quarter. stronger year. going increase the but half of year I to than will the so And going won't how tell you be back half to

with I all out lines So think that up there. commentary other

Yu Shi

Or more or the sequential business? for we very to the a improvement, -- EUV some would -- meaningful improvement? upside as like less we should inflection expect that characterize you So are the

Jeffrey Andreson

components more a EUV kind There's going service other back one-for-one to some saw that into of Well, as mean We I of and EUV that saw we than and we the of of it's then QX's say exited quarter, fits I function the just things more would drop we that volumes some the whole there. fourth matches. do how thing.

Operator

Securities. Ellis question next with Our from B. Riley Craig comes

Craig Ellis

get to you be wanted looking business coming $XXX improvement to more moving to you've about understand the are I you million telling point those Jeff, for just direction. at you what at made now, how a are something revenues. that wanted need by levels? customers million up Are that's things going following And quarterly returning XXXX? to on you is Or just of start on ready into that. $XXX to aspirational been to just the Or in to as that to I seeing visibility is just but deeper look talking from in least some you're

Jeffrey Andreson

continued pretty gate-all-around run look yes to memory, little incremental I half, continue I then bandwidth want bit going yes, start inflect yes. which high it's we I that to And strong we recovering NAND sideways and see second as strength that logic. not think to answer year, some about. drive the again. likely around to There's is, talked think is foundry until say at the we XD with next But for we and a could

growth if those think revenue So to weighted, in you aspirational, it's area. not at as rates look a we I close pretty run get think that it's half see year-over-year be XX% back I necessarily and but you'll it,

Craig Ellis

at headwind different Has being question, some for this issue near-term concern it's seeing. that more they're where of And second fitness with expressed your levels and demand it some customers some in the a stand its inventory inventory commentary. have you may do at your resolved then or real about the the of much that customers question, That's earlier business. helpful. that of implicitly sequential gains and and been year, in and a we But answered for

Jeffrey Andreson

specifically I at talk won't Yes. customers.

have ordering think to when seeing I business, patterns what one. -- But you in the going We're to component -- business is, the turn forward. year. would the exit say our that it's say tell be an at muted still look all seen already. is year we're resolved for normal we where going and typically you would I'd that. surge some where that I seen return expected still not things our entering We we it's I would haven't back from

slightly And would above say, WFE includes this call delivery, chemical is so panel integration, growing, actually gas I slightly panel, our growth too, year. gas business which I'll it our

So the strength integration side. the really has been in

Craig Ellis

Yes.

higher you next getting of get year. improvement precision you're that nice could margin machining or so this gross mix, some And without but weldments significantly

for significantly rise so year? next what gross mean And that can margin does how

Jeffrey Andreson

I as the flow-through look relatively $X at think you on Well, million. it, is flat revenue about

pretty accelerate because a it products. hard But revenue will on calculate that help So are those that's it's Well higher-margin a to healthy percentage. basis.

You place. have the infrastructure in

maybe to so. incremental around the go up margins and the probably So in in kind machining can XX start are or mid-XXs probably XXs and of the in are high weldments,

be normalizes. will inventory once So helpful that that

Operator

from comes question next Schwab with Christian Our Craig-Hallum.

Christian Schwab

recover that, half it an of us you to Just idea what doing doing what type second that quantify what and strong 'XX. EV levels now, those carbide in of 'XX, it's could side, back can to in silicon give business of the is on

of an we of have magnitude. order idea So the just

Jeffrey Andreson

growth gas midyear but say we've I'll when sure would you first give delivering 'XX. about specifically, was not some I relative panels, in I'm start it ever patterns. we cited

to We naturally expected double. that

flat So be And year say, a say, and relatively it I see XX% to kind if between has of fourth fallen was this going somewhere is and running run growth recovery. off, kind quarter XX% that we at a depending on rate. probably of would

started to adding it dipped as But to second on. in the back more there's I customer customers, period expect digestion this it's going clearly be but of at year. return will So least down our a where half we

Christian Schwab

And you're so carbide silicon then aware inside strength predominantly your broadly European tell about of that you're fair? by China. revenue talking the of driven it domestic manufacturers Is not EV that should in that China,

Jeffrey Andreson

a customers. a they to No. it process don't use on. actually We the know actual We manufacturer and sell sell to end

tell I So couldn't are. specifically you customers their who

Operator

next comes with Our from Diffely question Tom D.A. Davidson.

Thomas Diffely

question assuming play? at Craig's all today, just we earlier $XXX margins. First, products margin constant to million, of the million back what a before getting follow-up $XXX range, incremental mix When the is into from the on on the new come look

Jeffrey Andreson

high new on XX% it. will is would the you products would of be XX% at end. in the XX% mix, dependent of be It or think probably somewhat It how bring I north as

Thomas Diffely

of And that new when existing gas customers the placed at we to panel gas next-generation then door? the your out new this going in does components, product? OEM a the look be products Or Jeff, own your XX% is to panel, have are with this ramping require going

Jeffrey Andreson

initially, say, compatibles substrates, products is a out. product new this most intersecting that, is fittings, passive said would focused valves. have, tool on and the new this I all introductions, Having backward of we seals, that going of

today being being and gas So panels on those delivered. integrated the are

So Tom. it's combination both, of a

Thomas Diffely

Okay.

the look that panels? X- mind, with X-year to content, to XX% out gas level adoption you is get frame the panel it when across to or So itself most in gas of time of X-year next-generation X- to a your

Jeffrey Andreson

that I the multiyear believe of because But customers panels. be our we well. And these -- all we'll customer and Yes, as I think is you're a things so be incorporating source the sole gas customer well flow I don't customers think by their controller, that qualified mass new ramp. think will it -- as

revenue to of past, our panel 'XX. a we our into as penetration target to gas tremendous model model of amount the don't -- So need move really you the in talked 'XX of that and into kind for market needle about get

Operator

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

Jeffrey Andreson

for like for our customers support. the joining suppliers, on thank at want I opportunity with investors forward and thank you us during dedication and quarter, third our call upcoming to this including quarter. to the ongoing the look to employees in Needham Please out to updating virtual us. on Claire Conference as up free earnings scheduled as call. Investor our feel Conference, reach to to that We Chicago. Semiconductor Operator, well early QX concludes to directly the you forward their Jefferies to I'd follow call We and meet our with investors for November. look

Operator

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

Ichor (ICHR) 6 Aug 242024 Q2 Earnings call transcript