Ichor (ICHR) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3, the company's revenues were $197 million, a 6% increase from Q2, primarily due to a rebound in the core gas delivery business [28][47] - Q3 gross margin was 13.1%, lower than expectations due to additional inventory provisions and a less favorable product mix [28][47] - Operating expenses for Q3 were$ 21.3 million, a decline from Q2 levels, resulting in an operating margin of 2.2% [28] - Net earnings for the quarter were $0.07 per share, aligning with expectations [28][47] - For Q4, the company anticipates revenues between$ 190 million and $205 million, with gross margins expected to improve to approximately 14% [29][30] Business Line Data and Key Metrics Changes - The NAND Memory segment has seen spending declines of up to 75%, with memory WFE now representing about 25% of total revenues [24] - The company is experiencing growth in segments like EUV and lithography, with new customer design wins in silicon carbide [24][25] - Proprietary machine components are seeing new qualifications, with initial shipments expected soon [26] Market Data and Key Metrics Changes - The company noted that the semiconductor process equipment market is stabilizing, with expectations for a revenue ramp in the second half of 2024 [49] - The overall industry is expected to recover significantly in 2025, with the company positioned to benefit from this recovery [49] Company Strategy and Development Direction - The company is focusing on share gains for proprietary products and investing in new offerings to support long-term customer technology roadmaps [49] - The new gas panel contains about 75% proprietary content, which could significantly expand the gross margin profile [49] - The company is working on integrating proprietary components into existing gas panels, which will take time as customers deplete existing inventory [26][49] Management's Comments on Operating Environment and Future Outlook - Management indicated that the current demand environment is expected to remain stable, with new technology drivers emerging [48] - The company does not foresee a NAND inflection in the first half of 2024, which may impact revenue growth [43] - Management expressed confidence in achieving a 25% flow-through at similar revenue levels compared to Q2 [54] Other Important Information - Cash and equivalents totaled$ 76 million at the end of the quarter, with a decrease primarily due to net debt reduction [53] - The company generated $4 million in cash flow from operations, with free cash flow for the quarter at$ 1.6 million [53] Q&A Session Summary Question: What is the outlook for Ichor's business in 2024? - Management expects revenue levels to remain similar, with potential share gains to offset muted order patterns [58] Question: What drove the inventory reserve increase in Q3? - The increase was due to headwinds in various business units and additional reserves taken for inventory roll-off from prior quarters [59] Question: How does the company benefit from shipments to China? - The company does not sell directly to Chinese OEMs but benefits indirectly through customer shipments [6] Question: What is the status of the silicon carbide market? - The company has one customer in the silicon carbide space, with expectations for market growth [80] Question: What is the timeline for new gas panel evaluations? - Initial evaluations are expected to lead to production tool rollouts in late 2024 and 2025 [83]