Yahoo Finance Ichor Holdings Ltd (ICHR) Q1 2024 Earnings Call Transcript Highlights: Stability and Strategic ...
Revenue: Q1 2024 revenue stable at $201 million, similar to Q4 2023.
Gross Margin: Improved to 12.2% in Q1 2024, up 180 basis points sequentially from Q4 2023.
Net Income: Reported a net loss per share of $0.09 in Q1 2024.
Free Cash Flow: Approximately neutral, with $4.8 million generated from operations and $4.5 million in capital expenditures.
Equity Offering: Raised net proceeds of $137 million, used to pay down $115 million of revolver balance.
Debt: Total outstanding debt balance of $133 million at the end of Q1 2024.
Q2 2024 Revenue Guidance: Expected to range between $190 million and $205 million.
Q2 2024 Gross Margin Guidance: Anticipated to improve to between 12.5% and 13.5%.
Q2 2024 EPS Guidance: Reflects a higher share count of 34 million shares.
Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Ichor Holdings Ltd (NASDAQ:ICHR) reported Q1 revenues of $201 million, maintaining stability from Q4 and aligning with expectations.
Gross margin improved by 180 basis points sequentially to 12.2% in Q1, driven by improved factory efficiencies.
The company successfully completed an equity offering in early March, raising net proceeds of $137 million, which was used to pay down the entire balance of their revolver, improving their leverage ratio.
Ichor Holdings Ltd (NASDAQ:ICHR) is making progress with proprietary products, including initial shipments of next-generation gas panels, which are expected to significantly expand gross margin profiles.
The company remains optimistic about revenue growth and industry recovery, projecting a ramp towards $250 million to $300 million levels in 2025.
Negative Points
Q1 earnings came in below guidance due to a combination of gross profit impacts and a change in the tax provision.
The product and customer mix in Q1 was less favorable than forecast, contributing to gross margin being approximately 100 basis points shy of expectations.
Visibility remains limited to approximately three months, with current visibility not showing a meaningful uptick in demand for new systems.
There is isolated softness in certain business areas, such as the silicon carbide gas panel business and a slower than expected EUV system build rate.
Inventory levels in certain components still need to be burned off, which could affect revenue and margin performance in the short term.
Q & A Highlights
Q: Can you confirm whether Ichor Holdings has material exposure to semiconductor equipment OEMs based in China? A: (Jeffrey Andreson, CEO) No, Ichor Holdings does not sell directly to China OEMs, so there is no direct channel to China for our products.
Q: What is the current situation with China's spending in the semiconductor sector? A: (Jeffrey Andreson, CEO) China's spending in the semiconductor sector remains strong in the first half of the year, with expectations of a slight slowdown in the second half. However, growth in areas like high bandwidth memory is expected to sustain overall levels.
Q: How does the inventory situation look for the second half of the year, and how might it impact revenue? A: (Jeffrey Andreson, CEO) Inventory levels, particularly in components, are expected to normalize by the end of the year, which should align with a return to normal lead time ordering by our largest OEMs.
Q: Can you discuss the dynamics affecting gross margins and how they might trend in the second half of the year? A: (Greg Swyt, CFO) Gross margins are expected to improve incrementally, driven by a 25% flow-through on incremental revenue and enhanced by the integration of proprietary products which should begin to impact margins positively in the second half of the year.
Q: What are the expectations for the demand recovery in 2025, particularly in relation to new technologies like AI? A: (Jeffrey Andreson, CEO) Demand is expected to inflect positively in 2025, supported by growth in sectors like AI which requires significant storage solutions, potentially boosting the NAND market where Ichor has strong positioning.
Q: How are the proprietary products like next-generation gas panels progressing, and what impact do they have on financials? A: (Jeffrey Andreson, CEO) The integration of proprietary products is on track, with initial shipments already contributing to revenue. These products are expected to significantly enhance gross margins as they ramp up and gain customer acceptance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
