UCTT Ultra Clean Hldgs

Rhonda Bennetto Investor Relations
Jim Scholhamer Chief Executive Officer
Sheri Savage Chief Financial Officer
Quinn Bolton Needham & Company
Karl Ackerman Cowen and Company
Patrick Ho Stifel
David Duley Steelhead Securities
Call transcript
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Good day, everyone, and welcome to the Ultra Clean Technology’s Fourth Quarter and Full Year 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask question. [Operator Instructions]. event recorded. today’s that note is being Please I to Rhonda like to conference over turn the Bennetto, would now Investor Relations. Please go ahead.

Rhonda Bennetto

with found Jim? adjusted I’d assumptions measures, over to them assumes on non-GAAP GAAP as be the concerning this and forward-looking like differ Good call for and me actual follow be with financial materially along how to open section Chief in Information of Also no All remarks today, about Thank reconciliations cause recent and to joining periodic may afternoon, with Jim will including our Savage, risks information the the contained operator. the based afternoon, this business, update relating today’s questions. about today’s replay financial some results be Investors thank after And and earlier and Officer. will can issued Form website to Today’s the management’s discussed release Relations webcast SEC, the and filings on up you, to statements. involve prepared forward-looking XX-K with you release Chief UCT and in us. today’s our Financial With to from we’ll release. of on are uncertainties the referring Officer; call. obligation Jim. and the and press are are uncertainties at review. Investor projections and contains in Executive most our call. is with Scholhamer, of this the The to call. these Then statements found cautioned that begin a turn XX-Q today’s we call statements to Jim call access and press that Sheri estimates, call, everyone, can those press call, for risks Sheri will on those that,

Jim Scholhamer

for afternoon, our full everyone. call joining Thank XXXX fourth conference webcast. Rhonda. you us and and year for And Thank good you, quarter

Sheri going I this will semiconductor taking to we I’m then landscape commentary. we it financial with on profitable results, more see of in our follow actions and expand become increase First, the And deliberate outlining an our conclude overview how in highlight by long-term her a some short-term deliver are a to market few shareholders. we outlook. to and and customers will and value

plan top-line our results the Quantum’s begun the and have to we moment. complementary over third our In With addition full $XXX results for the exactly work profile. quarter capped were These to I to despite accelerate already quarter to of quarter just margin quarter-over-quarter, financial quarter. dynamic and diversified XX.X% UTC’s capabilities million, fourth improved has guided extremely a profitability revenue, an report range. on Acquiring able how UCT to off contributor strong margin second uncertain with fourth of an be the in from of Quantum there is valuable end a X.X% expand the first and growth indicating X.X% XXX we non-GAAP the over our slightly Operating year of to half. proven points gross be will and done to transform for at year-over-year revenue us improved

short perceive Top-tier and for by semiconductor they will undertaking the improvements right of new innovative I IDMs even holds have distinct very and elaborating decline. position and expected China, chain about technological business. We processes we’re what mid both describe significant and well magnitude mounting I high as expectation. the general chip not outlook the fab then high longer-term, benefit to Despite describe a in did grow though in the half in First, is year investments ways. expected what doing we’re uncertainty chips and second changes two rapid cost softer in down business XXXX. for offset resulting is industry for maintain reason semiconductor slow were spending macro I in especially the in of equipment value is where to in advantage single-digits seeing our to results on a would to and start below for lackluster end talk posting Intensifying IDMs a resulted size competition economic the will design. the like business landscape with manufacturing primary service need smartphone uncertainty for idea competitive this our memory levels demand materials we're XXXX, The admitted to to the of to XXXX, deceleration in business, plays the by and cited defined our in increasingly distinct from the role. wafer complex Quantum

base First, we where stream we leading a a our receive recurring ongoing the from hold installed within service growing position. revenue

closely top tier customers they higher in and new and technical advanced and helping requiring add partnering with product. We our work IDM customer our value productivity from existing extract we them Second, within capability as with technical solution. by fab cleaning highly invest new analytical assets increased

elevated stop continues over weakness within push quarters, the both fundamentals, few to segment especially system. and announced than great in performance showing step XXXX. headwind predicted in the Taking memory slightly. sustain which on customers. of solely majority and with next As the driven bodes to are this to Quantum’s wafer This WFE peers and Industry DRAM by our very levels Non-memory more increase, chain, by offerings disciplined and excess products long-term as our deliver one Regardless us brings our business. so poised hand-to-hand for sentiment integrated and albeit highly NAND a anticipate favorable rational stronger solutions with business a custom slightly to inventory UCT are trickle-down in OEMs grow manufacturing more rely IDM, service us contract, capital value Unlike our start to spends. the for OEM the does out investment well our is resulting effect of growth business. primarily equipment some delivered the that normalize opportunities. solution remains from near-term struggling by IDM. who is industry to UCT’s spend. the attractive in confidence the to down WFE XXXX, these And gives inventory ability optimistic by We

tone even Our industry throughout intelligence, is seen see from direct together year. could customers’ significantly we heard we believe we’ve IDMs visibility orders taking and change what the year based muted OEMs, a weakness much quarter. on limited Based is far the internal on so this and marketing continue and can our with within and more

series our While now does either improvement of resume. we year, capacity the constraining initiatives to in without the second profitability to With rigorous more industry profitable materialize react a wrong backdrop to summary our half cost be and we hope initiate we’re increase that this are that compromising quickly a it to restructuring of of we was growth imperative scenario. recovery business felt in or the when

not demand. take is what While second softened, we the they an did were through now to as equipment reduce extended of year expenses believe half us the reduced last period in market sufficient we of

objectives both longer drive product operational higher companywide, and solutions to the that service to Our returns and over and for analysis are and drive business profitability brought an meet designed exhaustive underwent shareholders list our excellence our forward improve business term. of a

plan planned restructuring or to consolidating moving workforce. includes certain meaningful sites Our and elimination production Asia, expenditures and postponement additional a eliminating, the of in capital reduction

the out underway, initiatives While will some these the over along improvements cost rolled others are coming be We anticipate of quarters. way.

when second once the as successfully the of be However, through the much restructuring will managed UCT in has the discussions those savings stronger began. as the million majority range million several annualized $XX will $XX cost industry year. to completed. a emerged cycles be and latest has Expected half XXXX realized recently in plan from company

very customers significant closely position to when our We are working rebounds. us the with industry for growth

as a requirements benefit technology stronger As more position increased and we from will semiconductor these the The ongoing benefit semi navigate memory to we well as confident foundry from the is we’re uncertainties, in much logic, set be in to leading-edge industry multi-year and inflections short-term center, devices, broadly. further name contribute data Increasing connected and components industry. intelligence, to few. in and system, world in artificial next-generation innovation Internet just software, devices will our development to electronic and automation of wearable the connected industrial in consumption home computing, cloud and ever advanced that growth automated expanding

have. business our in For of roughly comparative non-semi display revenue quarter, total fourth which was approximately up made purposes, X% of the

a investment display resulting seeing are timing from market softer delays We outlook.

of the downturn we a application. and we our you to will appealing bottom-line, meaning year. equipment look for industry In materially improve on spending and With creating We ever to opportunity revenues thank to shareholders I believe I'll remain in their over with growth. optimize period, protect next are to Sheri. technology display while our updating call our turn the that accelerate our longer confident in current forward Although and transitions call. opportunities coming as summary, muted capabilities employees prospects remains continued display view that market secure I like ensuring long-term our to would very our the long-term during support we the and over an increasing the semiconductor the

Sheri Savage

recap I fourth discussion, good of a to afternoon, will then quarter results. Thanks, be And today’s into only. will our us. In numbers Thanks with I joining for referring Jim. short guide everyone. XXXX, non-GAAP begin

the year. prior compared year year $XX.X to period and margin income X.X% X% revenue Diluted XX.X% over year. million as $X.X XXXX. year compared in the percentage over full cash billion, compared operations $XX.X previous generated $XXX.X to And in in cash Gross Operating on with $X.XX margin equivalent. XXXX. by totaling prior and earnings and million. of exited compared we For to share increased revenue $XX.X Operating lastly $XX.X per averaged $XX.X prior million to $X.XX expenses XXXX at was an for XX.X% increase in full of of million of XXXX total came the less in cash of million net XX.X% the of than XX.X% the from a million the

results. to quarter fourth turn met let Now

include the $XX.X at million the semiconductor semiconductor revenue. of our total reflected display, revenues better than increase from expected, offsetting guidance quarter third our resulted Quantum. quarter-over-quarter non-GAAP XX.X%, range. to generated of $XXX.X included in business end of from which services revenue XX.X% million quarter. million Total margin and rose weakness product dramatic $XXX.X seen Total in improvement business. X.X% high the Our was solutions or gross This services a up which a high revenue million, full Non-semiconductor margin and This business. XX% our of $XX.X performed in

percentage a can you influenced to in and these the mix to margin expense up slightly As product be geography, of Quantum quarter-to-quarter. was the fourth prior due concentration, as we increased Operating and costumer factors revenue see by expected acquisition. the X.X% volumes, to including from expect shared as quarter margins before, number quarter. of should variances X.X%, Operating for XX.X%

earnings $X.XX and value direction increasing right underway the the while customers per Based XX now action net outstanding, quarter. in net were last cost. be. million for it’s through clearly improving per share we’re quarter By heading for will results further $XX.X environment UCT compares manage we not fourth income and is on to decisive While $X.X and improve and an million. efficiency preparing shareholders. term derived from that to unpredictable income want of This where our share million $X.XX, taking reduce Restructuring longer to shares

quarter. XX.X% was quarter the to compared for last rate XX.X% tax Our

we forward, you’re going tax teens the rate to variances as always but middle be quarter-to-quarter. to our high see Going expect to in to expect

decreased the operations during used $XX.X the match equivalents, cash to over related million million from and decrease over prior in to balance joint of quarter a to will million continue we at Quantum closely the We demand. the venture Turning $XX increase million Inventory sheet, quarter the ended million prior by payoff quarter. to $XXX.X optimize and to our cash of quarter. we an $XX.X Cash customer million, acquisition. $X.X level the debt inventory $XX.X was

reported have quarter outlook of lot in solutions customers business. peers first what softening Our and and our our continued already semiconductor products a reflects and

to expect our in do slight see we However, services revenue. increase

We’re assuming to first quarter between total $XXX $XXX the million be revenue for to million.

on some will that our be to result realized. upside fully expect aggressive the we take and of strategy see to we’re undertaking, benefit a of restructuring as time fill process the bottom-line through While

I’d the like non-GAAP EPS $X.XX $X.XX. the For call operator be for that, And between to projecting questions. quarter turn we’re to the with first and to over


Thank you.

will We the begin session. Instructions]. now question-and-answer [Operator

question Please first & comes Our Bolton of from Quinn Needham go Company. ahead.

Quinn Bolton

sort thinking with your just I throughout WFE taking any the have quarter. to that back that’s not XXXX? it? think in approach gross we and first want we to to think -- about is, recovery nice the consumption sort you like fourth for of second in year. confirm XXXX. the the are want are would fairly improvement sounds come outlook process expecting in do on way reduction where you you're inventory The if the guess Congrats levels margin start wanted to you of and I conservative a It underlying I to question I in of potentially when

Jim Scholhamer

Hi, Quinn. Yes. Sheri part first will take for and it turn to will the the I second. I over

the outlook, obviously uncertain visibility have We don’t is mentioned half as the think half. on second So the the I XXXX, for I call. second

think out I best there the given going I uncertainty second think few half recover a know instead recovery, the is ago. banking was initial of the months like in think I in interest. don't And it’s our consensus a on this to situation if we

be a least some will second time inventory lower runway, guess a half. manage implement will to the given continue that on longer-term with able good of reduction to been have we've in to the it’s working down. quarters the costs us I two the we in aggressively I recovery period. the that of We embark on inventory, some time But for at

would the side, turns some up catch it at but things levels. that the We’ve be. a like the we have but -- the slow we'd has recover next equipment stop reduce able it normal or time as we to we We on as two over as yet stabilize, been think several to to we think fast reducing be dropping will I declines revenue But to been be down finally I able inventory, the quarters not turns level our haven't We’re as revenue one up. or year. been like the that or more to will now to have

Quinn Bolton

actually you the do was think are at underlying meant shipments really they aligned are are fairly Sorry, point? their lower what for what or inventory with shipping Jim demand of buying inventories, than an my think at customers’ this sort on well rate question a they your you

Jim Scholhamer

yes. Okay,

items. our not standard inventory making original that. it about generally and on the OEM the us concern customers, Sorry of Yes, between large between part the is as more the as customers a is are shelf manufacturers

significant goods of So finished modules, of of that I impacting worked major has we that QX did portion see customers’ some some the inventory a of been the think in out.

Quinn Bolton

roughly Sheri, for us Can into that then implement million how you goods? that million OpEx of much of much you comes savings think programs. give the cost And sense I how mentioned annualized to line, you these savings hits of of $XX cost as cost $XX some

Sheri Savage

some Most it small is OpEx. of of will but in cost see increments goods actually we

say OpEx. the would XX% will then through flow I So probably XX% go through COGS will of to and it rest


ahead. Our comes next Company. question Cowen Ackerman Karl go Please and from of

Karl Ackerman

on question to Jim last OpEx. that or Sheri, back going just

OpEx, of the for the absolute we balance XXXX? seek how the manufacturing the gross for think higher should implementation the But cost perhaps you $XX that I of of as March what spending of thought. I million should we actions improve level following at And of Looking think how taking, the million balance than to secondarily, think you margins about would about year? have utilization, to $XX are isn’t realignment it OpEx

Sheri Savage

from So out. we’re a obviously OpEx forecasting perspective,

as thought the as I XX%range, that think we overall OpEx have quarter is that part of level about of would last QDT now certain they we company, we we mentioned be do. our well in

to cost That’s as to reductions grow up year what we’re bit. obviously up well we just to continue tend of general that something the in optimizing these the a over do. optimize percentage with as course going our So they little

would expect the to we then So I and would that revenue continue been upon as if be in drive to range XX% we down be have depending possible. XX%

Karl Ackerman

WFE from this would likely drop follow more starts growth services pullback kind the the least wafer insulated would year, I of think business at year-over-year in that affect near-term. a As up, QDT much is obviously a in XXXX, while

does guess a this in relatively flattish or your be would second business stick the And the to year growth XXXX expect March you it levels? hockey mid growth for high the of ramp services of single-digit imply of so, massive is, in question I half

Jim Scholhamer

a the we visibility. service Yes, in business actually more lot have

near up has bottoms and is extended forecast the the bound and very with side, than due equipment facilities Our putting fab tightly bit being it start-up. to of quite the the place a in more on -- particular the fab that's nature fabs

especially that they we example. some that well-positioned we’re see fab in are Israel been announced and been have growing there's ramp ups for now So and

we're where water forecast got the in positioned are we’ve starts so, that we in to And fab that area. confident pretty in solid pretty


Our next Patrick question from of go Stifel. ahead. Please comes Ho

Patrick Ho

restructuring, is, color asking on Could forward Sheri is cost of a Maybe from, core kind basis? earlier QDT a or going core Jim products give with I’m rationalization, business it's first side front? acquisition sense and the of a is where makes reason you regards for can of does restructuring systems your or that to some the have And either going off the whether things. on more you and little UCT from been UCT kind structure on done of lot to get come side the the this before the close, it could so the the

Jim Scholhamer

side would time that went in quarter. along we the quick only a major recovery the question business adjustments have a incrementally the is is there ‘XX. we we side Yes. Back bottom equipment year The it a making what of we pretty [SPS] have on we call Obviously as your the it. is core through believed answer yes, to been fall at of be or after the call that side that to and customer

and we now So longer period of then that steps aren’t the took period has levels time of do moves been take restructuring that period a of We high at more are easily time. running extended -- factories when can a but the that, achieved that of capacity. back types and

order a So lot now doing, runway we do that to of kind it -- see that we a really in of have. that things needed we’re we

Patrick Ho

cyclical follow-up in been been then long And mean and equipment given the as industry a for in than maybe maybe it’s time business, now I a -- extremely enough. you’ve an less volatile it’s it's Fair that, the past. to

those With get’s $XX billion the you it if level confident quickly turn higher that that times. that or levels these go future have I you in be future guess few to quickly? very today, back I the are to they for and we but a how WFE back customers to your sense to understand rationalization saw on restructuring in we just ramp moves return high the that can should able if quarters, the

Jim Scholhamer


detail level that the confidence the very very have is into about we’re much improved capacity more without be of much Our It are doing, not the restructuring. be too going at confident end we very if a efficient. types we will high, will to of restructuring similar able

of lot and capabilities, duplication globally. a both have We within the region then

And opportunity that areas is so remove duplication side-to-side. an make scale really certain get sense from and there in to

Patrick Ho

How traditional business. How I that at grow different for product this and the of parts are customers final year, looking from the time? revenues analytics, solutions at than cleaning services business that guess dynamics looking types Great. it’s again you I And drive to obviously over offering new side stickier are more a offerings even the guess market me a your will services, even question of It’s things. you different on you're projecting front. from

Jim Scholhamer

segment cleaning, with Actually doing control cleaning actually doing part, ChemTrace that we’re analytics the is contamination lot a not of just our division. a definitely and already of we’re

it’s element one that the So the of of Quantum we’re the leverage and strategic we is that that definitely at capability. that selling service business and actually how bought that point looking one to and key of of definitely improve

taken a engineering on surface and done a of put work treatments lot on up new that there’s strange lot of along. being into materials a texturing, and being of chip. goes activity of on periodic lot also handling surface a technology-wise lot coatings table Second, is And and

area arm definitely want a so the it’s main an grow. to leverage And resources we’re entity and that effective as we’re business to because -- in of put combined that is the focus and that definitely we service how something already


David Steelhead [Operator next Duley Securities. of Instructions] Our from question comes

David Duley

couple a Just clarifications. of

is You I is grow What business going to think Quantum’s your total mentioned Quantum in to what the revenue ‘XX? was high single-digits. base that level, in

Sheri Savage

‘XX have, I million. -- is the have don’t XXX about I

David Duley

Great. to it what size as down was then for, think think And roughly the far planning you be you are far XXXX, last of WFE I in year, XX year? it’s level billion market purposes, the this for planning as going how do

Jim Scholhamer

may the guy we But to that I this really it’s don’t analysis the than I to to up from But current major deterioration. believe major mixture which over half, point recovery it. happen, lone range in not sign and down down let we we else. down what of WFE of did more kind now definitely top the that in we and of but of second billion. are a of everyone see don't bottoms with, at not kind revenues but it's think what or -- want us lack It’s see think definitely, Yes. of backed ahead I we going a XX that out we movements further just any predicting would similar believe get been be be a don't a

David Duley

of the then is, billion of that XX what or wondering are more it’s this to is, range it level billion think just figure kind a have visibility guess end or that industry? But don’t referring generally people down what trying that’s other, down recovery if I the gearing out one into towards then around be of high I’m Why than and I not roughly way if half you down would I it you’re that asking planning second kind I’m might to. there that XX% guess second half XX consensus be of is kind recovery from

Jim Scholhamer

make down I WFE number, Again a our those there. from assumptions think and planning do could -- to we without I to reasonable new you bridge are could think trying to

David Duley

then And for margin Okay. we should have going gross forward cleaning there? business your expectation what

Sheri Savage

Well they UCP about what cleaning has typical for the business double our side, are core been.

really we through standpoint, been combined of we’re as higher course our a beyond the that in that year company from to to, the at not the perspective move us how we’re So goes see the of the but of range higher we end the end of a our year at from revenue seek going if course range for QX.

David Duley

so, percentage was quite there business? then And a large for the

Sheri Savage


providing we point, to going We’re forward start when reporting. this really so at starting go that half we’re in reporting margin into segment not the XXXX business to be going that doing QX see for

David Duley

me the another Okay, this fit to just second given mentioned cost they question things. don’t think you I half year the goal, from the savings timing of about really of is calendar

as how and we the on QX second the million guess by far of a As XX end achieved of half, have basis the million would much quarterly QX XX the might kind to say? in of end let’s be

Jim Scholhamer

have don’t as very we a actions to Obviously Yes. occurred the full of do some of forecast, recently. year want

how might that maybe the some think out. quarter, half just cost spread and that we occurring assumptions the continue believe real the are the I the year. on are if no the into material actions year obviously them will will second and and the second So we make savings of as going speak half spread of of you some be first There until through you effect they can


would to remarks. question-and-answer our Scholhamer for I to the closing Jim session. over like This conference turn concludes any back

Jim Scholhamer

for you, speaking in us, we forward again you look to Thank Yes. April. joining and


conference now today’s The you has presentation. attending concluded. for Thank

You disconnect. may now