Yahoo Finance Ultra Clean Holdings Inc (UCTT) Q1 2024 Earnings Call Transcript Highlights: Strong Revenue ...
Total Revenue: $477.7 million in Q1 2024, up from $444.8 million in the previous quarter.
Product Revenue: Increased to $418.5 million from $389.7 million in the prior quarter.
Services Revenue: Rose to $59.2 million from $55.1 million in Q4.
Gross Margin: Improved to 17.9% from 16.7% last quarter.
Product Gross Margin: 15.8%, up from 14.6% in the prior quarter.
Services Gross Margin: 32.3%, increased from 31.7% in Q4.
Operating Expenses: $54.5 million, compared to $51.3 million in Q4.
Operating Margin: Increased to 6.5% from 5.2% in the fourth quarter.
Net Income: $12.1 million, up from $8.5 million in the previous quarter.
Earnings Per Share (EPS): $0.27, compared to $0.19 in Q4.
Tax Rate: 19.7%, up from 16.4% last quarter.
Cash and Cash Equivalents: $293 million, down from $307 million in Q4.
Cash Flow from Operations: $9.8 million, a decrease from $35.3 million in the previous quarter.
Projected Q2 Revenue: Between $465 million to $515 million.
Projected Q2 EPS: Ranges from $0.16 to $0.36.
Release Date: May 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Ultra Clean Holdings Inc (NASDAQ:UCTT) reported a solid first quarter with top and bottom line increases, driven by strong demand in the domestic China market and high-bandwidth memory and advanced packaging supporting AI.
The company celebrated the 20th anniversary of its Shanghai facility, positioning it well to support local growth plans in the Chinese market.
Ultra Clean Holdings Inc (NASDAQ:UCTT) received two prestigious awards, highlighting its excellence in supplier performance and innovation, enhancing its reputation in the industry.
The company has strategically expanded and diversified its vertical capabilities, giving it a competitive advantage to participate at all levels of industry growth.
Ultra Clean Holdings Inc (NASDAQ:UCTT) has a robust long-term outlook for the semiconductor market, supported by ongoing investments and a focus on manufacturing excellence.
Negative Points
Despite positive growth, the company faces uncertainties due to potential trade restrictions and geopolitical tensions, particularly with China.
The semiconductor industry's growth is expected to be uneven within the value chain, which could lead to challenges in maintaining consistent growth rates for Ultra Clean Holdings Inc (NASDAQ:UCTT).
Operating expenses increased in the first quarter, which could impact profitability if not managed effectively.
The company noted that the broader base recovery in the semiconductor market is not expected until 2025, indicating potential short-term challenges.
While service revenue increased, it was influenced by a fab relocation, which may not represent sustainable growth.
Q & A Highlights
Q: Hey, good afternoon, Jim and Sheri. Congrats on the solid results and very strong guidance. I think I Jim in your prepared remarks, I got the sense that your strength in Q1 seems to be primarily due to some of the upside you see with your Chinese OEM customers and I did notice that your PowerPoint that that the category called other OEM, meaning outside of Lam and Applied, seems to have seen the most amount of growth, but it gets a little bit hard for me to reconcile because China revenue has been like a single digit percent of your total revenue. So how do I think about your actual exposure to the Chinese OEMs at this point? A: Yes, Charles, hi, Tom. Yes, you're right over the Chinese revenue is directly to the OEMs is relatively small, but it actually and it doubled. I think over the last two or three quarters and then nearly doubled again. So if you think about our our overdrive on revenue, I mean that was about half of it. The other half was on deposition tools that are used in the AI applications.
Q: Got it. So it sounds like the hemoai. side, it's probably largely dominated by a deposition type of tools, probably electroplating, if I have to take a guess? A: That's a good guess.
Q: Thanks, Jim. So maybe another question about service share. You mentioned about fab relocation of part of the reason for the service revenue strength, what do you mean by that fab relocation? A: Yes, we had a customer that moved some of their parts that needed to be cleaned on to a different location. And as a result, we had some additional revenue flow through the services P&L.
Q: Got it. That's not a China customer. A: No, no, no, it is not, I mean, with every incremental dollar that we put into service. And basically, it really helps them bring that margin up with with the volume flowing through their garden.
Q: So so maybe the two largest stuff, I mean, SAP customers, I would guess it's an Intel and Samsung, but that and how how are the business there are trending so far as are still looking quite positively so far? A: Yes. I mean, again, child so you have a positive would be would be optimistic, is that it's definitely inching up. It has inched up a little bit, as you saw, it's not a it's not a extremely strong recovery, but we are seeing signs of utilization starting to increase and some of the idled systems starting to be, but back in getting ready for her for a scaling up. So yes, it is getting a little bit better, but it's not it's not extremely Steve Perbio.
Q: Thanks, Jim. And Sheri, congrats on the results. I'll hop back in the queue. A: Thanks, Jerome.
Q: Yes, thanks, for taking the question and congrats on the strong results out of a couple of questions. One is a follow-up on Charles' question on the China revenues. You mentioned the domestic China strength. Is that maybe is that comment related to what you're seeing from China semi-cap volumes or is that also tied to your US semi-cap customers? A: Because my understanding was that you might not have the visibility with the U.S. semi-cap customers with the end customer is yes, you're right, Krish, we don't usually have the visibility or we have it, but it's in thousands of pieces on where we're shipping everything, but this is direct business from our Chinese factory directly to Chinese OEMs who've been servicing and several of these OEMs for over 15 years. We have long relationships with them, and we're pretty unique in the supply chain to have to have that where we're directly supplied into the OEM in China and have been doing that for a long time. We've seen a significant, like I mentioned earlier to Charles, we've seen that that business grow from mid-single digits to double and then double again. And we expect that to continue throughout the year. And as we as we look into what's going on with it and where it's going, we estimate about anticipate your next question, Chris, that we anticipate about half of it is going in directly at the line and going into production. And the other half is a little bit pre-ordered in anticipation of perhaps some more rules coming down, the trade trade restrictions. So that all of that we think is being is being driven directly as an immediate need, but it's been a very healthy growth and we think it's not just the stockpiling these cut. These customers are picking up new applications and are starting to grow much faster than we've seen over the last 15 years.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
