ICHOR HOLDINGS, LTD. Q4 FY2024 earnings call

Key Points - Q4 revenue accelerated to $233M, up 10% sequentially, with full-year revenue at $849M (+5% vs 2023). - Demand strengthened in Q4 for Etch and CVD, requiring ramped weekly build rates. - Q4 gross margin was impacted by higher direct labor costs and inventory charges, but residual effects expected to carry into Q1. - For 2025, expect gross margin improvement with visibility into strong demand and increasing proprietary component content. - Progress in qualifying proprietary components: high-purity valves qualified at a second customer, fittings nearing third qualification, substrates qualified by process tool customers. - Next-generation gas panel: over 50 delivered in 2024, with ongoing qualifications and engagement on additional applications.

In Q4, revenue was $233 million, up 10% sequentially and 15% year-over-year. Full-year revenue was $849 million, up 5% from 2023. Gross margin in Q4 was 12% due to higher direct labor costs not fully absorbed and inventory charges. The revenue contribution across segments showed growth in Etch and CVD applications with broad-based demand from advanced logic, DRAM, and the start of NAND recovery.

Guidance - Q1 2025 revenue outlook raised to $235M-$255M, gross margin 14%-15%. - Anticipate gross margins above 15% by Q2 2025 with flow-through in 25%-30% range. - Q1 operating expenses projected at ~$23.5M. - Full-year OpEx increase lowered to 5%-7% compared to fiscal 2024. - Net interest expense for 2025 projected at ~$6M, non-GAAP effective tax rate for 2025 ~12.5%.

Risks - Forward-looking statements subject to risks and uncertainties outlined in earnings press release, Form 10-K, and SEC filings. - Export controls and tariffs could impact costs, though most inbound tariffs from China are de-minimal and rules around Mexico are ambiguous and still being clarified.

Q: Craig Ellis asked about how much of the gross margin benefit in 2025 is from new products, volume, and absence of headwinds.

A: Greg Swyt and Jeff Andreson responded that tailwinds from internal branded products, exiting headwinds, and volume leverage will contribute, with new products being a large driver.

Q: Brian Chin inquired about revenue outlook and margin progression.

A: Jeff Andreson stated demand strengthened, resources added to meet sustained demand, and margins expected to accrete as headwinds subside.

Q: Krish Sankar asked about NAND shipments cadence and proprietary gas panels.

A: Jeff Andreson said NAND shipments increased in Q4 and expected to continue, while Greg Swyt noted proprietary gas panels are a large component of gross margin accretion.

Q: Tom Diffely asked about revenue capabilities and NAND growth.

A: Jeff Andreson and Greg Swyt discussed current infrastructure capacity being well below maximum and NAND growing as a percentage of revenue but still smaller than DRAM and foundry logic.

Q: Christian Schwab inquired about gross margin outlook and future potential.

A: Greg Swyt said full-year 2025 gross margin expected above 16%, with optimal margins potentially reaching 19-20% by 2026 with increased proprietary products.

Q: Edward Yang asked about new product progress and export controls.

A: Jeff Andreson stated new product deliveries in 2024 were more than 50 and aligned with expectations, and export controls and tariffs were noted as risks with most impacts already baked into visibility.