Ultra Clean Holdings, Inc. Q3 FY2024 earnings call

Jim started by noting that third - quarter revenue was at the high end of the guided range due to increased equipment spend for AI infrastructure build - out and demand from the domestic China market. UCT revenue is on track to be up over 20% this year compared to last year. Demand in the third quarter broadened to include AI related processes like Chemical mechanical planarization (CMP) for large AI chips. Revenue from the Shanghai manufacturing facility supporting local Chinese OEMs remained elevated, and there was an expectation of continued spend into 2025. Industry metrics such as inventory realignment, increased shipments of high performance computing chips, robust data center spending, and improved fab utilization rates showed improvement. UCT's diversified products touch nearly every semiconductor chip, and its manufacturing in Malaysia saw revenue increase nearly 150% year - over - year. The long - term outlook for the semi industry remains positive with the expectation that the global semiconductor market will exceed $1 trillion by 2030.

In the third quarter, total revenue was $540.4 million, up from $516.1 million in the prior quarter. Product revenue increased to $479 million from $452.7 million in the previous quarter, while services revenue was $61.4 million compared to $63.4 million in Q2. Total gross margin was 17.8% compared to 17.7% in the prior quarter. Product gross margin was 16.1% versus 15.6%, and services margin was 30.5% compared to 32.7% in Q2. Operating expense was $56.5 million, with operating margin increasing to 7.3% from 6.9% in Q2. Earnings per share were $0.35 on net-income of $15.9 million. Foreign exchange headwinds from the Malaysian ringgit negatively impacted EPS by $0.06 per share. Cash-and-cash equivalents were $318.2 million, and cash flow from operations was $14.9 million.

For the fourth quarter, total revenue is projected between $535 million and $585 million. EPS is expected in the range of $0.34 to $0.54.

Today's call contains forward - looking statements subject to risks and uncertainties. For more information, refer to the Risk Factors section in SEC filings. Foreign exchange headwinds, such as those from the Malaysian ringgit, can impact financial results.

Q: What's the percentage of revenue coming from China in the third quarter?

A: Jim mentioned they had about $55 million direct revenue from China, with continued strength and expectation it will stay strong.

Q: Can you talk more about CMP related strength in AI infrastructure build - out?

A: Jim said CMP business increased, UCT has a strong footprint in CMP, and investment in CMP is related to improving yields in AI chip manufacturing.

Q: Update on WFE growth?

A: Jim said WFE is expected to increase, with range 10% to 14%, and 2025 will be up with UCT growing more than that.

Q: Segmentation of China revenue and visibility?

A: Jim said not segmented by chip type, mostly deposition and etch modules, with visibility that 2025 will continue at 2024 levels.

Q: Product margins, mix vs volume?

A: Sheri said both mix and volume play roles, with volume being a major factor as it covers fixed costs due to added capacity.