Release Date: October 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue for the third quarter came in at the high end of the guided range, driven by increased equipment spending for AI infrastructure and strong demand from the domestic China market.
- Ultra Clean Holdings Inc (UCTT, Financial) is on track to achieve over 20% revenue growth this year compared to last year, surpassing the growth of its largest customers.
- The company has seen a significant increase in revenue from its Shanghai manufacturing facility, with expectations for continued high levels of spending supported by local government investment.
- Revenue from the Malaysia facility has increased nearly 150% year-over-year, contributing to greater economies of scale for customers.
- The company has a diversified product line that extends beyond gas and fluid delivery solutions, indirectly touching nearly every semiconductor chip used in AI applications.
Negative Points
- Services revenue decreased from $63.4 million in Q2 to $61.4 million in Q3, indicating a decline in this segment.
- The overall tax rate increased from 24.7% last quarter to 27.1% this quarter, impacting net income.
- Foreign exchange headwinds, particularly related to the Malaysian ringgit, negatively impacted earnings per share by $0.06.
- Cash flow from operations decreased from $23.2 million last quarter to $14.9 million, primarily due to timing of cash collections and vendor payments.
- Revenue from China, although strong, showed a slight decline from the previous quarter, indicating potential volatility in this market.
Q & A Highlights
Q: What percentage of revenue came from China in the third quarter, and is China the main contributor to non-Lam, non-AMAT revenue growth?
A: James Scholhamer, CEO: We did about $52 million to $55 million from China direct sales this quarter. This is a significant increase compared to past quarters where we did $10 million to $20 million. The strength is from direct sales to Chinese OEMs, and we expect this to remain strong through the year and into next year.
Q: Can you elaborate on the CMP-related strength and its connection to AI infrastructure build-out?
A: James Scholhamer, CEO: We have a strong position in CMP, which is used to improve chip yields. This quarter, we saw an increase in CMP business, contributing to our outperformance. Companies are investing in CMP to enhance yields, especially for large AI chips.
Q: What factors are contributing to UCT's growth faster than its customers?
A: James Scholhamer, CEO: As the market turns up, we typically outgrow the industry due to increased outsourcing by customers and gains in lithography. Our new platform in Malaysia also contributes to our growth as customers leverage the low-cost region.
Q: Is there any seasonality or moderation in the China revenue, given it's down from the prior quarter?
A: James Scholhamer, CEO: The decrease is due to lumpiness, with one main customer facing internal issues. However, the long-term prospects remain strong, and we expect continued strength into 2025.
Q: What visibility and confidence do you have regarding the strength in domestic China heading into next year?
A: James Scholhamer, CEO: We have not segmented by chip type, but we provide deposition and etch modules. Discussions with Chinese customers indicate they will continue to gain market share and maintain strong investment levels into 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
