Q1 2024 Ultra Clean Holdings Inc Earnings Call
Operator: Good afternoon, ladies and gentlemen, and welcome to the Ultra Clean Technology UCT 1st Quarter 2024 Earnings Call and Webcast Conference Call. At this time, all lines are in listen-only mode.
Good afternoon, ladies and gentlemen, and welcome to the Ultra clean technology, you see T first quarter 'twenty 'twenty four earnings call and webcast conference call.
At this time all lines are in listen only mode.
Operator: Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Monday, May 6, 2024. I would now like to turn the conference over to Rhonda Bennetto, Senior Vice President of Investor Relations. Please go ahead.
Following the presentation, we will conduct a question and answer session.
If at any time during this call you require assistance. Please press star zero for operator. This call is being recorded on Monday May six 2024, I would now like to turn the conference over to Rhonda <unk> Senior Vice President of Investor Relations. Please go ahead.
Rhonda M. Bennetto: Thank you, operator. Good afternoon, everyone, and thank you for joining us.
Rhonda: Thank you operator, good afternoon, everyone and thank you operator, good afternoon, everyone and thank you for joining US with me today are Jim Shellhammer, Chief Executive Officer, and Sheri Savage Chief Financial Officer, Jim will begin with some prepared remarks about the business and Sheri will fall.
Rhonda M. Bennetto: With me today are Jim Scholhamer, Chief Executive Officer, and Sheri Savage, Chief Financial Officer. Jim will begin with some prepared remarks about the business, and Sheri will follow with a financial review, then we'll open up the call for questions. Today's call contains forward-looking statements that are subject to risks and uncertainties. For more information, please refer to the risk factors section in our SEC filing. All forward-looking statements are based on estimates, projections, and assumptions as of today, and we assume no obligation to update them after this call.
Sheri L. Savage: All over with the financial review then we'll open up the call for questions.
Sheri L. Savage: Today's call contains forward looking statements that are subject to risks and uncertainties for more information. Please refer to the risk factors section in our SEC filings. All forward looking statements are based on estimates projections and assumptions as of today and we assume no obligation to update them. After this call discussed.
Rhonda M. Bennetto: Discussion of our financial results will be presented on a non-GAAP basis. A reconciliation of GAAP to non-GAAP can be found in today's press release posted on our website. And with that, I'd like to turn the call over to Jim.
Sheri L. Savage: Discussion of our financial results will be presented on a non-GAAP basis, a reconciliation of GAAP to non-GAAP can be found in today's press release posted on our website.
Sheri L. Savage: With that I'd like to turn the call over to Jim.
James P. Scholhamer: Hello, everyone, and thank you for joining our call this afternoon. I will start with a high-level summary of our financial and operating results for the first quarter, then share some thoughts on the broader industry and trends we are seeing. I'll close by highlighting a couple of important awards before turning the call over to Sheri for a more comprehensive financial review before opening the call up for questions.
James P. Scholhamer: Hello, everyone and thank you for joining our call. This afternoon.
James P. Scholhamer: I will start with a high level summary of our financial and operating results for the first quarter, then share some thoughts on the broader industry trends we are seeing.
James P. Scholhamer: I'll close by highlighting a couple of important award before turning the call over to Sherry for a more inclusive financial review before opening the call up for questions.
James P. Scholhamer: We reported a solid first quarter on the top and bottom lines. The increase in orders above midpoint was driven by ongoing strength in the domestic Chinese market and high bandwidth memory and advanced packaging demand supporting AI. Earnings came in above our guided range due to higher volume, favorable mix, and our ongoing focus on site efficiencies. Elevated domestic Chinese demand underscores the importance that the Chinese government and chip industry have placed on becoming self-sufficient.
Sherry: We reported a solid first quarter on the top and bottom line.
Sherry: The increase in orders above midpoint was driven by ongoing strikes in the domestic China market and high bandwidth memory and advanced packaging demand supporting <unk>.
Earnings came in above our guided range due to higher volume favorable mix and our ongoing focus on efficiency.
Sherry: Elevated domestic China demand underscores the importance that the Chinese government and chip industry has placed on becoming self sufficient.
James P. Scholhamer: Chinese chip companies are rapidly investing in new semiconductor factories to advance the nation's capabilities and address export controls imposed by the U.S. and its allies. We recently celebrated the 20th anniversary of our Shanghai facility and are ideally located to support our local customers' growth plans, based on external analysis and our customer roadmaps, confirmed by our internal marketing intelligence. We anticipate demand levels in the region to remain consistent or even increase slightly through the end of this year.
Sherry: Chinese chip companies are rapidly investing in new semiconductor factories to advance the nation capabilities and address export controls imposed by the U S and its allies.
Sherry: Yes.
Sherry: We recently celebrated the 20th anniversary of our Shanghai facility.
Sherry: There are ideally located to support our local customers growth plan.
Sherry: Based on external analysis that our customer roadmaps confirmed by our internal marketing intelligence, we anticipate demand levels in the region to remain consistent.
Sherry: Even increase slightly through the end of this year.
James P. Scholhamer: The second reason revenue increased beyond our expectations was related to areas of deposition and edge demand for high bandwidth memory and advanced packaging supporting AI. AI models are advancing rapidly so that they can run on edge devices like PCs and smartphones, creating new and compelling capabilities in both the consumer and enterprise sectors.
Sherry: The second reason revenue increase beyond our expectations was related to areas of deposition and etch demand and high bandwidth memory and advanced packaging supporting AI.
Sherry: Artificial intelligence models are advancing rapidly so that they can run on edge devices, like Pcs and smartphones, creating new and compelling capabilities in both the consumer and enterprise sectors.
James P. Scholhamer: Additional industry investment is required to meet the forthcoming demand for advanced computing, memory, and storage. Therefore, growth is likely to be uneven within the value chain for a while yet. In this landscape, success will favor those who are capable of quickly driving technological progress while also introducing innovations that disrupt the complexities associated with semiconductor fabrication. UCT supports the world's technology leaders in this sector, and our deep relationships with them are helping to advance their roadmaps with positive results.
Sherry: Additional into industry investment is required to meet the forthcoming demand for advanced computing memory and storage.
Sherry: So growth is likely to be uneven within the value chain for a while yet.
Sherry: In this landscape successful favorite those who are capable of quickly driving technological progress while also introducing innovation that disrupt the complexities associated with semiconductor fabrication.
Sherry: UCT supports the world technology leaders in the sector and our deep relationships with them are helping to advance their roadmaps with positive results.
James P. Scholhamer: The drive for localized chip manufacturing capabilities happening now in several countries is another tailwind that will support future demands and elevate UCT's significance with our customers. In the U.S. alone, the Chips and Science Act has committed $30 billion to date, supporting $275 billion in investment by 2030. As chips become increasingly critical to multiple industries and use cases around the world, the long-term outlook for the semiconductor market is very robust. The expansion and diversification of our vertical capabilities over the past several years gives us a distinct competitive advantage to participate at all levels of industry growth. From fab construction support, to equipment build out, to production services like part recycling and refurbishment, cleanliness, and analytics.
Sherry: The drive for localized chip manufacturing capabilities happening now in several countries is another tailwind that will support future demand and elevated UCT significance with our customers in.
Sherry: In the U S alone that shifts in Science Act with committed $30 billion to date supporting $275 billion of invested by 2030.
Sherry: As it shifts to become increasingly critical to multiple industries and use cases around the world. The long term outlook for the semiconductor market is very robust.
Sherry: The expansion and diversification of our vertical capabilities over the past several years gives us a distinct competitive advantage to participate at all levels of industry growth.
From fab construction support to equipment build out <unk>.
Sherry: Production services like part recycling and refurbishment.
That's an analytics.
James P. Scholhamer: Furthermore, our dedication to manufacturing excellence remains unparalleled, distinguishing us from competitors and solidifying our leading position. For example, we are honored to have received two very prestigious awards recently. First, we were recognized by Texas Instruments with their 2023 Supplier Excellence Award. This award is reserved for an elite group of suppliers with exemplary performance in the areas of cost, environmental and social responsibility, technology, responsiveness, and assurance of supply and quality. And for the second year in a row, we earned Intel's 2024 Epic Distinguished Supplier Award for consistently exceeding expectations.
Sherry: Furthermore, our dedication through manufacturing excellence remains unparalleled distinguishing us from competitors and solidifying our leading position.
Sherry: For example, we are honored to have received two very prestigious awards recently.
First we were recognized by Texas instruments with its 123 supplier Excellence Award.
Sherry: This award is reserved for the elite group of suppliers with exemplary performance in the areas of cost environmental and social responsibility technology responsiveness and assurance of supply of quality.
Sherry: And for the second year in a row, we earned <unk> 2024 epic Distinguished supplier award for consistently exceeding expectations.
James P. Scholhamer: As one of only 27 award recipients, UCT stood out among thousands of other suppliers because of its relentless drive to improve and serve as a benchmark for other suppliers across the ecosystem. We believe that supply and demand will gradually rebalance throughout the rest of this year. However, our opinion has not changed, and we expect a broader-based recovery in 2025. We are performing effectively and have achieved notable advancements in streamlining and expanding our capacity to mirror the evolving demands and technology shifts we see coming.
Sherry: As one of only 27 award recipient UCT has stood out among thousands of other suppliers because of our relentless drive to improve and serve as a benchmark for other suppliers across the ecosystem.
Sherry: We believe that supply and demand will incrementally rebalance throughout the rest of this year.
Sherry: However, our opinion has not changed and we expect a broader based recovery in 2025.
Sherry: We're performing effectively and have achieved notable advances in streamlining and expanding our capacity to mirror the evolving demands of technology shifts we see coming.
James P. Scholhamer: Mindful of these trends, we have strategically mapped out our global footprint to ensure a diversified and efficient manufacturing presence supporting all our global customers. We are pleased with UCT's execution and are prepared to outperform again through the next phase of industry growth. And with that, I'll turn the call over to Sheri for our financial review.
Sherry: Mindful of these trends we are strategically mapped out our global footprint to ensure a diversified and efficient manufacturing presence supporting all our global customers.
Sherry: We are pleased with <unk> execution and are prepared to outperform again into the next phase of industry growth.
Sherry: I'll turn the call over to Sherri for our financial review Sherri.
Sheri L. Savage: Thanks, Jim, and good afternoon, everyone. Thanks for joining us.
Thanks, Ken and good afternoon, everyone. Thanks for joining us in today's discussion I'll be referring to non-GAAP numbers only.
Sheri L. Savage: In today's discussion, I'll be referring to non-GAAP numbers only. As Jim noted, in the first quarter, we saw an increase in our products business within the Chinese domestic market and some new demand for product-supporting AI, which we expect to stay around these levels. Our service business also saw elevated demand from China, along with some additional business from a fab relocation. Total revenue for the first quarter came in at $477.7 million, compared to $444.8 million in the prior quarter. Revenue from products increased to $418.5 million, compared to $389.7 million last quarter. Services revenue was $59.2 million, compared to $55.1 million in Q4.
Sherri: As Jim noted in the first quarter, we saw an increase in our products business within the Chinese domestic market and some new demand for products to bring AI, which we expect to stay around these levels. Our service business also saw elevated demand from China, along with some additional business from a fad relocation.
Sheri L. Savage: Total gross margin for the first quarter increased to 17.9% from 16.7% last quarter. Products gross margin was 15.8% compared to 14.6% in the prior quarter, and services gross margin was 32.3% compared to 31.7% in Q4. Margins can be influenced by fluctuations in volume, mix, and manufacturing region, as well as material and transportation costs, so there will be variances quarter to quarter. Operating expense for the quarter was $54.5 million compared with $51.3 million in Q4. As a percentage of revenue, operating expense remained flat compared to Q4, at 11.4%.
Sherri: Total revenue for the first quarter came in at $477 $7 million compared to $444 8 million in the prior quarter.
Sherri: Revenue from products increased to $418 $5 million compared to $389 7 million last quarter.
Sherri: Services revenue was $59 $2 million compared to $55 1 million in Q4.
Sherri: Total gross margin for the first quarter increased to 17, 9% from 16, 7% last quarter.
Sherri: Product gross margin was 15, 8% compared to $14 six in the prior quarter.
Sherri: In services was 32, 3% compared to 31, 7% in Q4.
Sherri: Margins can be influenced by fluctuations in volume mix and manufacturing region as well as material and transportation costs that there will be variances quarter to quarter.
Sherri: Operating expense for the quarter was $54 5 million compared with $51 3 million in Q4.
Sherri: As a percentage of revenue operating expense really flat compared to Q4 at 11, 4%.
Sheri L. Savage: Total operating margin for the quarter increased to 6.5% compared to 5.2% in the fourth quarter. Margin from our products division was 6% compared to 4.6% in Q4. And services margin was 10.1% compared to 9.5% in the prior quarter. Margin improvements were largely due to higher revenue and operating efficiencies. Based on 45.1 million shares outstanding, earnings per share for the quarter were $0.27 on net income of $12.1 million compared to $0.19 on net income of $8.5 million in the prior quarter due to favorable product mix and factory utilization. Our tax rate for the quarter was 19.7% compared to 16.4% last quarter. We expect it to stay in the high teens for 2024.
Sherri: Total operating margin for the quarter increased to six 5% compared to $5 <unk> in the fourth quarter.
Sherri: Margin from our products Division was 6% compared to four 6% in Q4.
Sherri: Services margin was 10, 1% compared to nine 5% in the prior quarter.
Sherri: Margin improvements were largely due to higher revenue and operating efficiencies.
Sherri: Based on $45 1 million shares outstanding earnings per share for the quarter were 27 on net income of $12 1 million.
Sherri: Compared to <unk> 19 cents on net income of $8 $5 million in the prior quarter.
Sherri: Due to favorable product mix and factory utilization.
Sherri: Our tax rate for the quarter was 19, 7% compared to 16, 4% last quarter. We expected we expect it to stay in the high teens for 2024.
Sheri L. Savage: Turning to the balance sheet, our cash and cash equivalents were $293 million compared to $307 million in Q4. Cash flow from operations was $9.8 million compared to $35.3 million last quarter. The change in cash flow from operations was due to year-end compensation payments and increased inventory to meet elevated demand. In early April, we amended our Term B debt facility to extend it to February 2028. Strong demand from existing and new high-quality lenders enabled us to incrementally upsize the offering by $29 and reduce our interest rate by a quarter point.
Sherri: Turning to the balance sheet, our cash and cash equivalents were $293 million compared to $307 million in Q4.
Sherri: Cash flow from operations was $9 $8 million compared to $35 3 million last quarter.
Sherri: Change in cash flow from operations was due to year end compensation payments and increased inventory to meet elevated demand.
Sherri: In early April we amended our term b debt facility to extended to February 2028.
Sherri: Strong demand from existing and new high quality lenders enabled us to incrementally as far as the offering by $20 million.
Sherri: And reduce our interest rate by a quarter point in.
Sheri L. Savage: In conjunction, we extended the maturity of our revolving credit facility to August 2027. For the second quarter, we project total revenue between $465 million and $515 million. We expect EPS in the range of $0.16 to $0.36. And with that, I'd like to turn the call over to the operator for questions.
Sherri: In conjunction we extended the maturity of our revolving credit facility to August 2027.
Sherri: For the second quarter, we project total revenue between $465 million and $515 million, we expect EPS in the range of 16 to 36 cents.
Speaker Change: With that I'd like to turn the call over to the operator for questions.
Operator: Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the number one on your telephone. And you will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number 2. If you are on a speakerphone, please lift the handset before pressing any button. Your first question comes from the line of Charlie from Needham; please go ahead.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the number one on your telephone and you'll be you'll hear a prompt your hand, that's been raised.
Should you wish to decline from the voting process. Please press star followed by the number two.
Speaker Change: If you are on a speaker phone please lift the handset before pressing any keys.
Speaker Change: Your question comes from the line of Charles <unk> from Needham. Please go ahead.
Charlie: Hey, good afternoon, Jim and Sheri. Congratulations on the solid results and very strong guidance. I think, Jim, in your prepared remarks, I got a 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 in your PowerPoint that the category called other OEM, meaning outside of land where it is applied, seems to have seen the most growth.
Charles: Hey, good afternoon, Jim or Sheri, congrats on the solid results and very strong guidance.
Charles: I think Jim in your prepared remarks, I got the sense that that your your strength in Q1 seems to be primarily due to some of the upside.
Charles: Do you see with your Chinese OEM customers and I did notice that they can go powerpoint that that that that the category called other oh, yeah by many outside of land is applied seems to have been the most amount of growth but.
Charlie: But it gets a little bit hard for me to reconcile because China's revenue has been like a single digit percent of your total revenue. So how do I think about your actual exposure to Chinese OEMs at this point?
Speaker Change: It gets a little bit hard for me to reconcile because China revenue, how something 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.
Speaker Change: Yeah.
James P. Scholhamer: Yeah, Charles, hi. Yeah, you're right. The Chinese revenue directly to the OEMs is relatively small, but it's actually doubled, I think, over the last two or three quarters and then nearly doubled again. So, and if you think about 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 application.
Speaker Change: Yeah, Charles Hi.
Charles: Yes, you're right the Chinese revenue is.
Charles: Directly to the Oems.
Charles: Relatively small but it actually.
Charles: Doubled I think over the last two or three quarters, and then nearly doubled again.
And if you think about our.
Charles: Our overdrive on revenue I mean that was about half of it the other half was.
Charles: Deposition tools that are used in the AI applications.
James P. Scholhamer: Got it. So, sounds like the HBM or AI side, it's probably largely dominated by deposition type of tools, probably electroplating, if I have to take a guess. That's a good guess. Thanks, Jim.
Speaker Change: Got it.
Speaker Change: So it sounds like the HCM or AI side, it's a it's probably largely dominated by deposition type up towards probably electroplating, if I have to take a guess.
Speaker Change: That's a good guess.
Speaker Change: [laughter].
Sheri L. Savage: So maybe another question about service. Sheri, you mentioned FAB relocation as part of the reason for the service revenue strength. What do you mean by that, FAB relocation?
Speaker Change: So maybe another question about service.
Speaker Change: Sherri you mentioned about the.
Speaker Change: Relocation as part of the reason for that so it is a revenue sense, what do you mean by that relocation.
Sheri L. Savage: Yeah, we had a customer that moved some of their parts that needed to be cleaned to a different location. And as a result, you know, we have some additional revenue flow through the service at C&L.
Sherri: Yeah, we had a customer that moved some of their parts that needed to be cleaned them to a different location and as a result.
Sherri: We had some additional revenue flows through the service the P&L.
Sheri L. Savage: Got it, that's not a China customer, no?
Sherri: Got it that that's not the China customer.
Sheri L. Savage: Now, no, no, it is not, you know, and with every incremental dollar that we put into service, basically, it really helps bring that margin up with the volume going through there.
Speaker Change: No no no it is not.
Speaker Change: With every incremental dollar that we put into service basically it really helps bring that margin up.
Speaker Change: Great.
Speaker Change: With the volume flowing through there.
James P. Scholhamer: Got it. So, maybe your two largest, I mean, SAP customers, I would guess they're Intel and Samsung, but how is business there trending so far? Is it still looking quite positively so far?
Speaker Change: Got it so.
Speaker Change: So maybe.
Speaker Change: There are two largest I mean, SAP customers I would've guessed that Intel and Samsung buybacks.
Speaker Change: How how are the business there are trending so far is that still looking quite positively so far.
James P. Scholhamer: Yeah, me again, Charles. So it positive would be optimistic. It's definitely inching up. It has inched up a little bit, as you saw. It's not an extremely strong recovery, but we are seeing signs of utilization starting to increase and some of the idled systems starting to be put back and getting ready for..., for scaling up. So yeah, it is getting a little bit better, but it's not an extremely steep curve yet.
Speaker Change: Yes me again Charles.
Positive it would be.
Speaker Change: We'd be optimistic.
Speaker Change: Definitely itching up.
Up a little bit as you saw.
Speaker Change: It's not a it's not a extremely strong recovery, but we are seeing signs of utilization started to increase.
Speaker Change: And some of the idled system starting to be.
Speaker Change: Got it back and getting ready for <unk>.
Speaker Change: Sure.
Speaker Change: For scaling up so yes, it is getting a little bit better, but it's not.
Speaker Change: It's not extremely steep curve yet.
Speaker Change: Yes.
Charlie: Thanks, Jim and Sheri. Congratulations on the results. I'll hop back into the queue.
Speaker Change: Thanks, Jim or Sheri Congrats on the results I'll hop back into the queue.
Sheri L. Savage: Thanks, Charles Thank you.
Operator: Your next question comes from the line of Krish Sankar from TD Cowen; please go ahead.
Your next question comes from the line of Krish Shankar from Cowen. Please go ahead.
Krish Sankar: Thank you for taking my question and congratulations on the strong results. I have a couple of questions.
Krish Sankar: Yeah, Hi, Thanks for taking my question and congrats on the strong Russo.
Krish Sankar: A couple of questions I wanted to follow up on Charles' question on the China revenue.
James P. Scholhamer: One is to follow up on Charles' question on China revenues. You mentioned the domestic Chinese strength. Is that comment related to what you're seeing from China's semi-capital OEMs, or is it also tied to your U.S. semi-capital customers? Because my understanding was that you might not have visibility with the U.S. semi-capital customers who are the end customers?
Krish Sankar: You mentioned the domestic China spend.
Krish Sankar: Is that is that comment related to what are you seeing from China Oems or is that also tied to your U S semi cap customers because my understanding was that you might not have the vista looking at the U S semi cap customers with their end customers.
James P. Scholhamer: Yeah, 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. We've been servicing 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 that where we're directly supplying to the OEM in China and have been doing that for a long time.
Krish Sankar: Yes, you are right, Chris we don't usually have the visibility.
Krish Sankar: 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 have been servicing.
Krish Sankar: Several of these Oems.
Krish Sankar: 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 are directly supplied into the Oems in China and have been doing that for a long time.
James P. Scholhamer: We've seen a significant, like I mentioned earlier to Charles, we've seen 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 look into what's going on with it and where it's going, we estimate about half of it is going in directly on 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 on the trade trade restrictions.
Krish Sankar: <unk> seen a significant.
Krish Sankar: Like I mentioned earlier to Charles we've seen that business grow from mid single digits to double and then double again.
Krish Sankar: We expect that to continue throughout the year and as we as we look into what's going on with it and where is it going we estimate about anticipate your next question Chris.
Krish Sankar: Anticipate about half of it is.
Krish Sankar: Going in directly at the line and going into production and the other half is a little bit preorders.
Krish Sankar: In anticipation of perhaps some more.
Krish Sankar: Rules coming down on the trade.
James P. Scholhamer: So not all of it, we think, is being driven directly as an immediate need, but it's been a very healthy growth, and we think it's not just stockpiling. These customers are picking up new applications and are starting to grow much faster than we've seen over the last 15 years.
Trade restrictions so.
Not all of it we think is being is being driven directly.
Krish Sankar: Mediate need.
Krish Sankar: But.
Krish Sankar: At a very healthy growth and we think it is.
Krish Sankar: Not just stockpiling.
Krish Sankar: These customers are picking up.
Krish Sankar: New applications and are starting to grow much.
Krish Sankar: Much faster than we've seen over the last 15 years.
James P. Scholhamer: Got it, got it. That's very helpful, Jim. And then, like a follow-up, you know, obviously, one of your U.S. Semicap OEMs, you have pretty good exposure to some of your lagging-edge products, you know, eventually they sell into. I'm just kind of curious, I understand Chinese demand is very strong, which is lagging-edge, but how do you see the non-China l
Speaker Change: Got it got it that's very helpful. Jim and then I can follow up.
Speaker Change: Obviously, one of your U S semi capped Oems, we have pretty good exposure.
Speaker Change: Just some of the lagging edge product nor do I see this all Linda I'm, just kind of curious I understand the China demand is very strong which is lagging edge, but how do you see the non China lagging edge demand.
James P. Scholhamer: I'm sorry, non-China what demand? Yeah. Oh, the lagging edge demand is also as bad and strong, if that's what you're asking about. But it's, I think that strength was, you know, appeared, you know, maybe a quarter to a go, and it's starting to maybe temper a little bit, but it has been elevated.
Speaker Change: I'm, sorry, non China what demand.
Speaker Change: Lagging edge.
Oh.
Speaker Change: The lagging edge demand has also been strong if that's what you're asking about.
Speaker Change: But.
Speaker Change: I think that strength appeared.
Speaker Change: Maybe a quarter or two ago.
Speaker Change: Maybe temper a little bit, but it has been elevated.
Yeah.
James P. Scholhamer: Got it, got it. And then the one final question, you know, obviously, I think you've spoken about ASML exposure in the past. With EUV, my understanding is that it is probably for more of the high-pressure components. Was ASML greater than 10% customers, or is it still too small for you?
Speaker Change: Got it got it and then the one final question.
Speaker Change: Obviously I think it was spoken about asking all exposure in the past.
My understanding is more than probably put more of the high pressure components.
Speaker Change: Well, it's a little greater than 10% customer or is it still too small for you folks.
James P. Scholhamer: It is not. It's mid-single digits and on its way, we believe, within a few years.
Speaker Change: It is not as mid single digits.
Speaker Change: And on its way so we believe in a within a few years.
James P. Scholhamer: But yeah, and I think Charles mentioned the other one. The other one has ASM, ASML, KLA, as well as the Chinese OEM. So that's where you see a lot of it, a lot of them. The numbers pile up.
Speaker Change: But yes.
Yes.
Charles mentioned the other the other has ASM ASML.
Speaker Change: As well as the Chinese Oems, So that's where you see a lot of it.
Speaker Change: A lot of the.
Speaker Change: The numbers.
Krish Sankar: Thank you very much.
Speaker Change: Got it thank you very much very helpful.
Speaker Change: Yeah.
Operator: Your next question comes from the line of Krish Chan-Schwab from Craig Helm Capital Group. Please go ahead.
Speaker Change: Your next question comes from the line of Christian Schwab from Craig Hallum Capital Group. Please go ahead.
Krish Sankar: Congratulations on the good quarter. Jim, when would you anticipate your memory customers' utilization to improve enough to show up in the clean?
Christian David Schwab: Congrats on the good quarter.
Christian David Schwab: Jim what when would you anticipate.
Christian David Schwab: Your memory customers utilization to improve enough to just show up in the cleaning business.
James P. Scholhamer: We're anticipating, and we've been pretty consistent about, you know, the WFE side of it, the product side, probably not improving until 2025, and I think we are sticking with that. On the services side, it's difficult to predict. It's definitely outside of our bottom-up window, but you would anticipate from the past that, you know, we'd see that start to tick up, you know, in the latter half of 2024, to start to see the equipment orders coming in in 2025.
James P. Scholhamer: We are anticipating we've been pretty consistent about.
Christian David Schwab: On the WSI side of it the product side, probably not improved.
Improving until 2025, and I think we are sticking with that on the services side, it's difficult to predict it definitely outside of our bottoms up window, but you would anticipate from the past that.
Christian David Schwab: See that start to tick up.
Christian David Schwab: In the latter half of 2024.
Christian David Schwab: To start to see the equipment orders coming in in 2025.
James P. Scholhamer: Okay, okay. And what is your kind of baseline thoughts of what you would anticipate WFE growth to be in 25? And then the next question to that would be, you know, what type of growth rate would you anticipate you'd be positioned for to outgrow WFE on a go forward basis similar to what you did in the last up cycle?
Okay. Okay.
Speaker Change: And what is your kind of baseline thoughts of what you would anticipate.
Speaker Change: You know Wi Fi growth to be in 'twenty, five and the next question.
Speaker Change: To that would be.
Speaker Change: What type of growth rate would you anticipate you'd be positioned for to outgrow WSB.
Speaker Change: On a go forward basis similar to what you did in the last up cycle.
James P. Scholhamer: Yeah, I think our current view, which we're always updating, is low double digits in 2025 growth in WFP. And, of course, it's always difficult to predict, and things tend to be stronger than you expect and weaker than you expect depending on where we are in the cycle.
Speaker Change: Yes, I think our current view.
Speaker Change: Always updating.
Speaker Change: Low double digit in 2025 growth in WMC.
And of course.
Speaker Change: It's always difficult to predict and things tend to be stronger than you expected weaker than you expect depending on the.
James P. Scholhamer: As far as outgrowing goes, I think, you know, it's the same formula we've been following for years that has led to our outgrowing WFP. We have a lot of, I'd say, where there is a lot of the runway or the green pastures or the opportunities. You know, the HIS acquisition has a lot of growth expected in that segment, with all the fab buildouts and their strong position there that we're making stronger from our fluid solutions acquisition as well.
Speaker Change: Where we are in the cycle.
Speaker Change: As far as outgrowing I think it's.
Speaker Change: The same formula we've been following for years that have led to our outgrowing <unk>. We have a lot of I'd say, whereas a lot of the runway or the green pastures are the opportunities.
Speaker Change: The <unk> acquisition has a lot of growth expected.
Speaker Change: And that segment is with all the fab build outs and their strong position there that we're making stronger.
From our fluid solutions.
Speaker Change: Acquisition as well I mean, we have a relatively we have a great product line, but a relatively small.
James P. Scholhamer: I mean, we have a relative, we have a great product line, but a relatively small market share versus the two industry leaders. But we've been working on getting those qualified in our main customers that, prior to our acquisition, there was a slower slog for Hamlet, the company that we bought. So we're seeing that accelerate as well as I think we're pretty well penetrated at our largest customer. But I think when you look at the second, third, and fourth, there's a lot of opportunity there for market share growth within those customers.
Speaker Change: Market share versus the two industry leaders, but we have been working on getting those qualified and our main main customers.
Speaker Change: Prior to our acquisition there was a slower slog.
Speaker Change: For for Hamlin the company that we bought so we're seeing that accelerate as.
Speaker Change: As well as I think.
Speaker Change: I would say, we're pretty well penetrated at our largest customer, but I think it is.
Speaker Change: When you look at the second third or fourth Theres, a lot of opportunity there for or market share growth within those customers.
Krish Sankar: No other questions. Thanks, guys.
Speaker Change: Okay.
Speaker Change: No other questions. Thanks, guys.
Speaker Change: Thanks, Chris Thank you.
Operator: There are no further questions at this time. I would like to hand the call back to James Scholhamer for closing remarks.
There are no further questions at this time I would like to hand, the call back to Jim Scheel Hammer for closing remarks.
James P. Scholhamer: Thank you everyone for joining us today, and we look forward to speaking with you again next quarter.
Speaker Change: Thank you everyone for joining us today, and we look forward to speaking with you again next quarter.
Speaker Change: Yeah.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.