Q1 2025 Ultra Clean Holdings Inc Earnings Call
Operator: Good afternoon, ladies and gentlemen, and welcome to the UCT Reports Q1 2025 Financial Results Conference call. At this time, all lines are in listen-only mode.
Good afternoon, ladies and gentlemen, and welcome to you see if the reports Q1 rather than 'twenty.
95 financial results conference call at this time all lines are in you think Oh Nemo.
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.
Following the presentation, we will conduct a question and answer session.
If at any time during the call you require immediate assistance. Please press star zero for any operator.
Operator: This call is being recorded on Monday, April 28, 2025.
This call is being recorded on Monday April 28 2025.
Rhonda Bennetto: I would now like to turn the conference over to Rhonda Bennetto, Investor Relations. Please go ahead. Thank you, Operator. Good afternoon, everyone, and thank you for joining us.
Speaker Change: I would now like that during the conference Oh, great.
In that.
Speaker Change: Investor relation.
Speaker Change: Please go ahead.
Speaker Change: Thank you operator, good afternoon, everyone and thank you for joining US with me today are Clarence Granger interim CEO and Sheri Savage Chief Financial Officer, and Cheryl can answer our VP of marketing clearance. We will begin with some prepared remarks about the business and Sheri will follow that with a financial review then we'll open up the corporate.
Rhonda Bennetto: With me today are Clarence Granger, Interim CEO, Sheri Savage, Chief Financial Officer, and Cheryl Knepfler, our VP of Marketing.
Rhonda Bennetto: Clarence will begin with some prepared remarks about the business and Sheri will follow that 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 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. Discussion of our financial results will be presented on a non-GAAP basis.
Speaker Change: Question.
Speaker Change: Today's call contains forward looking statements that are subject to risks and uncertainties.
Speaker Change: For 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.
Speaker Change: That's the end 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 Clarence.
Rhonda Bennetto: A reconciliation of GAAP to non-GAAP can be found in today's press release posted on our website.
Clarence Granger: And with that, I'd like to turn the call over to Clarence. Clarence? Thank you, Rhonda. And good afternoon, everyone.
Clarence Granger: Thank you Rhonda.
Clarence Granger: And good afternoon, everyone.
Clarence Granger: We appreciate you joining our first quarter 2025 conference call. I'll start with a brief review of our financial and operating results, followed by some commentary on the near and yet longer term semi-market landscape. I'll also highlight some opportunities we're pursuing, and then I'll turn the call over to Sheri for a more detailed financial discussion. First of all, due to some pushouts in demand from our customers and some shipment delays due to technical challenges that our customers had with their customers, we missed the midpoint of our revenue guidance range by about $12 million. While we are disappointed by this myth, it was not caused by any performance issues or customer issues on UCT's part.
Clarence Granger: We appreciate you joining our first quarter 2025 conference call.
Clarence Granger: I'll start with a brief review of our financial and operating results followed by some commentary on the near and longer term semi market landscape.
Clarence Granger: I'll also highlight some opportunities we are pursuing and then I'll turn the call over to Sherry for a more detailed financial discussion.
Clarence Granger: First of all due to some push outs and demand from our customers and some shipment delays due to technical challenges that our customers had with their customers. We missed the midpoint of our revenue guidance range.
Clarence Granger: $12 million.
Clarence Granger: While we are disappointed by this bad it was not caused by any performance issues or customer issues on uct's part.
Clarence Granger: Going forward, as you all know, the global reciprocal tariff war has disrupted nearly every industry and supply chain in every market around the world. Companies in all industries are having to assess where their existing inventory is, what US bound inventory they may want to ship or hold, and what alternative markets may be available for their products. On the upside, chipmakers are likely to continue positioning for future demand by adding critical capacity and completing ongoing node transition at key fab. This supports our belief that $1 trillion in ship revenue by 2030 remains light. However, the timing of the broader capital expenditure required to reach that goal is uncertain.
Clarence Granger: Going forward as you all know the global reciprocal tariff war has disrupted nearly every industry and supply chain in every market around the world.
Clarence Granger: Companies in all industries are having to assess where their existing inventory is what U S bound inventory they may want to ship or hold and what alternative market may be available for their products.
Clarence Granger: On the upside chipmakers are likely to continue positioning for future demand by adding critical capacity and completing ongoing node transition at key fabs.
Clarence Granger: This supports our belief that one trillion dollars and ship revenue by 2030 remains likely.
Clarence Granger: However.
The timing of the broader capital expenditure required to reach that goal is uncertain.
Clarence Granger: Just like our customers and their customers, we are actively monitoring the geopolitical landscape and will make the necessary adjustments to our business to maximize efficiency. We can't predict how long this period of uncertainty will last. What we are presuming is that the already slower semiconductor market recovery that became apparent earlier this year will be extended. As you saw from our Q2 guidance, we are factoring in a modest decline in demand for the June quarter. And based on what we know today, we anticipate bouncing around these revenue levels for the remainder of this year.
Clarence Granger: Just like our customers and their customers. We are actively monitoring the geopolitical landscape and we'll make the necessary adjustments to our business to maximize efficiency.
Clarence Granger: We can't predict how long this period of uncertainty will last.
Clarence Granger: What we are presuming the already slower semiconductor market recovery that became apparent earlier this year will be extended.
Clarence Granger: As you saw from our Q2 guidance, we are factoring in a modest decline in demand for the June quarter.
And based on what we know today, we anticipate bouncing around these revenue levels for the remainder of this year.
Clarence Granger: With this in mind, we are focusing internally on how we can improve our business performance. Over the last several years, we have made multiple acquisitions that have added to UCT's capabilities. And while these operations have performed well, we have not had the time to fully optimize. We will now focus on doing that. Also, with our history of growing faster than the semiconductor equipment industry as a whole, we had anticipated being well on our way to a $4 billion run rate by this time. However, given the length of the current industry downturn, we are presently at a $2 billion run rate.
Clarence Granger: With this in mind, we are focusing internally on how we can improve our business performance.
Clarence Granger: Over the last several years, we have made multiple acquisitions that have added to uct's capabilities.
Clarence Granger: And while these operations performed well we have not had the time to fully optimize them.
Clarence Granger: We will now focus on doing that.
Clarence Granger: Also with our history of growing faster than the semiconductor equipment industry as a whole.
Clarence Granger: We had anticipated being well on our way to a $4 billion run rate by this time.
Clarence Granger: However, given the length of the current industry downturn, we are presently at a $2 billion run rate.
Clarence Granger: We are now going to look at all of our business systems and cost structures and scale them to our current volume. This will include facilities, people, equipment, and discretionary expenses. At the same time, we will continue to work closely with our customers engineering teams to qualify new products and new vertically integrated components. UCT is in a relatively strong position, given all the geopolitical uncertainty. To mitigate future supply chain disruptions post COVID, we initiated a localized supply chain strategy. we reconfigured our procurement and qualification processes to ensure faster market responsiveness and enhanced resilience by securing reliable local supply sources for our global site.
Clarence Granger: We are now going to look at all of our business systems and cost structures and scale them to our current volumes.
Clarence Granger: Yes.
Clarence Granger: This will include facilities people equipment and discretionary expenses.
Clarence Granger: At the same time, we will continue to work closely with our customers' engineering teams to qualify new products.
Clarence Granger: And new vertically integrated components.
Clarence Granger: UCT is in a relatively strong position given all the geopolitical uncertainties.
Clarence Granger: To mitigate future supply chain disruptions post COVID-19, we initiated a localized supply chain strategy.
Clarence Granger: We reconfigured our procurement and qualification processes.
Clarence Granger: Sure faster market responsiveness, and enhanced resilience by securing reliable local supply sources for our global sites.
Clarence Granger: These initiatives included sourcing key components within the Asia-Pacific region to continue to support our local Chinese OEM customers. At the same time, we strategically invested in capacity and operational efficiencies at other global sites to maximize profitability as utilization increases with demand. Despite all the tariff distractions, our teams remain focused on what really matters to us. teamless collaboration with our customers. by identifying opportunities and designing solutions for their most challenging technology roadmaps. We continue to advance several opportunities in products and services that will create significant value over the long term. For instance, we have tripled our portfolio in lithography and continue to see incremental share gain at our third largest customer.
Clarence Granger: These initiatives include sourcing key components within the Asia Pacific region.
Clarence Granger: Continue to support our local Chinese OEM customers.
Clarence Granger: At the same time, we strategically invested in capacity and operational efficiencies at other global site to maximize profitability as utilization increases with demand.
Clarence Granger: Despite all the tariff distractions.
Clarence Granger: Our teams remain focused on what really matters to us.
Clarence Granger: Seamless collaboration with our customers.
Clarence Granger: By identifying opportunities and designing solutions for their most challenging technology roadmaps.
Clarence Granger: We continue to advance several opportunities and products and services that will create significant value over the long term.
Clarence Granger: For instance, we have tripled our portfolio.
Clarence Granger: Graffiti and continue to see incremental share gain at our third largest customer.
Clarence Granger: Another exciting area where we hold a unique competitive advantage over the long term is in the subfab space, where our engagement with our customers has expanded to include on-site engineering support. One other encouraging development is the accelerated ramp of the Arizona fab owned by the world's largest chipmaker that is scaling up twice as fast as originally planned. This benefits our services business. We expect all these initiatives will gain momentum once economies of scale kick in commensurate with a market recovery. enhancing our leadership position as the manufacturer of choice for our customers.
Clarence Granger: Another exciting area, where we hold a unique competitive advantage over the long term is in the sub fab space, where our engagement with our customers has expanded to include onsite engineering support.
Clarence Granger: One other encouraging development.
Clarence Granger: As the accelerated ramp of the Arizona fab.
Clarence Granger: Owned by the world's largest chipmaker that is scaling up twice as fast as originally planned.
Clarence Granger: This benefits our services business.
Clarence Granger: We expect all of these initiatives will gain momentum once the economies of scale kick in commensurate with the market recovery.
Clarence Granger: Enhancing our leadership position as the manufacturer of choice for our customers.
Clarence Granger: In summary, before I turn the call over to Sheri... We expect greater clarity to emerge in the coming months. and we'll closely continue to monitor potential impacts for us and our customers. Meanwhile, we will focus on managing our business in a very disciplined manner. We remain focused on the core strengths of our business, including technology leadership, manufacturing excellence, and customer trust. as we work to further reinforce our competitive position. It's important to keep in mind that despite ongoing uncertainty from tariffs and the cyclical nature of the semiconductor industry, The industry has consistently outperformed other markets over the long term.
Sherri: In summary, before I turn the call over to Sherri.
Sherri: We expect greater clarity to emerge in the coming months.
Speaker Change: And we will closely continue to monitor potential impacts for us and our customers.
Speaker Change: Meanwhile, Meanwhile, we will focus on managing our business in a very disciplined manner.
Speaker Change: We remain focused on our core strengths of our business, including technology leadership manufacturing excellence.
Speaker Change: And customer trust.
Speaker Change: As we work to further reinforce our competitive position.
Speaker Change: It's important to keep in mind that despite ongoing uncertainty from tariffs and the cyclical nature of the semiconductor industry.
Speaker Change: The industry is consistently outperform other markets over the long term.
Clarence Granger: The industry outlook remains highly promising, with semiconductors serving as essential enablers of numerous transformative megatrends. We believe that UCT will again outpace the market and drive increased earnings as top line growth recovers.
Speaker Change: The industry outlook remains highly promising with semiconductor serving as essential enablers of numerous transformative mega trends.
Speaker Change: We believe that UCT will again outpaced the market and drive increased earnings as topline growth recovers.
Sheri Savage: And with that, I'll now turn the call over to Sheri. Thanks, Clarence. And good afternoon, everyone. Thanks for joining.
And with that I'll now turn the call over to Sherri.
Sherri: Thank you Clarence and good afternoon, everyone. Thanks for joining us.
Sheri Savage: In today's discussion, I will be referring to non-GAAP numbers only. As Clarence just noted, we saw a softening of demand for our product business unit late in the quarter. We are focusing internally on positioning ourselves from a cost perspective for the environment we are in. That means we are reviewing our headcount, our organizational structure, and our footprint. And we are further optimizing our acquisitions that we've made over the last several years. This will allow us to adjust our cost structure accordingly to protect profitability as we move to 2025 and beyond.
Sherri: Today's discussion I'll be referring to non-GAAP numbers only.
Speaker Change: As Clarence just noted we saw.
Sherri: Softening of demand for our products.
Sherri: Late in the quarter, we are focusing internally on positioning ourselves from a cost perspective for the environment. We are in that.
Sherri: That means we are reviewing our head count our organizational structure and our footprint and we are further optimizing our acquisitions that we've made over the last several years.
Sherri: This will allow us to adjust our cost structure accordingly to protect profitability as we move through 2025 and beyond.
Sheri Savage: For the first quarter, total revenue came in at $518.6 million, compared to $563.3 million in the prior quarter. Revenue from products was $457 million compared to $503.5 million last quarter due to weakening demand late in the quarter. are services that had a good quarter with revenues increasing from $59.8 million in Q4 to $61.6 million in Q1, primarily from two of their top. Total gross margin for the first quarter was 16.7% compared to 16.8% last quarter. Products gross margin was 14.9% compared to 15.2% in Q4. services remain flat at 29. Margins continue to 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.
Sherri: For the first quarter total revenue came in at $518 $6 million compared to $553 3 million in the prior quarter.
Sherri: Revenue from products with $457 million compared to $503 5 million last quarter due to weakening demand late in the quarter.
Sherri: Our surfaces business.
Sherri: Had a good quarter with revenues increasing from $59 8 million in Q4 to $61 6 million in Q1, primarily from two of their top customers.
Sherri: Total gross margin for the first quarter was 16, 7% compared to 16, 8% last quarter.
Sherri: Gross margin was 14, 9% compared to 15, 2% in Q4.
Sherri: Services remained flat at 29, 8%.
Sherri: Margins continue to be influenced by fluctuations in volume mix and manufacturing region.
Sherri: As well as material and transportation costs, so there will be variances quarter to quarter.
Sheri Savage: Given the uncertainty surrounding tariffs, we remain focused on execution, and we are ready to react quickly to any new trade regulations.
Sherri: Given the uncertainties surrounding tariffs we remain focused on execution and we are ready to react quickly to any new trade regulations.
Sheri Savage: Operating expense for the quarter was $59.4 million compared to $55.3 million in Q4. As a percentage of revenue, operating expenses were 11.5% versus 9.8 in Q4. Due to lower volume. and Increase. Q1 operating expenses are typically higher due to an increase in year-end activities such as audit-related costs. As I noted earlier in my comments, we have instituted cross-savings measures that we expect will reduce our operating expense run rate as we move through the year.
Sherri: Operating expense for the quarter was $59 $4 million compared to $55 3 million in Q4.
As a percentage of revenue operating expenses were 11, 5% versus $9 eight in Q4.
Sherri: Due to lower volumes and increased expenses.
Sherri: Operating expenses are typically higher due to an increase in year end activities, such as audit related costs.
Sherri: As I noted earlier in my comments, we have instituted cost saving measures that we expect will reduce our operating expense run rate as we move through the year.
Sheri Savage: Total operating margin for the quarter came in at 5.2% compared to 7.7% last quarter. margin from our product division was 4.6% compared to 6.6%. and Services margin was 10.2% compared to 9.7% in the prior quarter. The overall margin decrease for products was primarily driven by lower volume. Our tax rate was 20% for this quarter compared to 14.5% last quarter. Our mix of earnings between higher and lower tax jurisdictions can cause our rate to fluctuate throughout the year.
Sherri: Total operating margin for the quarter came in at five 2% compared to seven <unk>.
Sherri: 7% last quarter.
Sherri: Margin from our products Division was four 6% compared to six 6%.
Sherri: And services margin was 10, 2% compared to nine 7% in the prior quarter.
Sherri: <unk> margin decreased for products was primary driven by lower volumes.
Sherri: Yeah.
Sherri: Our tax rate was 20% for this quarter compared to 14, 5% last quarter.
Sherri: Our mix of earnings between higher and lower tax jurisdictions.
Sherri: Cause our rate to fluctuate throughout the year for.
Sheri Savage: For 2025, we expect our tax rate to be in the low to mid- For more information visit www.fema.gov Based on 45.4 million shares outstanding, earnings per share for the quarter were $0.28 on net income of $12.7 million. compared to 51 cents on net income of $22.9 million in the prior primarily due to lower revenue and higher operating Turning to the balance sheet, our cash and cash equivalents were $317.6 million, compared to $313.9 million in the end of last quarter. Cash flow from operations was $28.2 million compared to $17.1 million in last quarter, mostly due to working capital efficiency and tight Subsequent to quarter end, we repurchased 182,000 shares at a cost of $3.4 million as part of our repurchase program.
For 2025, we expect our tax rate to be in the low to mid twenties.
Sherri: Based on $45 4 million shares outstanding earnings per share for the quarter were 28.
Sherri: Our net income of $12 $7 million compared to 51.
Sherri: Net income of $22 9 million in the prior quarter, primarily due to lower revenue and higher operating expenses.
Sherri: Turning to the balance sheet, our cash and cash equivalents were $317 $6 million compared to $313 9 million.
Sherri: Last quarter.
Sherri: Cash flow from operations was $28 2 million compared to $17 1 million in last quarter, mostly due to working capital efficiency and tight inventory control.
Sherri: Subsequent to quarter end, we repurchased 182000 shares at a cost of $3 4 million as part of our repurchase program.
Sheri Savage: The tariff situation remains very fluid, we are actively monitoring the geopolitical landscape, and will make the necessary adjustments to our business to maximize efficiency and protect profitability.
Sherri: The tariff situation remains very fluid we are actively monitoring the geopolitical landscape and we'll make the necessary adjustments to our business to maximize efficiency and protect profitability.
Sheri Savage: Given the heightened uncertainty within the semiconductor market at this time, We project total revenue for the second quarter of 2025 to be between $475 million and $525 million. We expect EPS in the range of 17 cents to 37.
Sherri: Given the heightened uncertainty within the semiconductor market at this time.
Sherri: We project total revenue for the second quarter of 2025 to be between $475 million and $525 million.
Sherri: We expect EPS in the range of $17 37.
Operator: And with that, I'd like to turn the call over to the operator for questions. Thank you.
Sherri: And with that I'd like to turn the call over to the operator for questions.
Sherri: Thank you.
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 touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number one on your touch tone phone. You will hear a prompt that your hand has been raised.
Speaker Change: And gentlemen, we will now begin the question and answer session did you have a question. Please press the star followed by the number one on your attached to the phone.
Sherri: You will hear a problem, you're having has been weak.
Speaker Change: Could you use to decline from the polling process. Please press the star followed by the number of Skus.
Operator: If you are using a speakerphone, please leave the handset before pressing any key. One moment, please, for your first question.
Sherri: You are using a speaker phone please lift the handset before pressing Andy.
Speaker Change: One moment. Please for your first question.
Sherri: Okay.
Charles Shee: Your first question comes from Charles Shee of Needham. Please go ahead. Hi Clarence, Sheri, good afternoon. I want to start with the first question. I want to learn a little bit more about what exactly happened, what exactly you were seeing when you said softening demand late into the quarter. I want to provide a couple of numbers I saw from the press release or the PowerPoint. It looks to me that the revenue actually coming from your largest customer was flat quarter on quarter, and the second largest customer maybe down a little bit, but not to the same degree as what we saw on the top line.
Sherri: Your first question comes from Charles she needs.
Sherri: Please go ahead.
Sherri: Yeah.
Sherri: Hi, Clarence Sherri good afternoon, I wanted to start with the first question I wanted to.
Sherri: We're a little bit more about what exactly popcorn.
Sherri: Exactly you are seeing when you said.
Sherri: Softening demand late into the quarter.
Sherri: I want to provide a couple of numbers I saw from the press release or the Powerpoint.
Sherri: It looks to me that the revenue actually coming from your largest customer was a flat quarter on quarter.
Sherri: And the second largest customer and you make it down a little bit but not to the same degree as what we saw on the top side.
Charles Shee: So I wonder what exactly the weakness you are seeing, and maybe this is maybe related. What's the China revenue number or percentage for the March quarter? Thank you.
Sherri: So wonder ways basketball weakness that you are seeing and maybe this is maybe related but what what's the China revenue number or percentage for the March quarter.
Sherri: Sure.
Clarence Granger: Well, that's a lot of questions. First of all, let me talk about the softening demand that we saw in Q1. What we really, you know, obviously we already guided down based on what we thought was going to happen in the quarter. Some of it was related to our Asian customers, some of our other customers, but we actually missed the midpoint of the guidance by about 12 million dollars. But literally, that was related to two customers. One of those customers was an Asian customer, and the other customer was a European customer. And the situation with those two customers, literally, they had a technical issue with their customers, which caused us not to be able to ship.
Sherri: Well, that's a lot of questions.
Sherri: First of all let me talk about the softening demand that we saw in Q Q1.
Sherri: <unk>.
Sherri: What we really.
Sherri: Obviously, we already guided down based on what we thought was going to happen in the quarter. Some of it was related to our Asian customers some of our other customers.
Sherri: We actually missed the.
Sherri: Midpoint of the guidance by about $12 million.
But literally that was related to two customers.
Sherri: One of those customers was an Asian customer and the other customer was a European customer.
Sherri: The situation with those two customers are literally they had a technical issue with their customers, which caused us not to be able to ship and so that's how we ended up missing our Q1 guidance by roughly $12 million.
Clarence Granger: And so that's how we ended up missing our Q1 guidance by roughly $12 million.
Charles Shee: In terms of the China overall, obviously, that's a complicated situation, and it's evolving constantly. But what I would say is that at this point in time, We are anticipating an actually a slight revenue increase in Q2. And we anticipate further revenue increases in the second half of the year. So we're starting to feel like our China situation is solidifying. Definitely, our China for China strategy is working very well. So we're very happy with that. And then I'm trying to remember what was what was your other question, Charles? Yeah, Clarence, I think the way you answered the question, you actually covered most of the part of my question.
Sherri: In terms of the China overall.
Sherri: This is obviously, it's a complicated situation and it's evolving constantly but what I would say is that at this point in time.
Sherri: We are anticipating it actually a slight revenue increase in Q2 and we anticipate.
Sherri: Further revenue increases in the second half of the year. So we're starting to feel like our China situation of solidifying definitely our China for China strategy is working very well. So we're very happy with that and then I'm trying to remember what was what was your other question Charles.
Sherri: Yes Clarence.
Clarence Granger: I think the way you answered the question you actually covered most of that part of my questions. Okay. Maybe a quick follow up but won't be in March quarter, what's the China revenue percentage or a China revenue on a dollar basis is that something you can provide on this call.
Sheri Savage: So maybe a quick follow up, in March quarter, what's the China revenue percentage or China revenue on dollar basis? Is that something you can provide on this call? My CFO is waving at me furiously that I'm not supposed to say a number. Okay. We'll wait for that. Thank you. What can we say, Sheri? Yeah, we don't have a specific percentage for you, Charles. So, it's going up slightly quarter of a quarter, and we see it continuing to grow in the second half. So, we'll provide further guidance when we have that. We certainly don't provide guidance out any further than one quarter.
Sherri:
Sherri: My CFO is waving at me seriously that I'm not supposed to say a number.
Speaker Change: Okay, Okay, well wait for that kind of curious what Kim can we say, it's Eric Yeah. We don't have we don't have a specific percentage for you Charles.
Speaker Change: So, we'll it's going up slightly quarter over quarter, and we see it continuing to grow in the second half. So we will provide further guidance. When we have we have that we certainly don't provide guidance out any further than one quarter. So.
Charles Shee: Yeah, absolutely.
Speaker Change: Yeah, absolutely so.
Charles Shee: So maybe a second question. I do want to ask, since you mentioned this softening customer demand late in the quarter, but you also guided on June. And beyond June, you actually said you think you're gonna be bouncing around the June quarter level, but it feels like some of the stuff you, some of the weakness you are seeing, you consider that as going to have a longer term impact and not just a one quarter phenomenon.
Speaker Change: Maybe a second question.
Speaker Change: But I do want to ask you you mentioned.
Speaker Change: This is soft and the customer demand late in the quarter, but you also guided on G.
Speaker Change: And beyond June you actually said that you think are you going to be bouncing around.
Speaker Change: The June quarter level, but feels like some of the stuff you are the some of the weakness you are seeing you consider that as.
Speaker Change: The cocoa going to have a longer term impacting not just a one quarter phenomenon.
Speaker Change: Wanted to ask you.
Clarence Granger: Are any customer behavior changes that make you think it's going to be a multi-quarter impact, or is there anything else that leads you to make this call that we should not expect a stronger second half, for example, for your business, or any recovery from the current level in the near term? Hopefully, that question is clear. Yeah. Yeah, I think it's fairly clear, Charles.
Speaker Change: Or any customer behavior change that makes you think.
Speaker Change: It's gone out and done that.
Speaker Change: Would be a multi quarter impact or.
Speaker Change: Is there anything else that leads you to make this call that out.
Speaker Change: We should not expecting.
Speaker Change: A stronger second half for example, right.
Speaker Change: For your business or any recovery from the current level in the near term.
Speaker Change: Hopefully that question is clear yeah.
Speaker Change: Yeah, I think it's fairly clear with Gerald.
Clarence Granger: So, from my perspective, obviously, there's a lot of uncertainty going on in the market right now. So, we're pretty comfortable that there isn't going to be any dramatic downturn from this point, but there might be a minor downturn, is at least what we're seeing right now. And that's kind of why we've said it's going to be bouncing around the $500 million per quarter range.
Speaker Change: From my perspective.
Speaker Change: Obviously, theres a lot of uncertainty going on in the market right now so we're pretty comfortable that there isn't going to be any dramatic downturn from this point, but there might be a minor downturn is at least what we're seeing right now and that's kind of why we said, it's going to be bouncing around.
Speaker Change: $500 million per quarter range.
Cheryl Knepfler: But there's clearly a lot of uncertainty in the market right now, and I'm going to let Cheryl address that. So, Cheryl, if you want to talk about that a little bit, I'd appreciate it. Yeah. I mean, a number of the customers and other folks have already talked about the fact that they are seeing a little bit of softness in the second half prior to anything related to tariffs or anything else. So, what we're seeing and saying is a reflection of that. So, obviously, The level to which and things that we're forecasting, we just don't have the visibility beyond what is being said and what's being communicated to us to do that.
Speaker Change: But there is clearly a lot of uncertainty in the market right now and I'm going to let Cheryl address that those Cheryl if you want to talk about that a little bit I. Appreciate it yeah, I mean in a number of the customers and other folks have already talked about the fact that they are seeing a little bit of softness in the second half prior to anything related to tariffs.
Or anything else.
Speaker Change: So what we're seeing is in saying as a reflection of that.
Speaker Change: So obviously.
Speaker Change: The level to which and things that we're forecasting we just don't have the visibility beyond what is being said in what's been communicated to us to do that so we had indicated that we expected some level of decline.
Charles Shee: So, you know, we had indicated that we expected some level of decline for a period and it's just looking to extend a bit. Got it.
Speaker Change: For a period and it is just looking to extend of it.
Speaker Change: Got it maybe a last question from me.
Charles Shee: Maybe a last question from me. There's this 90-day pause for tariffs, but we're basically looking at maybe by early July, some of the tariffs are going to go up. And have you guys done any scenario analysis to see how that's going to impact the business one way or the other? And if there's any conclusion or any view on that, can you share with us? And so we do want to know what kind of impact that can be from the tariffs, at least from a profitability standpoint.
Speaker Change: There is a 90 day pause.
Speaker Change: Tariffs, but we're basically looking at that it may be by early July some of the tariffs.
Speaker Change: I'm going to go off and.
Speaker Change: Have you guys done any legacy scenario.
Speaker Change: Analysis.
Speaker Change: All that's going to impact our business, one way or the other end.
Speaker Change: If theres any.
Speaker Change: Any any any conclusion or any view on that.
Speaker Change: Can you share with us and so we do want to know what kind of impact that can be from the tariffs at least off on a profitability standpoint.
Clarence Granger: Yeah, Charles, obviously, that's a very good question. Obviously, and equally, obviously, we have been very focused on this in the last month, heavily, we have a dedicated team working on what this potential impact could be, how it will affect us, how it will affect our customers. We're obviously working very closely with our customers already and trying to understand what the impact is. And of course, the variability from day to day makes it harder to figure out. But I can tell you a few things. First of all, one of the things that from a positive standpoint.
Speaker Change: Yes, Charles obviously, that's a very good question, obviously and equally obviously, we have been very focused on this in the last month.
Speaker Change: Heavily we have a dedicated team working on what potential impact could be how it will affect how it will affect our customers. We're obviously working very closely with our customers already and trying to understand.
Speaker Change: What the impact is and of course, the variability from day to day. It makes it harder to figure out, but I can tell you a few things first of all one of the things that.
Speaker Change: From a positive standpoint.
Clarence Granger: You know, we've been talking about China for China for over a year now. And really, what's going to happen for us relative to China to China, by the middle to the end of the third quarter, all of the products that we are manufacturing in China will be for China. So, we won't be manufacturing any products in China and sending them to the United States, nor vice versa. And so, as a consequence of that, we've been fortunate that we've been working on this China for China strategy for a long time, so there should be almost no impact to us from the China counter-tariff wars.
We've been talking about China for China drove a year now and really what's going to happen for us relative to China to China by the middle to the end of the third quarter all of the products that we are manufacturing in China will be for China.
Speaker Change: No we won't be manufacturing any products in China, and selling in the United States, nor vice versa, and so as a consequence of that just.
Speaker Change: We've been fortunate that we've been working on this China for China strategy for a long time, so there should be almost no impact to us from the China.
Speaker Change: <unk> tariff tariff wars on the others products.
Clarence Granger: On the other products, again, we have a pretty good handle on what the potential impact would be. We have a dollar number, but we're not comfortable really sharing that dollar number. But what I would say is that, obviously, there's multiple situations here where we're using products as components in the United States that are coming from outside of the United States that will be sold to our customers that will have a tariff effect on them. And products going outside the United States. So, we have different areas where we can be hit by tariffs. But what we've identified of the total tariffs that could potentially impact us, more than half, much more than half, are associated with components that have been specified by our customers.
Speaker Change: Again, we have a pretty good handle on what the potential impact would be.
Speaker Change: We have a dollar number but we're not comfortable really sharing that dollar number but what I would say is that obviously there is multiple situations here, where we're using products.
Speaker Change: The components in the United States that are coming from outside of the United States that will be sold to our customers that will have a tariff effect again on them.
Speaker Change: And <unk>.
Speaker Change: Products going outside the United States, So we have <unk>.
Speaker Change: Different areas, where we can be hit by tariffs, but what we've identified of the total tariffs that could potentially impact us more than half much more than half.
Speaker Change: Associated with components that have been specified by our customers.
Clarence Granger: So if our customers aren't comfortable changing those components that we're using from outside of the U.S. we will pass those charges on to the customers and they're aware of that. There's also fairly significant situations where we might be able to use alternative suppliers. So we're pretty confident in our customer, we're working with our customers on things like free trade zones and how we can work with that to mitigate any potential tariffs. But in any sense, we're pretty comfortable that whatever tariff that we end up being hit with in the long range is going to be fairly minimal and certainly won't be a material effect on our business.
Speaker Change: So if our customers aren't comfortable changing those components that were using from outside of the U S.
Speaker Change: We will pass.
Speaker Change: Pass those charges out of the customers and they are aware of that there is also fairly significant situations, where we might be able to use alternative suppliers. So we're pretty confident in our customer we're working with our customers on things like free trade zones, and how we can work with that.
Speaker Change: Again any potential tariffs.
Speaker Change: And any in any sense.
Speaker Change: We're pretty comfortable.
Speaker Change: Ever tariffs that we ended up being hit with in the long range is going to be fairly minimal and certainly won't be a material effect on our business.
Clarence Granger: So I guess the biggest challenge for us is going to be data collection and controls, record keeping, because obviously we'll have to keep track of all the tariffs, how much is specified by the customer, charging that back to the customer, finding other ways to mitigate the tariffs. But in any case, for the long term, as complicated and difficult as these may be, we don't anticipate this to be hugely, adversely effective at impacting our financial results.
Speaker Change: So I guess the biggest challenge for us is going to be.
Speaker Change: Data collection and controls recordkeeping, because obviously, we will have to keep track of all the tariffs how much is specified by the customer charging that back to the customer finding other ways to mitigate the tariffs, but in any case for the long term.
Speaker Change: As complicated.
Speaker Change: Difficult disease may be.
Don't anticipate this to be hugely adversely affected.
Impacting.
Speaker Change: Our financial results.
Speaker Change: Okay.
Speaker Change: Yeah.
Charles Shee: Thank you. I'll be back on the queue.
Thank you I'll get back on the queue.
Okay.
Speaker Change: Yes.
Operator: Next question. You're next.
Speaker Change: Next question.
Robert Mertens: Your next question comes from Krish Sankar of P.D. Cowen. Please go ahead.
Speaker Change: Your next question comes from Krish Shankar.
Speaker Change: Colin Please go ahead.
Robert Mertens: Hello, this is Robert Mertens on for Krish Sankar. Thank you for taking my question. So, I think previously you had mentioned some headwinds in your domestic China Semicut business arising in the December quarter of last year and initially expected to sort of decline this quarter and maybe a bit softer in Q2. Could you provide any more color into the outlook through the year? I know the largest contributor was customer-specific. Is that still the case or is there way to sort of quantify how your view is for the overall demand in the region or sort of the inventory, potentially inventory overhang in that area, how that could affect the second half of this year?
Speaker Change: Hello. This is Robert Mertens on for Chris Sand car. Thank you for taking my questions.
Speaker Change: So I think previously you had mentioned some headwinds in your domestic China semi cap business horizon in the December quarter of last year.
Speaker Change: Initially expected to sort of decline this quarter and maybe a bit softer in Q2 could you provide any more color onto the outlook through the year I know the largest contributor was customer specific is is that still the case or is there any way to sort of.
Speaker Change: Hi, how are you.
Speaker Change: Your view is for the overall demand in the region or sort of the inventory potentially inventory overhang.
Speaker Change: In that area, how that could affect the.
Speaker Change: The second half of this year and then I have one more follow up.
Clarence Granger: And then I have one more follow-up. Sure. So, let me try and do my best I can on the China. So, first of all, we said that the situation was slowing down in China in Q1. And so, we already anticipated that and shared that with you. In addition to that, I said that of the $12 million shortfall, roughly half of that was associated with another customer in China who was unable to ship because of a technical issue that they had with one of their customers. And then, in addition to that, what we're trying to say is that our Q2 numbers, without giving a specific number, are going to be up a little bit from our Q1 numbers.
Speaker Change: Sure. So let me try and do my best I can on the China. So first of all we said that the situation was slowing down in China in Q1.
Speaker Change: And so we already anticipated that.
Speaker Change: And share that with you. In addition to that I said that of the $12 million shortfall roughly half of that was associated with another cut.
Speaker Change: Customer in China, who is unable to ship because of <unk>.
Speaker Change: Technical issue that they had with one of their customers and then in addition to that what were trying to say is that our Q2 numbers without giving a specific number are going to be up a little bit from our Q1 numbers.
Clarence Granger: And we're feeling pretty confident now that Q2, I mean, Q3 and Q4 should be some slight recovery in China from going forward. Is that the answer? That's helpful. And just in terms of the China for China business, could you provide any color in terms of maybe what their customers' technical delays may have been related to, or if you have any idea of memory or foundry or anything like that would be helpful? Yeah, we really don't want to talk about technical issues that our customers have. So in terms of what products that we serve in Asia, can you answer anything there?
Speaker Change: We're feeling pretty confident now that Q.
Speaker Change: I mean, Q3 and Q4 should be.
Speaker Change: Some slight recovery in China from going forward.
Does that that got to answer yes.
Speaker Change: That's helpful.
Speaker Change: Just in terms of the China per ton of business.
Speaker Change: Could you provide any color in terms of maybe what their customers' technical delays may have been related to where if you have any idea.
Speaker Change: Bill, it's memory or foundry or anything like that would be helpful.
Speaker Change: Yeah, we really don't want to talk about technical issues that our customers had.
Speaker Change: So in terms of what products that we serve in Asia.
Speaker Change: Your answer anything there.
Cheryl Knepfler: Um, so When we look at the overall, obviously, there are a number of, you know, both NAND, DRAM, and Foundry, all of which are looking at replacements of other technologies because of limitations. So we expect it to be distributed across that as they go forward. So exactly which would be there as the current challenge, we are not certain. But we do expect it to be at the, their largest opportunities are going to be at the three largest. and others. would look at addressing the inventory that was built because that would be why they built that level of inventory.
Speaker Change: So.
Speaker Change: When we look at the overall.
Speaker Change: Obviously, there are a number of.
Speaker Change: Both NAND DRAM and.
Speaker Change: Foundry all of which are looking at replacement.
Speaker Change: Other technologies because of limitations so.
Speaker Change: So we expect it to be distributed across that.
Speaker Change: They go forward, so exactly which would be there as the current challenge.
Speaker Change: We are we are not certain.
Speaker Change: But we do expect it to be.
Speaker Change: They are there opportunities there largest opportunities are going to be at the three largest.
Speaker Change: Vendors in China, and so we expect when things are cleared up.
Speaker Change: And going forward that the.
Speaker Change: Once they have cleared any issues they have the level of demand should be substantial and wood.
Speaker Change: We'll look at addressing the inventory that was built because that would be why they built that level of inventory.
Clarence Granger: to meet a expected large demand. We do want to be a little. Yeah, one of the things though, I do want to be a little careful on overstating. I mean, we are all obviously everybody's very concerned about China and what the implications are. But China is less than a 10% customer to us overall. So we're roughly a 10% customer to us overall. So anyhow, I do want to keep things in perspective, although we're very comfortable with our situation in China. Okay.
Speaker Change: To meet a expected large demand.
Speaker Change: We do want to be a little okay. Yes, one of the things so I do want to be a little careful on overstating. It. We're all obviously everybody is very concerned about China and what the implications are but China is of.
Speaker Change: Less than a 10% customer to us overall.
Speaker Change: So.
Speaker Change: We're roughly a 10% customer to us overall so.
Speaker Change: Anyhow I do want to keep things in perspective, although we're very comfortable with our situation in China.
Speaker Change: Okay, and then just one last one if I can squeeze in for that business, you expect it to improve a little bit.
Robert Mertens: And then just one last one, if I can squeeze in. For that business, you're expecting it to improve a little bit this next quarter and hopefully incrementally improve through the second half of this year. Do you have any sense of what impact potential export controls could have on that business? I know it's locally sourced, but... if you have any way to view what may happen if X-Force controls tightened, even company-specific for those domestic suppliers.
Speaker Change: This next quarter and hopefully.
Speaker Change: Incrementally improve.
Speaker Change: Second half of this year do you have any sense of what impact.
Speaker Change: Potential export controls could have on that business I know, it's locally sourced but.
Speaker Change: If you have any way to view what may happen, if exports controls tightened or even company specific for this domestic.
Clarence Granger: Thank you. Yeah, boy, that's hard to predict. But from our perspective, it's likely to have no impact because our Chinese customers are, you know, that we're shipping to in China is 100% for China. Obviously, there are some US customers that may be impacted by restrictions on what they can and ship into China. But that isn't what we're talking about here. What we're talking about is our China customers in China, and making those products in China for them. Got it.
Speaker Change: Suppliers. Thank you.
Speaker Change: Yeah.
Speaker Change: Boy, that's hard to predict.
Speaker Change: But from our perspective, it's likely to have no impact because our Chinese customers.
Speaker Change: You know that we're shipping to in China is 100% for China. Obviously, there are some U S customers that may be impacted by restrictions on what they can and can't ship into China, but that isn't what we're talking about here what we're talking about is our China customers.
Speaker Change: <unk> in China, and making those products in China for them.
Speaker Change: Got it alright, well. Thank you for letting me ask these questions.
Robert Mertens: All right, well thank you for letting me ask this question. Sure.
Speaker Change: Sure.
Speaker Change: Okay.
Chris Trenschwab: Your next question comes from Chris Trenschwab of Craig Helen. Please go ahead. Can you, Sheri, can you elaborate on the cost reduction plans, headcounts, and people?
Speaker Change: Your next question comes from Chris <unk> of Craig Hallum. Please go ahead.
Speaker Change: Can you.
Speaker Change: Sure can you elaborate on the cost reduction plans head count and people.
Sheri Savage: in the commentary earlier in the prepared comments about, you know, positioning the size of the company to a $2 billion run rate. So should we assume, you know, OPEX, you know, in the second half of the year gets on a yearly run rate of, you know, say 190 to 200 billion, is that roughly the right math or how should we be thinking about that? Yeah, Christian, we're looking at just about everything. I mean, headcount is obviously a Headcount and Footprint are probably your two largest expenses in the company, so those are the two things that we're absolutely looking at, along with just our overall org structure.
Speaker Change: And the commentary earlier in the prepared comments about <unk>.
Speaker Change: Positioning the size of the company to a $2 billion run rate. So should we assume you know opex you know in the second half of the year gets out of the year than you've guided rate of say 190 to 200 billion is that roughly the right math or how should we be thinking about that.
Yeah Christian we're looking at just about everything I mean head count is obviously a head.
Speaker Change: Head count and footprint are probably your largest expenses in the company. So those are the two things that were absolutely looking at along with just our overall org structure. We're looking at both in Cogs and Opex, but really concentrating on the opex side as well.
Sheri Savage: We're looking both in COGS and OPEX, but really concentrating on the OPEX side as well. I don't want to give you a specific number at this point, because it's kind of an ongoing analysis right now. But we've already went underway on some headcount reductions, and we'll continue to look at that as we move through the year. But really, the footprint, I mean, obviously, we had a certain level of footprint that allowed us to be at potentially a four billion dollar run rate. And we're really looking at optimizing that to bring it to the point that we get as much efficiency out of that footprint as possible, assuming that things will grow eventually, but it's going to take a little bit longer than we expected.
Speaker Change: I don't want to give you a specific number at this point that this is kind of an ongoing.
Speaker Change: Analysis right now, but we've already went underway on some head count reductions and will continue to look at that as we move through the year, but really the footprint I mean, obviously, we had a certain level of footprint that allowed us to be at potentially a $4 billion run rate and we're really looking at optimizing that and bring it to the point that we get as much.
Speaker Change: Patiency out of that footprint as possible, assuming that things will grow eventually, but it's going to take us a little bit longer than we expected and really looking at discretionary spending as well. So we're kind of looking everywhere youll see those plans kind of fall out as we move through the next quarter or two.
Sheri Savage: And really looking at discretionary spending as well. So we're kind of looking everywhere. You'll see those plans kind of fall out as we move through the next quarter or two, but it's already kind of started. And we're really underway, and you'll start to see those benefits. As you can tell from our guidance, we're down on revenue, and the EPS is only slightly down, and that's because we've already started some of those costs.
Speaker Change: But it's already kind of started and we're early.
Speaker Change: Underway and Youll Youll start to see those benefits as you can tell from our guidance.
Speaker Change: Down on revenue and the EPS was only slightly down and that's because we started some of those cost initiatives.
Sheri Savage: Okay, and then on the on the OPEX, you know, if you guys get to a level, I mean, is that like an announceable event, like x percent of workforce reduction, or is this going to kind of be dripped out over multiple quarters? We are not at a point where it's announceable, luckily, but we will continue to, you know, look at that and see if there's anything, obviously, if it's necessary to be announceable, we will make that so, but we are, we're not at that point. Okay.
Speaker Change: Okay, and then on the Opex you know if you guys get to a level set.
Speaker Change: And then notable events like X percent of workforce reduction or is this going to kind of be dripped out over multiple quarters.
Speaker Change: We are not at a point, where it's announced Apple Luckily, but we will continue to look at that and see if theres anything obviously, if it's necessary to be announced that will we will make that sells that.
Speaker Change: We are not at that point.
Speaker Change: Okay.
Clarence Granger: And I think I wrote it down, but any tariff costs, your customers are already prepared that you'll pass that on to them? Did I hear that correctly? Yeah, Christian, this is Clarence. Nobody's prepared to accept additional costs. We're all going to figure out what we can do to resolve it. But yes, from our perspective, all of the costs, not all of the costs, but a significant portion of the costs related to the tariff are subcomponents that have been specified by our customers. And in that particular case, they will, they understand that they're obligated for the costs associated with that.
Speaker Change: And I think.
We wrote it down but any tariff costs to your customers are already prepared that debt.
Speaker Change: But youll pass that onto them did I hear that correctly.
Christian Claris: Yeah Christian Claris.
Christian Claris: Nobody is prepared to accept additional cost we're all going to figure out what we can do to resolve it but yes.
Christian Claris: Our perspective.
Christian Claris: All of the costs not all of the costs, but a significant portion of the cost related to the tariffs are sub components that have been specified by our customers and in that particular case. They will they understand that they are obligated for the cost associated with that so we will immediately pass those on as they occur.
Clarence Granger: So we will immediately pass those on as they occur. The next would be stuff that we might have some control over. We will work very closely with our customers on that already to see if we can change sources of supply, or if we can work with them. One of our customers, one of our larger customers is talking about potentially utilizing some free trade zones. So, there's a lot of stuff being discussed about what would be the long-term situation, but our expectation is that any cost to us is likely to be relatively small, and we feel very manageable.
Christian Claris: The next would be stuff that we might have some control over.
Christian Claris: We will work very closely with our customers on that already.
Christian Claris: Let's see if we can change sources of supply or if we can work with them in one of our customers one of our larger customers is talking about potentially utilizing some free trade zones. So theres a lot of stuff being discussed about what would be the long term situation, but our expectation.
Christian Claris: And is that at any cost to us is likely to be relatively small.
Christian Claris: We feel very manageable.
Chris Trenschwab: So, yeah, we're pretty comfortable with that. Great.
Christian Claris: So.
Christian Claris: Yes, we're pretty comfortable with that.
Clarence Granger: And then my last question, in the peer comments, we talked about pushouts and technology challenges. But it seems that in answering the questions that it was really technology of the two customers or did No, you're correct. We really didn't see any significant push out towards the end of the quarter for the customer. So obviously, we're very leery. And we've guided down a little bit this quarter because of all the uncertainty, but the tariffs didn't occur until the beginning of this quarter. So and obviously, there's a lot of Just a lot of general confusion about what's going on in the marketplace.
Christian Claris: Great and then my last question then in the prepared comments, we talked about push outs and technology challenges.
Christian Claris: But it seems that in answering the question that it was really technology challenges by two customers and customers.
Christian Claris: That that caused the delay in fulfilling orders or pushing them out you didnt see push outs.
Christian Claris: Above and beyond the technology challenges.
Christian Claris: The two customers or did you.
Speaker Change: No you're correct, we really didn't see any significant push us.
Christian Claris: Towards the end of the quarter for the customer so.
Christian Claris: Obviously, we're very leery, and we've guided down a little bit this quarter because of all the uncertainty but.
Christian Claris: The tariffs didn't occur until the beginning of this quarter. So.
Christian Claris: And obviously theres a lot of <unk>.
Just a lot of general confusion about what's going on in the marketplace and we think that there is likely to be some slowdown just because of the nervousness Cheryl do you want to add.
Clarence Granger: And we think that there's likely to be some slowdown just because of the nervousness.
Cheryl Knepfler: Cheryl, do you want to add on to that or? Yeah. So obviously, all of our customers, all of the end customers will position for the long-term demand. How that needs to play out will, because everyone is looking at the long-term requirements needed to support a trillion dollars by the 2030, and ships by the 2030 timeframe. So we do think that that is the overall driver for the industry. We are just going to be cautious on looking at that with the understanding that everyone is putting forward the comments based on what we know at this time.
Speaker Change: Under that or let me add.
Speaker Change: So obviously all of our customers.
Although the end customer is well positioned for the long term demand.
Speaker Change: That needs to play out well because everyone is looking at the long term.
Speaker Change: Requirements needed to support a trillion dollars is tied to 2030 and chips by the 2030 timeframe. So we do think that that is the overall driver for the industry and we are just going to be cautious on I'm looking at that with the understanding that.
Speaker Change: Everyone is putting forward the comments on based on based on what we know at this time.
Cheryl Knepfler: So, at this point, based on what we know at this time, we think that we need to be a little bit more cautious in terms of our outlook, and that's what we're indicating, since we are further down on the chain, and we've indicated that, you know, our customers may have some inventory, there's a number of things happening that are outside of our control that we just don't have as much visibility on, And so we are looking and sizing and working towards a little bit more cautiousness.
Speaker Change: So at this point based on what we know at this time, we think that we need to be on a little bit more cautious in terms of our outlook and that's what where we're indicating.
Speaker Change: Since we are further down on the chain and we've indicated that our customers may have some inventory. There's a number of things happening that are outside of our control that we just don't have as much visibility on.
Speaker Change: And so we.
Speaker Change: We are looking and sizing and working toward.
Speaker Change: A little bit more cautiousness.
Chris Trenschwab: Great. Got it. Thank you.
Speaker Change: Great got it thank you no other questions.
Edward Yang: No other questions. Your last question comes from Edward Yang of Oppenheimer. Please go ahead. Okay, thank you. Clarence, I mean, just a lot of puts and takes going on.
Speaker Change: Youre welcome.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Your last question.
Speaker Change: And the right yeah, well thank you.
Hymer: Hymer. Please go ahead.
Speaker Change: Okay, Yeah. Thank you.
Speaker Change: Clarence I mean, just a lot of puts and takes going on would you be able to just give us an updated view on wf fee growth for 2025.
Edward Yang: Would you be able to just give us an updated view on WFE growth for 2025? I'm not going to touch that. I'll let Cheryl deal with that. So, as we look at 2025, as a starting point, I think 2024 came in a little bit higher than what had been forecasted before the third parties made their announcements around that. So. At this point, I don't think anyone is in a position. They're going to increase the forecast for 2025. So even with that, we were looking at about a two to 3% year over year increase. I think with the uncertainty in the market, it is unlikely that that is going to grow.
Speaker Change: Sure.
Speaker Change: I'm not going to touch that I'll, let cheryl.
Speaker Change: With that.
Speaker Change: So as we look at 2025 and.
Speaker Change: At the starting point I think 2024 came in a little bit higher than.
Speaker Change: What has been forecasted for the third party has made their announcements around that.
Speaker Change: No.
Speaker Change: At this point I don't think anyone is in a position they're going to increase the forecast for 2025.
Speaker Change: So even with that we were looking at about a 2% to 3% year over year increase I think with the uncertainty in the market. It is unlikely that that is going to grow in.
Cheryl Knepfler: In fact, Intel announced that they were looking at about a $2 billion reduction in their CapEx. Obviously, part of that was going into buildings, but not necessarily equipment. But I do think that everyone is going to be looking at that and there is more downside risk than upside opportunity. And that's what we're looking at sizing for. So, I think everyone would be relatively thrilled if it ends up at the $100 billion that LAM indicated. And so that we certainly see that as an opportunity, but we do not know if that is where things will end up.
Speaker Change: In fact, Intel announced that they were looking at about a $2 billion reduction in their capex.
Obviously part of that was going into buildings, but not necessarily equipment, but I do think that everyone is going to be looking at that and there is more downside risk than upside opportunity and that's what we're looking at sizing floor. So I think everyone would be relatively.
Speaker Change: If it ends up at the $100 billion that land indicated.
Speaker Change: And so that we certainly see that as an opportunity, but we do not know if that is.
Speaker Change: Where things will end up.
Edward Yang: Got it.
Speaker Change: Got it.
Edward Yang: In your business, have you seen any pull-ins or front loading of demand related to tariffs? And I only bring this up because you know, you hear about retailers that stocked up on inventory, you know, consumers panic buying iPhones ahead of tariffs. Have you seen any direct front loading on your end?
Speaker Change: In your business have you seen any pull ins or frontloading of demand related to tariffs and I only bring this up because you hear about.
Speaker Change: Retailers are stocked up on inventory consumers panic buying iphones ahead of tariffs.
Speaker Change: Have you seen any direct frontloading on your end or do you think there have been some secondary.
Edward Yang: Or do you think there have been some secondary https://TheBusinessProfessor.com affect future pushouts or shipment delays outside of the technical and qualification issue.
Speaker Change: <unk> from that that could potentially.
Speaker Change: Effect.
Speaker Change: Future push outs for shipment delays outside of the technical qualification issues that you mentioned earlier.
Clarence Granger: Yeah, Ed, this is Clarence. I don't really think so. I don't feel if there are any pull-ins or anything associated with, you know, timing and all the tariffs, they feel relatively small to us at this point in time. So, I don't think that's a, you know, obviously, if you were buying some clothing from Asia, you'd probably be really concerned about that. But we're not in that kind of a situation, and I don't see anything that might be similar to that.
Ed: Yeah, Ed this client.
Speaker Change: I don't really think so I don't feel as if there are any or any pull ins or anything is associated with.
Ed: Timing on all of the tariffs.
Speaker Change: They feel relatively small to us at this point in time.
Speaker Change: So I don't think that's a.
Speaker Change: Obviously, if you are buying some closings from Asia, you'd probably be really concerned about that but we're.
Speaker Change: We're not in that kind of a situation.
Speaker Change: I don't see anything that.
Speaker Change: Might be similar to that.
Edward Yang: Okay, and just finally, just an update on the CEO search.
Speaker Change: Okay and then just finally, just an update on the CEO search.
Clarence Granger: Yeah, so I was wondering if anybody was going to ask that. So I'm sneaking up on two months now. What we said is it should take about six months. We have hired a search firm, and they told us it's likely to be three or four more months in the process. So I think my original six month timing sounds pretty good. So I'm going to stick with that.
Speaker Change: Yes. So I was wondering if there is good asset so.
I'm sneaking up on two months now what we said is it should take about six months.
Speaker Change: <unk> hired a search firm and they told us it's likely to be three or four more months in the process. So I think my original six month timing.
Speaker Change: It sounds pretty good.
Speaker Change: Stick with that.
Clarence Granger: All right. Thank you. Yep, thank you guys.
Speaker Change: So another great. Thank you.
Speaker Change: Yes, Thank you guys.
Operator: There are no further questions at this time. That concludes our question and answer session.
Speaker Change: There are no further questions at this time that concludes our question and answer session I would like to turn the conference back to Mr. Grainger for closing remarks.
Clarence Granger: I'd like to turn the conference back to Mr. Granger for closing remarks. Well, thank you, operator. And thanks, everybody, for joining us on this call. We look forward to speaking to you again at our next quarterly call. Thank you.
Speaker Change: Well, thank you operator, and thanks, everybody for joining us on this call. We look forward to speaking to you again at our next quarterly call. Thank you.
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.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Thanks.