Ultra Clean Holdings Inc (UCTT) Q4 2024 Earnings Call Highlights: Strong Revenue Growth Amidst ...

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Tue, Feb 25, 2025, 12:03 AM 5 min read

Total Revenue (Q4 2024): $563.3 million, up from $540.4 million in the prior quarter.
Products Revenue (Q4 2024): $503.5 million, increased from $479 million last quarter.
Services Revenue (Q4 2024): $59.8 million, compared to $61.4 million in Q3.
Total Revenue (Full Year 2024): $2.1 billion, compared to $1.7 billion in 2023.
Total Gross Margin (Q4 2024): 16.8%, down from 17.8% last quarter.
Products Gross Margin (Q4 2024): 15.2%, compared to 16.1% in Q3.
Services Gross Margin (Q4 2024): 29.8%, compared to 30.5% in Q3.
Total Gross Margin (Full Year 2024): 17.5%, up from 16.6% in the prior year.
Operating Expense (Q4 2024): $55.3 million, compared to $56.5 million in Q3.
Operating Expense as % of Revenue (Q4 2024): 9.8%, down from 10.5% in Q3.
Operating Margin (Q4 2024): 7%, compared to 7.3% in Q3.
Products Operating Margin (Q4 2024): 6.6%, compared to 7% in Q3.
Services Operating Margin (Q4 2024): 9.7%, compared to 10.1% in Q3.
Operating Margin (Full Year 2024): 6.9%, up from 4.9% in the prior year.
Tax Rate (Q4 2024): 14.5%, compared to 27.1% last quarter.
Earnings Per Share (Q4 2024): $0.51, on net income of $22.9 million.
Earnings Per Share (Full Year 2024): $1.44, on net income of $65.2 million.
Cash and Cash Equivalents (End of 2024): $313.9 million, compared to $318.2 million in 2023.
Cash Flow from Operations (Q4 2024): $17.1 million, compared to $14.9 million last quarter.
Cash Flow from Operations (Full Year 2024): $65 million, compared to $135.9 million in the prior year.
Projected Revenue (Q1 2025): Between $505 million and $555 million.
Projected EPS (Q1 2025): $0.22 to $0.42.

Warning! GuruFocus has detected 5 Warning Signs with UCTT.

Release Date: February 24, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Ultra Clean Holdings Inc (NASDAQ:UCTT) achieved a 21% growth in 2024, outperforming its customers, competitors, and the overall WFE market.
The company has a strong global manufacturing footprint and vertically integrated offerings, allowing it to quickly adapt to customer demands.
UCTT played a significant role in the growth of the artificial intelligence sector, particularly through its operations in the Czech Republic and China.
The company reported a full-year revenue increase to $2.1 billion from $1.7 billion in 2023.
Operating margin for the full year increased to 6.9% from 4.9% in the prior year, driven by higher revenue levels and increased efficiencies.

Negative Points

UCTT is experiencing demand softness from its 'In China For China' business due to extended qualification timelines and inventory digestion.
The company's gross margin for the fourth quarter decreased to 16.8% from 17.8% in the previous quarter.
There is a reduction in demand from domestic China customers, impacting short-term visibility and recovery expectations.
The company anticipates a flat revenue performance in the first half of 2025, with potential recovery only in the second half.
UCTT's cash flow from operations decreased to $65 million for the full year, compared to $135.9 million in the prior year.

Q & A Highlights

Q: How much were the sales to China's semiconductor customers in the December quarter and for the entire 2024? A: Sales to China's semiconductor customers were about $40 million for Q4 and approximately $215 million for the full year 2024. - Sheri Savage, Chief Financial Officer

Q: Were the export restrictions in December factored into your guidance, and how would the guidance have been without those restrictions? A: The export restrictions were not factored into the guidance. We saw strong performance through Q3 2024, with softness beginning in Q4, expected to continue into the first half of 2025. - Chris Cook, President, Products Division

Q: Can you rank the issues affecting the China For China business, such as customer-specific ramp issues, demand softening, and inventory excess? A: The customer-specific ramp issue is the most significant, followed by inventory and demand corrections. We expect recovery in the second half of the year. - Chris Cook, President, Products Division

Q: What is the outlook for the non-China business from Q4 to Q1? A: The non-China business is expected to remain flat sequentially. We anticipate recovery in the second half of the year. - Chris Cook, President, Products Division

Q: What are the reasons for the weakness in the Products division's gross margin? A: The weakness is due to the mix of products shipped and their manufacturing locations. Lower shipments from China, a high-margin business, and additional year-end expenses affected margins. - Sheri Savage, Chief Financial Officer

Q: Is the revenue for 2025 expected to be flat compared to 2024? A: We anticipate the first half of 2025 to be flat, with potential growth in the second half, but overall revenue for the year is expected to be flat compared to 2024. - Rhonda Bennetto, Investor Relations

Q: Which AI growth drivers are most important for UCT, and what should be monitored for impact on revenue? A: High bandwidth memory and transitions to advanced nodes like Gate-All-Around and 2 nanometer are significant contributors. These areas should be monitored for their impact on revenue. - Cheryl Knepfler, Vice President, Marketing

Q: What are the balance sheet alternatives being considered? A: We are exploring options to optimize our capital structure, including debt and equity perspectives, to enhance flexibility and shareholder value. - Sheri Savage, Chief Financial Officer

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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