• 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.