Ichor Holdings, Ltd. (NASDAQ:ICHR) Q4 2023 Results Conference Call February 6, 2024 4:30 PM ET

Company Participants

Claire McAdams - IR

Jeff Andreson - CEO

Greg Swyt - CFO

Conference Call Participants

Craig Ellis - B. Riley Securities

Brian Chin - Stifel

Charles Shi - Needham & Company

Robert Mertens - TD Cowen & Company

David Duley - Steelhead Securities

Operator

Good day, ladies and gentlemen. Welcome to Ichor Fourth Quarter 2023 Earnings Conference Call [Operator Instructions]. I would now like to turn the conference over to your host, Claire McAdams, Investor Relations for Ichor. Please go ahead.

Claire McAdams

Thank you, operator. Good afternoon. And thank you for joining today's fourth quarter 2023 conference call. As you read our earnings press release and as you listen to this conference call, please recognize that both contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, and which could cause actual results to differ materially from such statements. These risks and uncertainties include those spelled out in our earnings press release, those described in our annual report on Form 10-K for fiscal 2022 and those described in subsequent filings with the SEC. You should consider all forward-looking statements in light of those and other risks and uncertainties. Additionally, we will be providing certain non-GAAP financial measures during this conference call. Our earnings press release in the financial supplement posted to our IR Web site each provide a reconciliation of these non-GAAP financial measures to their most comparable GAAP financial measures. On the call with me today are Jeff Andreson, our CEO; and Greg Swyt, our CFO. Jeff will begin with an update on our business and then Greg will provide additional details about our results and guidance. After the prepared remarks, we will open the line for questions. I'll now turn over the call to Jeff Andreson. Jeff?

Jeff Andreson

Thank you, Claire. And welcome to our Q4 earnings call. Our fourth quarter revenues came in at the upper end of our expectations at $203 million. This equates to sequential growth of 3% from Q3 within an otherwise stable demand environment. I'd like to provide some color on our revenue movements within the fourth quarter. First, the majority of the upside in revenue growth above the midpoint of guidance was essentially passed through. This is because during the quarter, we elected to take the opportunity to reduce inventory levels in order to drive strong free cash flow generation, which in turn was used to reduce our debt levels and ongoing interest expenses. We sold the inventory at zero margin. And so while this decision carries a number of benefits for our ongoing financial performance, it did have a negative impact on our Q4 gross margin. Further, our Q4 revenue forecast had incorporated expectations of improved mix compared to Q3, but instead, our revenue mix actually became less favorable and this had the largest impact on our lower than expected gross margin.