Ladies and gentlemen, welcome to the Ichor's first quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will be given at that time. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this call is being recorded. I would now like to introduce your host for today's call, Claire McAdams, Investor Relations for Ichor. Please go ahead. Thank you, Michelle. Good afternoon, and thank you for joining today's first quarter 2022 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 2021, 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 and the financial supplement posted to our IR website 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 Larry Sparks, our CFO. Jeff will begin with an update on our business and a review of our results and outlook, and then Larry will provide additional details of our first quarter results and second quarter guidance. After the prepared remarks, we will open the line for questions. I'll now turn over the call to Jeff Andreson. Jeff? Thank you, Claire, and welcome to our Q1 earnings call. Q1 revenues were $293 million within our guidance range and grew sequentially from Q4. The $7 million or 2% difference compared to the midpoint of guidance was chiefly the result of additional disruptions in the supply chain that emerged since our last earnings call. At the time of our last call, we also had expected that the availability of some key components would improve by mid-quarter, and these did not materialize. Additionally, we had to manage through some key shortages that emerged in our machining business. While we now have these shortages largely behind us, this had an impact on our machining revenue mix in Q1. Both factors are indicative of the continued volatile dynamics in our industry's supply chain, where we, like many others in the industry, continue to forecast for improvement in support of the unabated customer demand, yet new issues have arisen each quarter that cannot be predicted, including the recent example of the closures of all shipping ports in and out of Shanghai that affected many of us since late March. Freight, logistics, factory shutdowns, and the costs, as well as the availability of labor, all continue to be a headwind to output and cost. At the same time, we are working to increase capacity across our footprint, which includes adding to our manufacturing headcount as well as our physical capacity. We're nearing the completion of our cleanroom expansion in our Austin, which adds to the cleanroom expansion we completed in Singapore last year. Additionally, we have added a second building to our machining facility in Mexico and are in the process of ramping their output. Given the continued expectations for strong customer demand and for wafer fab equipment growing to the $100 billion level, we made the decision to keep hiring to a level we needed to support the unconstrained demand, with the goal of having both the flexibility to burst within the quarter and to ramp the business as the availability of components and materials improves. Our decision to maintain our plans for a higher level of resources to support customer demand, along with a less favorable mix of machining revenues in the quarter, resulted in gross margin and earnings below guidance. However, we fully expect our margins will recover over the next couple of quarters. We expect Q1 to be the low point for gross margin and EPS performance in 2022 and are forecasting improving trends on both fronts as we continue to expect we will be able to achieve sequential revenue growth each quarter of 2022 and into 2023. The expectation for growth does not depend on significant changes in the availability of component and material supply versus what we see today, as we are planning for some of the key component constraints to continue into the second half of the year. Some of the shortages in Q1 have improved, and we are shipping at a higher level quarter to date compared to this time last quarter. We will continue to manage these ongoing and unpredictable supply chain challenges to drive increased output as we move through the year, as well as align with our customers to support their deliveries. With our current visibility and the improved shipment levels we are achieving recently, we are forecasting Q2 revenues to be up around 5%-6% sequentially. With our revenue output expected to increase sequentially through the forthcoming quarters, we believe our revenue growth will compare favorably to overall WFE growth this year, and the level of outperformance versus WFE will also depend on which segments of WFE are able to ramp the fastest in the second half. Also, driving our growth this year will be the addition of IMG, which is still on track to contribute $70 million-$80 million of revenue for the full year, along with increased demand from our customers. The added visibility brought upon by the tight supply conditions bodes well for the longevity of the current demand cycle, with our customers planning for continued growth into 2023. I'll provide a brief update on the progress on some of the new products, and in particular, the next-generation gas panel and chemical delivery systems. For our next-generation gas panel, following up on the first beta unit that is currently in evaluation with a new customer, we are now preparing to ship a second beta unit this quarter to an existing customer for an application that is expected to outgrow the WFE market over the next several years. Both of these gas panel beta units are fully configured with core content. We would expect both of these customer evaluations to extend up to a year, particularly given the engineering efforts that are assigned to qualifying new suppliers to address the supply chain challenges in the industry. We remain confident and highly encouraged by the progress we are making with our customers for these proprietary gas delivery systems. In our chemical delivery business, we have two evaluations underway with a North American customer. One evaluation unit shipped late last year, and another was delivered early in Q1. We continue to work with these customers as we move through the next phases of the evaluation for both programs, which are now progressing in tandem and are expected to complete in early 2023. As we have noted in the past, Japan is the largest market for chemical delivery systems. We continue to expect first production orders from the initial Japanese customer this quarter. The scale of this is relatively small, but is an important step in penetrating the Japanese market. We are now able to travel to Japan with our technical resources and are continuing to quote opportunities at other OEMs that are larger in scale. In summary, in a very challenging operating environment, the operations team is doing a very good job of maximizing output to address the customer demand we are experiencing. With our current visibility, we are expecting to report sequential growth and record-setting revenues for the next several quarters. We are also driving a recovery and positive gross margin momentum we've been reporting for the last two years. We achieved a significant improvement since 2019, and in Q4, we reported gross margins 330 basis points higher than where we were just two years ago. The setback in Q1 was a temporary one. Due to the investments we are making in headcount to support future growth, as well as the additional inflationary costs and less favorable product mix resulting from the latest supply chain disruptions, we are focused on driving increased earnings leverage on the revenue growth forecast for the forthcoming quarters. Prior to handing the call over to Larry to discuss our financial performance and outlook, I'd like to personally thank Kevin Canty, who recently moved into a strategic role reporting to me, for his contributions to Ichor over the past nearly five years since joining us in Q3 of 2017. He was instrumental in managing our operations over this significant growth period in the industry. Paul Chhabra joins us a month ago as our new COO. Paul brings a wealth of experience to the role. For the last four years, he was Vice President Global Product Supply of Franklin Electric. Prior to that, Paul was Vice President Global Supply Chain for the semiconductor division of Applied Materials. With that, I'll now turn the call over to Larry. Larry? Thanks, Jeff. First, I would like to remind you that the P&L metrics discussed today are non-GAAP measures. These measures exclude the impact of share-based compensation expense, amortization of acquired intangible assets, non-recurring charges, and discrete tax items and adjustments. There is a very helpful schedule summarizing our GAAP and non-GAAP financial results, including the individual line items for non-GAAP operating expenses such as R&D and SG&A in the investors section of our website for reference during this conference call. First quarter revenues were $293 million, up 2% from Q4 and 11% higher than Q1 of last year. Q1 revenues included $19 million of contribution from IMG for the full quarter, compared to $7 million for the partial quarter of contribution in Q4. While Q1 revenues came in relatively well compared to expectations a quarter ago, the increase in cost and component supply issues faced in the quarter, at the same time as we ramped hiring, impacted our gross margin. Q1 gross margin was 16%, down 110 basis points from Q4, compared to the 80 basis point improvement expected in our prior forecast. The total impact on gross profit was approximately $6 million. About half of this amount was associated with higher costs of direct manufacturing labor. The other half was pretty evenly affected by three factors. First, product mix. Second, increased freight and logistics costs. Third, higher indirect factory costs, such as supplies and utilities. Q1 operating expenses were $22.4 million, $1 million above forecast, primarily driven by higher than forecast fees related to audit and SOX- compliance ERP implementation, as well as increased investments in R&D, given the progress we are making with our new gas delivery products. The resulting operating margin was 8.4%. As expected, interest expense for Q1 was $1.5 million, and our tax rate was slightly lower than forecast at 12.1%. The resulting earnings per share was $0.70 for Q1. Now we'll turn to the balance sheet. Like many others in the industry, cash conversion of working capital was unfavorable in the quarter. With supply and output still constrained in the current environment, inventory increased in support of customer demand. Accounts receivable also increased due to the timing of shipments weighted heavily to the end of the quarter, while our payments to suppliers increased, driving payables down. Going forward, we expect these working capital investments will translate to strong free cash flow generations in the quarters ahead. Now I will turn to our second quarter guidance. With revenue guidance in the range of $290 million-$330 million, our Q2 earnings guidance is $0.68-$0.94 per share. We are expecting a 30-100 basis point improvement in gross margin for Q2 compared to Q1. Our Q2 operating expense forecast is approximately $23 million, consistent with prior expectations that our quarterly OpEx run rate would be moving up a bit with incremental investments in R&D supporting our new product development programs for our new gas distribution products, some additional investment in IMG infrastructure costs, higher costs associated with our new ERP system, and overall investments supporting company growth. We expect our interest expense will be approximately $1.7 million in the second quarter, reflecting the recently announced increases in interest rates. Our tax rate in Q2 is expected to be approximately 13%, and we estimate our fully diluted share count to be approximately 29.1 million. Finally, we continue to expect CapEx to be around 3% of revenues for 2022, which reflects the higher levels of investment required to support our machining business. We expect to deliver improving free cash flow performance as we move through 2022. Operator, we are now ready to take questions. Please open the line. Thank you. We'll now be conducting a question- and- answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for your questions. Our first question comes from the line of Quinn Bolton with Needham & Company. Please proceed with your question. Hey, guys. Two questions. First, just on the sort of annual outlook. You're looking for sequential growth through the year. You commented in the prepared comments, I believe, that you felt you could grow faster than WFE this year. I'm wondering if you back out the IMG revenue, do you still think the core business can grow faster than WFE, given all of the constraints you're facing here, at least in the first half of the year? Well, I think, Quinn, that's a really good question. The answer is, I do think we can grow faster than the segments that, you know, we largely address, dep and etch, as you know. I think, you know, when you look at some of those outlooks now, those are a little muted versus the total WFE, but I think we can outgrow with IMG, outgrow WFE, certainly. Great. The second question is just on the gross margin. I think prior models probably had you know, at or above 18% by the end of the year. I know you're facing some near-term cost pressures of, you know, increased staffing levels and, you know, kind of an adverse mix. But do you think you can get back towards 18% exiting this year? Do you think that some of these higher costs, especially on the hiring side, won't get absorbed fully in the model until sometime in 2023? I think we expect that by the end of the year, we should be back on 18%. I mean, we definitely have the headwinds with labor and some of the freight costs, as you mentioned. We're confident that we'll get back on track to that range. You know, Quinn, we're making the assumption that we're gonna grow quarter-over-quarter sequentially, and so we're gonna grow into the infrastructure and the flow-through will get us there. You know, we'll see the mix recover in the machining business that we saw decline a little bit this quarter. We have strong confidence we'll be back there by the second half of the year, depending on how fast we recover, but certainly by Q4. Got it. Thank you. You bet. Thank you. Our next question comes from the line of Craig Ellis with B. Riley Securities. Please proceed with your question. Yep. Thanks for taking the question. The first is a clarification on revenue. The $7 million variance that was mentioned for the first quarter, was that all related to issues that were internal to Ichor, or was some of that just Ichor being unable to ship due to component issues elsewhere, that had customers having Ichor hold back product? Yeah, I think the largest factor was kind of driven by component shortages in our supply base that didn't allow us to build as much as we want. That really affected the integration business. We also had a lower than expected machining Output this quarter because we had to deal with some delayed raw material. We've gotten that all behind us now, and we'll catch up on that demand. I would say, none of that delta to our midpoint is perishable demand. It's all gonna get fulfilled this quarter. Got it. The second question is related to some of the comments on hiring, and I think there were comments both in COGS and OpEx, so maybe you can clarify. The question is this, it seems like there's a much greater emphasis on hiring and the level of hiring in the near term than what we had heard of late. Are there things that are happening either with the current environment or just given different product programs or other issues that would be in OpEx that's causing an increase? How do we think about where productivity is in the COGS line and in OpEx relative to where it's been of late? Yeah. I'll start and then I'll hand the OpEx over to Larry. You know, what we did is we did not take our foot off the gas for hiring. Hiring was, as you know, we've all talked about how difficult it is. Our we wanted to have the people in place, as I talked about on my prepared remarks about being able to burst and also kind of ramp. I would say we'll see very little need for incremental headcount as we go through the year. The faster things recover, the quicker we can grow our revenue. I think from a COGS perspective, we're pretty comfortable that we have quite a lot of resources that can address growing demand as we look over the next two to three quarters, for sure. That's a decision that I made because, you know, as we've talked about, hiring's tough. I think it's the right thing to do for the industry, our customers in particular, to make sure that we can burst 'cause, you know, supply constraints make it very difficult to be linear in your manufacturing, so you're gonna have to burst. To get as close as we did to the midpoint, for example, we bursted pretty heavily in the last month of the quarter. I think just to add on the OpEx side, most of the increase in OpEx was not directly labor related. There was a little bit of labor. On R&D materials, we brought in, I'd say significantly more than we expected to address some of the new products that Jeff mentioned. We did have some higher costs around our SOX -compliance audit and a few things around IT as we kind of work through the implementation of a few of the sites on our new Oracle Cloud system. In general, most of what we're seeing there, we do have as you go forward into the balance of the year, this quarter, we do have our annual merit that does directly affect labor costs. We are seeing some pressure on labor, just general competitiveness in the marketplace. Most of it is related to R&D investments and investments in IT and things that we've mentioned before. Got it, Larry. I missed what you said about the guidance for OpEx in the second quarter. Can you repeat that? From the second quarter, what should investor expectations be about the trajectory of OpEx in the back half of the year? Yeah. We're looking at around $23 million in Q2. I think, moving beyond that, probably $200,000 a quarter as we kinda go through it. It'll be dependent on some of the speed of the R&D activities, which today look very promising, but I think that's a reasonable amount to model. Got it. Thanks, guys. Thanks, Craig. Thank you. Our next question comes from the line of Patrick Ho with Stifel. Please proceed with your question. Patrick? Patrick, can you please check to see if your line is on mute? Is this better? Yes. Hello? Hey, Patrick. Sorry. Sorry about that. Jeff, given the current environment, and obviously there are a lot of moving pieces, but you're probably working a lot with your customers in terms of redesigning components. You talked about some of the integration work. Can you just give a little more color or granularity on those type of efforts? And when you think some of those can begin paying off, you know, especially given that the supply constraints and that environment has not really improved, you know, over the last few quarters. Yeah. You know, we don't have 100% design control as you know on a built to print gas panel business. We do work with our customers to find and help them find as they help us find alternative supplies for some of our components that just aren't scaling. There is a lot of effort going on, I would say, in the industry to look for new sources of supply where we can. Obviously, some things are very difficult to change 'cause if they affect process in a chamber, it just becomes critically more difficult. We are putting efforts into that as well as our customers and working with them individually in areas that we think we can work together on and address. There are some things that are designed and their customers actually select the suppliers. With those, we're just working with those suppliers on how we can help with supply constraints or our customers are getting involved as well. If they're semiconductor based, y ou know, our customers are trying to influence the amount of supply they can get along the way. Great. That's helpful. Maybe as my follow-up question for Larry, again, a lot of moving parts. I understand it's really a challenge right now. For the June quarter, what's the biggest issue that you're facing? Is it the supply constraints? Is it labor constraints? You know, what's the biggest issue? And then maybe secondly, what's the, quote, "quantifiable impact" on the gross margin line? Is it several hundred basis points or less? Well, I think the first one is the supply chain obviously is impacting us because it's impacting output. I think, you know, we have, as you know, very strong customer demand, and we're, you know, driving as hard as we can and spending whatever money that's available to us here to get the output. I think if you look at, you know, we're showing, if you take the midpoint 65-ish basis point improvement in margin, that's primarily driven by some volume leverage, as we get some more volume expectation up. Also we expect our machining business will do a little bit better than it did last quarter, as we, you know, as we get through some of the supply chain issues that we had. I think, you know, when you look at, you know, impacts around freight and logistics, those have continued to get a little bit worse than what we had historically. You can wrap those all up into what we used to call COVID impacts. We talked about 50 basis points. I'd say it's closer to probably 100 basis points, maybe a little bit less than that, but it's significant. We're seeing the inflationary pressures on gases, on utilities, you know, beyond just labor and other things we're kind of used to as we go through the last couple of years. There's been a few new ones that have popped up. I'd say that's probably to quantify it, to give you an idea. That's what we said. Our expectation, as we mentioned, as we get into the second half of the year, is to, you know, get back up to, you know, the 18% level where we expect to be, hopefully wane as we go forward. Yeah. I think if you were to ask me 90 days ago, we were still seeing some headwinds in our supply chain to get hiring done. I think they've, you know, that's improved. It's not perfect. Just, you know, like everyone is still has some level of struggling on hiring. Largely the component supply are gonna be the things that probably affect us more than anything. We are seeing improvements. They're just not great improvements at this point. Great. Thank you very much. Thanks, Patrick. Thank you. Our next question comes from the line of Tom Diffely with D.A. Davidson. Please proceed with your question. Yes, good afternoon. Thanks for the question. I guess first, Jeff, when you look at the hiring, is it focused on one particular region like Malaysia, or is it kind of a global increase in capacity to handle that burst? It's global. We've got hiring going on in every location that we have. In certain areas it's easier to hire than in the U.S. Outside of the U.S., you know, Malaysia is one of the places where we get much quicker access to incremental resources. So those flex up pretty well. Singapore is a little bit tight, so all of those reasons is why we didn't take our foot off the gas. Obviously in the U.S., people are coming back to work. Okay. When you look at the future or the plan to have enough people to handle some burst capacity from time to time, does that change your long-term view of what the staffing should be on a, I guess, on more on a permanent basis where it's gonna be a higher percentage of the COGS going forward? Yeah. That's a really good question. I guess my initial reaction is no. I think we've always carried burst, but we've never been this far behind demand. Everybody's chasing demand. You know, if you kinda looked at our last month, it would have equated to a revenue level much above what we actually achieved. As I talked about, I think we have enough capacity to kind of burst into when supply chain recovers if it's spotty, as well as, you know, kind of support the outlook we see for the remainder of the year with what we've done in hiring to date. Okay. That's helpful. When you look at the supply chain issues, is there some way to quantify how much that was driven by either direct or indirect impacts of the shutdowns in China? What affected us in China, we had a few suppliers that got shut down for the first kind of the four to seven days. Given our inventory positions, we were in pretty good position in those particular ones. But what happened is it was difficult to get things transported. If you had suppliers that were outside the shutdown lines but had to get into Shanghai, for example, we had to find other ports. It was kind of a cost headwind, as Larry talked about, you know, we had to air freight things out of airports that were open. We had to truck things much further to get to ports that could go. Most of what we saw was a little bit slow deliveries, but the effect of it, I think is something we can handle. We're not seeing a huge effect. It did have a small effect, though, on the early part of this quarter. I would say last quarter, not much. Other than the cost headwind to get the inventory in. Yeah. Okay. The last question. When you look at your gas panel 2.0, it sounds like, you know, the first ones were a couple of very specific applications, but when you look forward over the next couple years, is this a gas panel that can serve a vast majority of gas panel needs out there, or is this gonna be kind of siloed into certain applications? No, it'll be able to address a wide range of applications and flow rates. I think, you know, as Larry talked about some incremental investments in R&D, you know, we're, you know, the first ones are pretty specific. We know the flow rates, but there's a broader range that we can address, and those are some of the things that we're still investing in and finishing up. When we kind of get through this, they'll be able to address a very wide range of applications, you know, particularly etch, you know, the etch and dep applications primarily. Yes. Okay, great. Thank you. Yeah. Thank you. Our next question comes from the line of Krish Sankar with Cowen. Please proceed with your question. Hi, this is Robert Mertens on behalf of Krish. Thanks for taking my questions. First, could you break out the quarterly sales from the IMG business? For the year you reiterated around the $80 million revenue level with 100 basis points gross margin, 40% operating margin benefit for the year. Is that still the correct way to think about the business? Yeah, you broke up a little bit on the first one. If you're asking this quarter, as we mentioned, IMG was $19 million in revenue. If you look at the expectation we had for the year, $70 million-$80 million, we're still holding with that. If you look at their overall profitability for that business, they are meeting our expectations. Most of the issues that we're facing today are really in the core business or the business that we had prior to adding IMG. Okay, thank you. That's helpful. Then, do you have any sort of progress on the manufacturing capacity there, if there's any sort of tightness in components that you can manufacture? I think you mentioned the e-beam welding previously, but I don't know if that's more of a second transition thing or a long-term goal. Yeah, the IMG has capacity that we can utilize to help support some of the supply that we supply ourselves internally as well that we need in some of the weldment sub-assemblies that we do. We're working on that and the e-beam welding as we speak. Those are things that I would think by mid-year we'll have, you know, ready to go. There's a qualification for both of those. But yeah, we're still tracking to that. I'll call it synergy. Great. Thank you. That's all for me. Thanks, Robert. Thank you. We have reached the end of our question- and- answer session. I'd like to turn the call back over to Mr. Andreson for any closing remarks. Thank you for joining us on our call this quarter. I'd like to thank our employees, suppliers, and customers for their ongoing dedication and support as we continue to execute against this historically strong demand environment for our industry. Our upcoming investor activities include a virtual roadshow with D.A. Davidson next week, the B. Riley Growth Conference later this month, the Cowen Tech Conference on June 1st, and the CEO Summit at SEMICON on July 13th. We also look forward to our next earnings call scheduled for early August. Operator, that concludes our call. Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.