Ultra Clean Holdings, Inc. (UCTT)

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Ultra Clean Holdings Inc. (UCTT)

Q3 2009 Earnings Call

October 26, 2009; 05:00 pm ET


Clarence Granger - Chairman & Chief Executive Officer

Casey Eichler - Vice President & Chief Financial Officer


Edwin Mok - Needham & Company

Jay Deahna - J&K Securities

Tim Summers - Newbridge Securities



Good afternoon. My name is Cara, and I will be your conference operator today. At this time, I would like to welcome everyone to the third quarter earnings release conference call. (Operator Instructions)

I’ll now turn the call over to Casey Eichler, Ultra Clean’s Chief Financial Officer. Sir, you may begin your conference.

Casey Eichler

Thank you Cara. Welcome to our third quarter financial results conference call. With me today is Clarence Granger, Ultra Clean’s Chairman and Chief Executive Officer. I will begin by presenting the financial results for our third quarter and Clarence will follow with some remarks about the business.

A few moments ago, we issued a press release reporting financial results for the third quarter ended October 2, 2009. The press release can be accessed from the Investor Relations section of Ultra Clean’s website along with the information for the tape delay and replay of the live webcast at www.uct.com.

Together with our recently issued press release, this conference call enables the company to comply with the SEC regulations for fair disclosure. Therefore, investor should accept the contents of this call as the company’s official guidance for the fourth quarter of fiscal 2009.

Investors should note that only the CEO and CFO are authorized to provide company guidance. If at any time after this call we communicate any material change in guidance, it is our intend that such updates will be done officially via public forum, such as a press release or publicly announced conference call.

The matters that we discuss today include forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995 related to matters including our future financial performance, new product orders and shipments and industry growth.

Investors are cautioned that forward-looking statements involve risk and uncertainty that may cause actual results to differ materially from those projected in the forward-looking statements. Some of those risks and uncertainties are detailed in our filings with the Securities and Exchange Commission. The company disclaims any obligation to publicly update or revise any such forward-looking statements or to reflect events or circumstances that occur after this call.

Now let’s turn to the third quarter results. Revenue for the third quarter of 2009 was $41.3 million, up 78% from second quarter revenue of $23.3 million and a decrease of 31% compared to revenue of $60.1 million in the same period a year ago. Semiconductor revenues increased 95% or $13.4 million sequentially or non-semiconductor revenues 51% or $4.4 million sequentially, to $13.7 million reflecting increases in revenue for all other served markets.

We experience significant sequential improvement in gross margin in the third quarter as gross margin of 7.9% compared to negative gross margin of 3.7% recorded in the second quarter and positive gross margin up 9.1% in the same period a year ago. The $4 million sequential gross profit increase is primarily attributable to increased factory utilization.

Operating expenses were $5 million, a decrease of approximately $400,000 from the prior quarter as a result of cost savings activities. Our pre-tax loss was $2 million compared to a pre tax loss of $6.5 million in the second quarter of 2009 and a pre-tax loss of $2.5 million in the same period a year ago. Our tax benefit of $536,000 was recorded in the third quarter.

The third quarter net loss was $1.4 million, this compares to a net loss of $14.1 million in the second quarter of 2009 and a net loss of $1.9 million in the same period a year ago. Our third quarter net loss per share of $0.07 compares to a net loss per share of $0.66 for the second quarter of 2009, and net loss per share of $0.09 for the same period a year ago. The second quarter net loss included a one time non cash tax expense of $7 million as a result of the tax valuation allowance.

The third quarter 2009 net loss per share is inclusive of non cash charges of $570,000 or $0.03 per share related to FAS 123R during the period, and $500,000 or $0.02 per share related to depreciation and amortization. Turning to the balance sheet, during the third quarter cash increased $500,000 to $30.7 million, while third party debt decreased $500,000 to $15.6 million. Taken together, cash net of third party debt increased $1 million during this period. This brings our net liquidity to its highest levels since the first quarter of fiscal 2006.

Accounts receivable of $15.5 million increased 50% from second quarter as a result of increased revenue. Day sales outstanding decreased to 34 days from 40 days at the end of the second quarter. Accounts payable up $23.1 million increased approximately $11.9 million or 106% sequentially due to increased purchases during the quarter particularly in September to support third and fourth quarter revenue.

Days payable outstanding at the end of the third quarter increased to 55 days from 42 days at the end of the second quarter. Net inventory increased $4.5 million or 14% to $36.6 million to support the fourth quarter demand. On a year-to-date basis, net inventory decreased $3.2 million from $39.8 million reported at the end of fiscal 2008.

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