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ichor\'s (ichr) ceo tom rohrs on q1 2018 results - earnings call transcript

by:Mingquan Machinery     2019-11-21
Yixin Holding Co. , Ltd (NASDAQ:ICHR)
4: 30 p. m. on May 8, 2018, etexecueshire McAdams-2018 Earnings Call
Ruida RelationsTom Rohrs-
Jeff Andreson, chief executive and chief executive-
Chief Financial Officer analyst spatrick Howe
Stefield, nicolaused Dwin Mo-
Joseph Needham and CoKarl Ackerman-
Cowensinignhao
Ladies and gentlemen, welcome to the Ichor Systems 2018 earnings conference call for the first quarter.
At this time, all the participants were listening. only mode.
We will hold a Q & A meeting later, and instructions will be issued at that time.
As a reminder, the meeting is being recorded.
I would now like to introduce the moderator of today\'s meeting, Claire McAdams, Ichor Investor Relations Committee. Please begin.
Thank you, Claire McAdam.
Good afternoon, thank you for attending today\'s conference call, we will have a replay on Ichor\'s website shortly after the end of this afternoon.
When you read our earnings press release, when you listen to this conference call, please recognize that both contain certain forwarding --
Forward-looking statements in the sense of federal securities law. These forward-
Looking at the statements will be affected by some risks and uncertainties, many of which are beyond our control and may result in significant differences in actual results from these statements.
These risks and uncertainties include the risks and uncertainties set out in our earnings press release, as well as the risks and uncertainties we describe in our annual report in table 10
K. for the fiscal year of 2017, documents have been submitted to the SEC and the documents described in the documents subsequently submitted to the SEC.
You should consider all the progress.
Look at the statements based on these and other risks and uncertainties.
In addition, we will provide some
During this call, the GAAP financial indicators and our earnings press release contain these non-
Based on the most comparable GAAP financial measures.
Today, I received a call from Tom Rohrs, Chairman and CEO of Ichor;
Jeff Andreessen, our chief financial officer.
Tom will start with a review of the business, and then Jeff will review the first quarter finance and outlook of 2018.
After the ready lecture, we began to ask questions.
I\'m transferring the call to Tom Rohrs now. Tom?
Tom rohrs thanks Claire for attending our Q1 2018 conference call today.
Our first quarter results strongly demonstrate that our strategic and operational excellence goals are correct.
Our revenue of $0. 258 billion was 41% higher than in the fourth quarter and 74% higher than in 2017.
This is the leading performance of the league.
We earn $1 per share.
03 is 47% higher than the fourth quarter, 81% higher than first quarter of 2017.
Our gross margin is 18.
3% is 120 basis points above the fourth quarter, supporting and fulfilling our commitment that we will increase gross margin as the business grows.
Our operating margin is 13.
3% is already within our target model range.
At this time last year, when we entered the first quarter of the 2017 conference call, we expect revenue for the full year of 2018 to exceed $0. 5 billion, about $0.
02 earnings per share.
In the first half of 2018 alone, our revenue and earnings will be flat for the full year of 2018, as analysts predicted a year ago.
We believe that our revenue will be close to $1 billion for the full year of 2018 and earnings per share will be close to $4.
This will generate about $0. 13 billion of EBITDA this year.
On top of that, our gross profit margin and operating margin will both show a strong year-over-
As we approach our long-term growth compared to 2017term model.
We have successfully achieved the goal of surpassing other industries. the following points are proof.
Since 2014, our compound annual revenue has grown by 38% per cent, compared to 14% per cent in the industry.
Our 62% growth rate last year was twice that of our industry.
The strong revenue growth rate we mentioned earlier in 2018 is much higher than that of the industry, both in a row and throughout the year. over-year.
Our revenue growth rate for the first half of 2018 was 64%-over-
Compared with the first six months, this year and 46% will be far higher than the industry performance, and we certainly expect to surpass the industry performance throughout 2018.
In all these periods, our performance outpaced the growth of fab equipment or WFE spending, customer revenue growth, and almost all suppliers in the fab equipment market.
Our income and profits are growing faster than our income.
As we promised at the IPO roadshow more than a year ago, in every subsequent investor speech, we did a very good job in value-added acquisitions, this helps to expand the available market for our services without diluting shareholders.
Our private equity sponsors no longer hold our shares, eliminating any outstanding issues that have existed over the past year, we have met or exceeded every key growth and profit indicator proposed by our own strategic objectives or street expectations.
Despite our outstanding performance, our market value is not very different from that of a year ago.
My conclusion is that we are not doing very well in telling our stories.
So we\'re going to take some time today to explain why we think Ichor is a great company and a great investment.
We understand that investors\' concerns about the semiconductor business cycle will remain, but we also believe that they should be eased.
It is clear that fab equipment will continue to grow in 2018.
The consensus is that China\'s economy will grow by 10% this year.
We also believe that, in fact, we will see a decline in the economy and its impact will weaken.
First, the industry has been restructured to reduce the impact of the cycle.
Integration has removed edge players from the battlefield.
For marginal participants, the worst cycle has resulted in capacity-building faster than demand.
There is no evidence of this happening.
Second, the lead time of the whole industry has been reduced.
Therefore, the equipment planning time is shorter and the certainty of booking is stronger.
Past practices like double O ring have become the past.
So we believe that the cycle will be muted in the future.
Nevertheless, we have built the operational capabilities to manage the company in the upper and lower business environments.
Compared with other companies with smaller cost structure changes, this will reduce the impact on profits in the downside environment.
But today, I want to explain why we continue to outspend the industry and why we think we can continue to grow in a flat or even declining market.
At a higher level, our business strategy has five key attributes, which will enable us to continue to grow as much as we have done every year since 2014, surpassing industry spending.
First of all, expand our footprint and overall market share in welding parts and precision processing business.
Second, by gaining a foothold in Korea, we will expand our footprint and overall market share in the natural gas panel business.
Third, achieve incremental revenue growth in market share in our emerging mobile delivery business.
Fourth, expand our footprint and overall market share in more geographical areas, and finally continue to maintain strong implementation in mergers and acquisitions.
So let me talk about this in detail.
First of all, in the field of welding and precision machining, our service market has increased by more than $1.
5 billion through the acquisition of Cal-
Wield and Talon innovate.
Before we buy these companies, they basically serve one customer.
We have a great opportunity to expand our share of these services markets by leveraging our strong relationships with three other big customers in the USS.
As well as two new customers in Europe and US in Asia, we expect to start with the initial qualification for this quarter and the first revenue for the second half of the 2018 calendar, growth in market share in welding and precision machining accelerated to 2019.
In addition, most of our additional capacity is under construction in Malaysia, which has
Competitive cost structure.
Our second growth opportunity is to take advantage of our foothold in South Korea through the recent acquisition of IAN Engineering.
IAN is already a gas panel supplier for SEMES and wonik ips.
In 2017, the leading Korean oem semes became the seventh-largest fab equipment supplier with annual sales of more than $1 billion.
Their main markets include wet processing, etching, and track, and we can serve all markets through our portfolio of precision machining and fluid delivery systems for welding pieces.
IAN\'s second-largest customer is wonik ips, one of the fastest growing equipment suppliers in South Korea, with sales of nearly $0. 4 billion last year, mainly in the CVD space.
The two OEMs grew by 2017 together, earning 150%, more than 2016, and now account for more than 5% of the global market for etching, CVD, ALD, orbital and wet cleaning.
Today, IAN provides gas boards to these customers, which means that our overall share of the gas board market is increasing with this acquisition.
We can further expand our position as a subsidiary of the United States. S. OEMs in Korea.
In addition, we will now be able to take advantage of our welding parts and precision machining solutions, as well as our chemical delivery, especially our new liquid delivery module, to serve the Korean market.
These additional opportunities will be the driving force for incremental growth as we exit this year, but certainly in 2019.
The next key factor in our outstanding performance across the market is our growing market share in the liquid delivery y module, which contributed little to last year\'s revenue.
We won an important award with the United States. S.
Last year\'s Silicon has just started to be put into use in a small way in the first half of 2018, and it will certainly bring incremental growth to our core gas panel business in the second half of 2018 and 2019 and beyond.
In addition, we have IP on this proprietary liquid delivery module and work closely with multiple other OEMs to expand our coverage in cleaning, tracking and other wet processes to further
Our next growth direction is geographic expansion.
We are developing strategies to expand our market share with OEMs of equipment and other customer markets, especially in Japan.
We are keen to bring our liquid delivery products to some of the largest OEMs there, which have a considerable market share in wet processes such as cleaning and track.
This should be an important source of revenue growth in 2019.
Finally, we will continue to make more acquisitions that are in line with our strategy, which are beneficial to our earnings.
We will continue to use our plastic in Ajax, Cal-
Waeld, Talon innovation, is IAN now.
We will maintain our strategic advantage in fluid dynamics in the semiconductor market.
We will work with more and more customers.
We will acquire the company that provides us with an additional revenue growth platform, and we will conduct value-added transactions.
To sum up, my goal today is to convey why we are doing better than this industry this year.
We will do well again in 2019 and over the next few years.
To sum up, first of all, we are gaining market share from single customers previously served by expanding our welding and precision machining businessWeld and Talon.
Second, by gaining a foothold in South Korea, we are gaining market share in the natural gas panel business.
Third, we have earned our share in the liquid delivery business through the major OEM business, and we can further take advantage of these advantages in our recent acquisitions.
Fourth, we continue to expand our international business. Finally, there are more opportunities for mergers and acquisitions. we have a good record in choosing the right mergers and acquisitions.
As I said before, we have developed the fab equipment industry since 2014, with an annual growth rate of 38% and an industry growth rate of 14%.
We will continue to grow the industry, and WFE is expected to grow by 10% in 2018, and we will grow several times at that rate, and then again in 2019 in a consistently strong consumer environment.
Most importantly, for everyone who is concerned that the semiconductor cycle will cause the equipment market to decline, we believe that due to the revenue increase I just listed, we can still show strong growth.
Let me repeat it.
With all of our expected growth, even with WFE spending falling, our revenue will continue to grow next year.
I believe you all have the confidence that Ichor has been executing our strategic growth plans in the industry and in each of our peers at an almost unbeatable rate.
We also want to convey our confidence that in 2019 our revenue growth will exceed that of the industry as operating margins grow, strong revenue growth and sustained incremental growth drivers.
With this, I will hand it over to Jeff to provide more details on our financial performance for the first quarter, guidance for the second quarter and further details of our recently announced debt refinancing, share Repurchase Program and acquisition of Ian. Jeff?
Thank you, Tom.
Before I start my review, I would like to remind you that the profit and loss indicators discussed today are
Unless I determine the measure as GAAP-based.
These measures do not include the impact of stocks.
Basic compensation expenses, amortization of intangible assets acquired, non-
Recurring expenses and independent tax items and adjustments.
I would also like to point out that we have added a timeline to summarize both GAAP and non-GAAP
The GAAP financial results were discussed in this conference call, as well as key balance sheets and cash flow indicators for the investor segment of our website, as well as revenue by geographical region.
Revenue in the first quarter reached a record $0. 258 billion, up 41% from the fourth quarter and 74% from 2017.
We are above the high.
With the strengthening of every area of our business, fluid delivery, welding parts and precision machining, our revenue guidance is over and our prospects will change as we move into this quarter.
In the first quarter, we adopted the new revenue recognition accounting standards, which did not affect the time of our revenue recognition.
We have a record 18 gross margin.
3% increased by 120 basis points over the fourth quarter, slightly higher than our forecast of 100 basis points.
As expected, growth was driven primarily by the value-added contribution of our acquisition and higher revenue compared to the fourth quarter, and was slightly higher than expected due to a favourable product portfolio.
Compared with the same period last year, our gross profit margin increased by 210 basis points, mainly reflecting Cal-
The acquisition of Weld and Talon.
It is important that our gross profit margin for the third quarter continues to grow, showing that we have made strong progress within the range of the improved target model of 19% to 20%.
Operating costs are $13.
1 million or 5% of the income, in line with our expectations.
Growth in the fourth quarter was driven primarily by Talon\'s full quarterly operating expenses.
Our record operating margin is 13.
3% increased by 210 basis points over the fourth quarter, an increase of 280 basis points over 2017.
With steep revenue growth in the first quarter, for the first time we were able to perform well within the published target model for operating revenue.
Our tax rate for this quarter is 12.
7%, at the high end of the range we offer, because our US profits contribute moreS. entities.
Net income hit a record high.
6% of revenue and earnings per share is $1.
03 increased by 47% over the previous quarter, an increase of 81% over 2017.
This is our ninth consecutive quarter of profitable growth.
The quarterly EBITDA listed in the previously mentioned supplementary schedule also recorded revenues of $36 million or 14%, up 68% from the fourth quarter and 117% from the same period last year.
As you will see on the schedule, we have also increased EBITDA for nine consecutive quarters and delivered EBITDA for $93 million over the last 12 months.
Now let me talk about the balance sheet. Cash of $63.
$8 million fell by five.
5 million from the fourth quarter.
Free cash flow with $4.
5 million, as our accounts payable offset the increase in inventory for the quarter, our current capital increase was primarily used for accounts receivable.
Capital expenditure was $3.
7 million as we continue to increase capacity in facilities in Singapore, Malaysia and Portland.
The cash reduction also reflects the use of $5 million to buy back 196,000 shares in the first quarter, which I will discuss further in my comments later.
Sales in 27 days increased slightly from 25 days in the fourth quarter.
Inventory increased to $164. 6 million or 6.
Our revenue grew by 5% compared to 40%, so we continued to focus on improving inventory turnover.
When free cash flow fluctuates quarterlyto-
Based on working capital investment, we expect strong free cash flow in the second quarter.
In the first quarter, we completed the refinancing of existing debt with a fixed-term loan of $0. 175 billion and increased the Company\'s revolving credit line to $0. 125 billion, of which we currently have $0. 108 billion.
The credit agreement reduced the applicable interest rate by 25 basis points and extended the due date from August 2020 to February 2023.
In addition, the credit agreement increased the maximum leverage ratio from 2 to 3 times. 5 times.
The current base rate is LIBOR plus 2.
25%, as our leverage ratio will drop to 1, it will decrease by 25 basis points in June. 3 times.
Given our reduced debt leverage ratio and the incremental lending capacity of more than $100 million, we have the money to spend on acquisitions and opportunistic stock buybacks.
Our interest expense for the first quarter was $2.
5 million, is expected to fall to $2.
The second quarter was 3 million.
After the second quarter, a similar price range was $2. Between $4 million and $2.
According to the number of rate hikes we have seen this year, interest expenditure per quarter is 5 million.
In the first quarter, the company approved a $50 million stock repurchase program.
Up to now, we have purchased 630,000 shares at an average price of $23 at $15 million. 75.
That means we bought back $10 million in the second quarter, compared to $5 million in the first quarter mentioned earlier.
We will continue to manage this on an opportunistic basis, balancing any future purchases with our acquisition strategy, prudent management of debt levels and the generation of cash flows.
On April, as Tom mentioned earlier, we announced the acquisition of IAN Engineering.
While this is a relatively small acquisition, it is strategic and it expands our addressable fluid delivery market by about $0. 125 billion and enables the company to further expand our welding
Our second quarter guidance today does not include any revenue related to this acquisition, but annual revenues are about $20 million and we do expect it to increase incremental revenue in the second half of the year, and increase revenue in the fourth quarter.
The total acquisition will be $8 million, half of which will be paid at the close and the other half in the next two years, provided they meet certain financial and operational conditions.
Now, I will talk about our second-quarter guidance.
We expect another strong revenue quarter to slow down slightly from the first quarter record, based on our customer shipping model.
Our forecast is that earnings per share are within $0 and revenue is between $0. 244 billion and $0. 254 billion. 91 to $1.
At the midpoint of the second quarter guidance, our revenue in the first half of the year will grow by 46% over the second half of 2017 and 64% over the first half of last year.
As with any business, gross margin may vary due to changes in product mix and revenue volume, we are tracking against the target gross margin model and we will continue to drive incremental cost improvements.
We continue to expect that our operating expenses will increase slightly each quarter during the year, but our total operating expenses this year will definitely be lower than 6% of our income.
The current tax rate will be between 12% and 13% this year.
Given the greater contribution of the United StatesS.
We now expect our cash rate to be around 5% in 2018.
We are ready to answer the question, operator.
Operator, please open the line. Question-and-
Operator [answer]
Operation instructions]
The first question came from Patrick Ho from Stiffel.
Your line is open.
Patrick Ho thanked and congratulated this quarter very much.
Tom, first of all, in terms of this [Indiscernible]
Did you see . . . . . . You\'re facing Jeff. you\'re breaking up, Patrick.
I apologize to you.
In terms of industry environment ,【Indiscernible]
Patrick, Tom RohrsSo, there\'s something wrong with your connection and it\'s almost impossible to be sure what you\'re asking now.
Is this better?
Tom rohrstis is 100% better. Let’s go.
Okay, I apologize, Tom.
First of all, in terms of the industry environment, can you discuss the shipment level for the third quarter?
You may have seen ins, and how is Ichor\'s visibility when we look to the future-are you starting to see the visibility level for the quarter of September?
Tom RohrsSo, we have directed 240 to 250 in the first quarter.
Obviously we got more revenue than we thought, and obviously some of them were items that were scheduled to ship in the second quarter.
So, yes, there\'s some pull
Entering the first quarter, we are more than happy to meet and meet the requirements of our customers. The -
In terms of the third quarter, the way we are looking at this now is that in terms of the second half, I think in terms of the first half and the second half, what we see is very similar to the low 50% I described in the first half and the high 40% in the second half, which I think is something I think is very powerful.
Obviously, if we end up being high-low 50 and high 40, we\'re going to start getting close to what I call the $1 billion figure.
Now, as I said in my script, we are working on the eligibility for additional revenue for welding, precision machining, and LDM modules, and qualifications are difficult to quantify from a time perspective.
This could be some of the reasons that led to the second half of the year\'s income, which would be a supplement to the percentage figure I just mentioned.
However, as I discussed, most of them will contribute to the 2019 growth momentum.
When we look at what\'s available in 2019, we also think there\'s more than $100 million.
So we are very optimistic as far as the overall fab equipment is concerned, and as I said, it has grown by 10% this year.
At this point, maybe a little ahead
Still, we are strong all year round, but in fact, we are very excited about 2019 and what we can do with incremental revenue.
Great. That’s helpful.
Maybe as a follower
Jeff asked questions about supply chain and management.
Given these higher shipping levels and higher demand for customers, plus the mergers and acquisitions you \'ve done in the last few quarters, I think how you manage, the supply chain and your own balance sheet, and what you gave-I think, is the level of consumption your customers see really high?
This is Tom. let me answer this question for you.
I was very pleased with our supply chain team and we added some executives last year as I talked about this on the conference call.
We have also added a new senior supply chain manager who has built a first class team.
So, as an example, our
Despite the large number of purchases, the time delivery is getting better and better, it is clear that we are very satisfied with the large number of purchases.
Not only that, but in the first quarter our inventory grew by 10% while shipments grew by 40%.
So this gives us a lot of extra cash that we can use for things like repos and acquisitions.
So, the supply team did a very good job.
We have a very good model to integrate acquisitions.
We integrate them almost immediately into the appropriate functional areas, so they cooperate almost immediately on the supply chain.
In general, we have made some significant investments in the real sense that are being rewarded.
Great.
Thank you very much.
Patrick, thanks Tom Ross.
Thank you.
The next question comes from Edwin Mok of Needham.
Your line is open.
Edwin, check your mute button.
Hey guys.
I\'m sorry.
So, congratulate on a great quarter and great prospects.
My first question is that as far as your ideal concentration for these two largest customers is concerned, I think it has dropped a bit last year and I think you have put the two together, reached a height of 93%.
As they continue this trend, does it mean that you are growing faster from other customers than your big customers?
Is the water in these two buckets still the same?
Tom RohrsSo, we mentioned, I mentioned in the script that the first quarter of this year is indeed much higher than the first quarter of last year.
I think it\'s more than 81%.
However, in addition to our two largest customers, our other customers actually doubled their revenue from 2017 to 2018.
So we are very happy about this, which gives you a good indication of how things are going.
Edwin Mok, it\'s very helpful, it\'s just that we don\'t see the trend and don\'t even include these two new Korean customers, you won\'t see it until the second half of the year, will you?
Tom RohrsNo, this does not include SEMES or WONIK. Edwin Mok Yes.
Then, from the driver of the layout, your welding extension in Korea, LDM, etc. , leads to my next question, do you have a way to rank the timing of these opportunities?
I know you\'ll call all of them, but I have some-some longer than you.
In terms of the timing of these different opportunities, it just gives us a feeling?
Tom RohrsYes, I think we\'re going to see some of the activities of precision machining first, and we \'d like to see some of the activities going into the backend of 2018.
Soon after that, we will see some activities in terms of welding parts.
Regarding the liquid delivery module, we actually, it looks like we hit all the cylinders in the first quarter, and we have actually rolled out some LDM if you want, because it\'s qualified among a very large customer, their 10-
Nano fab delay.
So, we actually saw some delays.
So we expect this to start again in the second half.
So, I will rank them in time.
Edwin Moke, to be fair, just based on your review of the readiness, is it fair to say that precision machining plus welding pieces could be the biggest chance of all of these different welding pieces?
I think this is a fair assessment.
I mentioned the size of the market there was $1.
There are 5 billion pieces of welding and precision machining in the semiconductor industry alone.
Our share is that there may be 25% on the weld side and less than 10% on the precision machining side.
So we have a lot of places to play.
Edwin mock is great.
Sorry for the background noise.
Last question, I think in terms of M & A and debt capacity, Jeff, you mentioned in your prepared comments that you have increased your debt and it sounds like you can easily increase your leverage three times.
Is this the way to consider your debt capacity?
Jeff andreino, well, Edwin, what I was thinking is that we can\'t go to the 3 Th.
Given that we want to make sure we are cautious, we may keep something below that.
So I suspect it will be between 2 and 2.
But that\'s what we\'re focusing on right now.
But if something comes up, we have the ability to do it, which allows us to do so.
If you don\'t have Edwin Moke, like if you haven\'t met in the next few quarters or haven\'t increased your revenue through any big deals that need to use this debt, right.
How do you prioritize repurchase and debt repayment?
I think the way we think is, I mean, obviously, we have to look at them together based on where our share price goes, we have-$23.
I think that is the value that we think is very good and the purpose for which we buy back our stock.
In the future, if we see some kind of risk of falling, or some of us might consider debt ratios and make sure we don\'t over-leverage.
So we just need to balance it in the foreground.
Okay, good. That’s great.
That\'s all I have. Thank you.
Thank you.
The next question comes from Carl Ackerman of Cowen.
Your line is open.
Carl akmanon Ian, Jeff, or Tom, I know you haven\'t shut down Ian Engineering yet, but will this accelerate or delay the gross margin you have achieved new savings in your revenue model
I have a following. up please.
Tom Roswell, I don\'t think so.
The impact on the income model is marginal.
Don\'t forget, we are paying $4 million now, $2 million a year from now on, $2 million two years later, and the current operating rate is $20 million, so $20 million on our percentage, I\'m not going to move that many needles-even more exciting though, as we said, it gives us the head of the beach
But it\'s also a growth point in Korea, especially in SEMES and WONIK, where welding, precision machining and delivery modules can be sold, in some cases, these modules will be the same cheaper than what we shipped today.
So overall, with the race going on, I think Jeff mentioned the chance we saw over $100 million there, and I think that will play well in our long runterm plan vis-à-
Profit margins are growing.
Karl AckermanI appreciated this. As my follow-
Jeff or Tom, what do you think of your manufacturing footprint today? Given that the four M & A deals you \'ve completed in the last 24 months will soon bring in several smaller facilities all over the world.
Should we look forward to the opportunity to integrate these facilities into your Singapore and Malaysian factories, which may increase the leverage of operating expenses next year?
Tom rohrstrom, I think I mentioned today when I was talking about the script that we are building a lot of welding capacity in Malaysia, so, although that doesn\'t mean that we will get from Cal-
Because they did a very, very good job.
A large number of incremental welding will be carried out in Malaysia.
So, essentially, yes, our current activities in Singapore and Malaysia will consolidate this business.
Even though I suspect that in terms of our relationship with Talon, and just buying IAN, these entities will remain as they are and, in fact, may not be integrated.
Just as they grow, we may play an increasingly important role in a more advantageous cost center.
Carl AckermanThank you.
Welcome to Tom rose.
Thank you. [
Operation instructions]
The next question comes from Ho of Deutsche Bank.
Your line is open.
Thank you for answering my question. Just to follow-
On the previous issue of the acquisition.
IAN offers products that are similar to what you offer today?
Or have you today-
Can you take advantage of additional features from existing customers?
Just wanted to know about the SAM extension opportunity, I think you said $0. 125 billion for the two clients you mentioned?
Tom rohrthe products of our gas delivery system are very similar to what we are building today, which is actually a very good thing because it is a direct fit, it\'s actually as exciting as anything because it\'s got us into two brand new customers.
Obviously we have the opportunity to develop this particular gas delivery business, and then we also have the opportunity to market our other products as a starting point in Korea.
But there will be good information sharing between IAN and our current gas delivery capabilities.
In fact, I think Ian will improve in terms of efficiency, because it is clear that we know as much about making gas boards as anyone, probably more than they do.
So I think this is the way that there is synergy in gas delivery.
Sidney Howe got it.
But just to follow up
So far, what is the competitive landscape of South Korea?
Why can\'t you get the same market share with the other two existing customers as you have to know?
Tom rohrstrom, the highly competitive market in South Korea is Samsung very eager to see more and more supply from the Korean market.
So, we think we want to go to Korea.
We believe this is important in terms of South Korea\'s growth opportunities.
This is the way we choose.
We feel that it is very expensive to set up our own Ichor subsidiary and may not be successful. First of all, it will not be Korean, and second, Korean. we really don\'t know what to do.
This is the way we choose.
So, right now, this puts us first in Korea as they will be in a hurry to buy products that we can do welding, processing, etc.
We may end up doing some in Korea as well and become another local source for the entire Samsung supply chain.
So this is a very big opportunity that will be used by the people of the Korean Peninsula.
Our customers in the United StatesS.
Understand this.
One of them has a very, very large subsidiary in Korea.
I think it could be around $0. 8 billion, which also allows us to provide these products because they want to have a supply source from Korea.
We think this is important.
We thought it was a great opportunity and we were very pleased with the deal.
Sidney Ho is amazing. That’s helpful. My follow-
The upward question is, on guidance, Q2 guidance, which part-well, take the midpoint of your guidance, down 3% --over-
In the quarter, which part of the business you expect to fall back to see that the welding is still growing, I think you mentioned this in the previous quarter, and you expect the core business to grow by 30% in the first quarter, how does this end?
Tom Roswell, let me give you my opinion on this issue.
So, you know our first quarter, we\'re expecting $0. 245 billion.
When we see this in January, I will be very blunt, our price is $0. 183 billion, to $0. 245 billion, and we know that the forecast for others is 8% or 9% or 10%, we said it was true, we did a good job, and of course we knew what we were doing, and fundamentally we did a very good job before and even overfulfilled $0. 258 billion.
When we look at the first quarter, we think the first quarter will be $0. 245 billion, and the second quarter will be $0. 26 billion to $0. 265 billion. we finally put $13 million into the first quarter.
So, if you look at half as a whole, the total doesn\'t drop at all, just the customer wants something earlier than others, and that\'s how it behaves.
Sidney Ho is amazing.
The last question, I think last quarter, Jeff, you mentioned that you expect gross margin to increase in the full year of 2018.
Especially after a jump in the first quarter, what do you think is the driving force for improvement in the next few quarters?
Jeff and resonyes, I mean, I think when you look forward to the future, I mean, obviously, I mentioned that we have some profit margins due to the product mix
I won\'t say we plan to do that now.
But what we\'re really concerned about is that in addition to what new acquisitions bring, we can do other things with these acquisitions to consume some of these parts internally.
We are working on these projects.
Then, as Tom said, the supply chain organization did a very good job of looking at how we could reduce the total cost of other products outside of Talon and Talon type products that we could use internally.
So these will be the driving force for the future.
Obviously, you\'ll see some leverage depending on the level of income and other factors, so.
OK, thank you very much.
Good Jeff langko.
Thank you.
This concludes the Q & A section of today\'s meeting.
I would like to transfer the call to Chairman and CEO Tom Ross for his closing remarks.
Tom rohrs thank you and thank you for joining us on this quarter\'s conference call, and we certainly look forward to providing you with an update on the second quarter of August call. Thank you.
Thank you all for attending today\'s meeting.
You can disconnect
Have a good day.
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