Good afternoon, and thank you for joining today's fourth quarter and fiscal year 2024 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 year 2023, 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 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 Andreessen our CEO and Greg Swite 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 will now turn over the call to Jeff Andreessen. Jeff?

Thank you, Claire, and welcome everyone to our Q4 Earnings Call. Thanks for joining us today. On today's call, I will briefly recap our year-end results, provide an update on our current outlook, and review our progress qualifying our proprietary products. I will We also discussed some of the gross margin headwinds that impacted our Q4 results and our margin expansion strategies ahead for 2025. On the top line, our growth accelerated in Q4, with $233 million in revenue exceeding our expectations going into the quarter. Revenues were up 10% sequentially after roughly six straight quarters of revenues hovering at the $200 million level. As a result, the year ended modestly stronger than expected, with 10% growth in the second half and total revenues of $849 million of 5% from 2023. Customer demand continued to strengthen throughout the fourth quarter, requiring our weekly build rates to ramp significantly to levels that began to require additional resources. We believe this higher level of demand is indicative of a strong year ahead for our primary applications of etch and CVD, with broad-based demand strength continuing from both the advanced logic and DRAM markets and the beginning of a recovery in NAND technology investments. With Q4 revenues finally indicating the inflection point for more meaningful growth ahead after After a prolonged downturn in etch and deposition, we added significant machining resources in Q4 to address the increase in demand for both our build-to-print and our internally developed machine products. Additionally, in preparation for increasing proprietary content, as we cut these components into our gas panel builds, we are building stocking levels to support our gas panel integration sites. These resources are critical to support not only the top line growth for our business, but also the increasing component content that we can supply internally, an important part of our gross margin expansion story. The gross margin headwinds in Q4 reflect the higher direct labor costs, which were not fully absorbed within the quarter, largely due to a longer than expected training process. We expect the residual impact of these higher labor costs to carry somewhat into the first quarter, but as Greg will discuss in his remarks, the vast majority of the labor and inventory charges that impacted Q4 gross margin were unique to the fourth quarter. So, as we look ahead to 2025, I'll first reflect on the momentum that has been building over the last few quarters in advance of what we expect will be a solid growth year for I-Corps within an increasingly positive mix profile emerging for wafer fab equipment demand, principally a higher mix of etch and deposition. You may recall that our visibility for growth and an inflection point in our revenue run rate improves significantly between our Q2 and Q3 earnings calls. While the debate over WFE growth in 2025 intensified, we were talking about the beginning of an upgrade investment cycle for NAN. We were talking about an increase in etch and deposition intensity, boosted in large part by the additional process steps required by advanced logic devices migrating to gate all-around architectures. We also talked about how the expected slowdown in WFE spending in China was a favorable makeshift, setting up a strong environment for the U.S. OEMs to outperform overall WFE. And while the evolving WFE demand environment did in fact result in lower quarterly build rates for our litho and silicon carbide businesses as we move through 2024, we also talked about how our participation in advanced packaging and high bandwidth memory through our chemical delivery business has largely offset these pockets of weakening demand. As we indicated by webcast in January, we believe this inflection point in our revenues is not a one or two quarter phenomenon. We are investing appropriately for the growth ahead. In In fact, demand has continued to strengthen quarter to date, and we are very pleased today to be raising the high end of the range of our revenue forecast for Q1. As we have gained clarity into the various margin impacts for Q1, we can also increase our gross margin outlook for the quarter, and even more importantly, for the full year. We expect continued gross margin improvement throughout 2025, given our visibility for continued strong customer demand and increasing content from proprietary components we believe the company can generate flow through of 25 to 30 percent or more enabling us to deliver gross margins in the 15 to 16 percent range by Q2 and exceeding 16% for 2025 even on modest revenue gains beyond Q1 which Which brings me to an update on our progress qualifying both our proprietary components for our existing gas panels as well as our next generation gas panel. We have made steady progress in closing additional component qualifications over the past quarter and will be cutting these components into our manufacturing pipeline in Q1. We expect growth in our new products this year will be a key driver for margin expansion for I-Corps in 2025. I'll start with our new component products we are very pleased to announce today that our high purity valves were qualified at a second customer during Q4 and we are currently progressing through qualification at a third customer we continue to make progress qualifying our proprietary fittings which are components used in our weldment business with our two largest customers already qualified, we are in the final stages of our third qualification. All three of our process tool customers have already qualified our substrates used in our gas panels. These are all critical components used in the existing gas panels that we assemble, as well as our next generation gas panels. These components will continue to ramp in volume as we cut them into our manufacturing pipeline. Now moving to our next generation gas panel. As discussed last quarter, we delivered more than 50 of our next-generation gas panels during 2024. We achieved initial customer or OEM qualifications on four applications last year, and many of the next-generation panels that we had delivered in 2024 are part of a qualification process with the end-device manufacturer, which are continuing into 2025. The timing of these qualifications is being worked between our customer and their customer, and in 2025 we expect additional qualifications to follow. We are also now engaged on two additional applications beyond the floor we discussed previously. The key takeaway as it relates to our proprietary content strategy is that we expect to supply an increasing proportion of our bill of materials with internally developed products whether they are passive components that we no longer have to purchase for build-to-print gas panels all the way up to our fully proprietary next-generation gas panel while these internally developed and manufactured products have required a meaningful investment by I core most of the incremental R&D investments are behind us and our labor force is now in place to address higher levels of customer demand and accelerate our gross margin expansion strategies as we move through 2025. To summarize, our expectations of industry spending dynamics, the mix shifts of investment priorities in the coming year are, on a whole, very positive for I-Corps business. And regardless of the magnitude of WFE growth expected for 2025, we are confident in our ability to outperform the growth in WFE this year. Likewise, we are confident in our ability to demonstrate strong flow-through and deliver continued expansion of our gross margin profile as we enjoy a more robust customer demand environment while steadily incorporating an increasing share of proprietary products into our production flow. With that, I'll turn it over to Greg to recap our Q4 results and provide further details around our financial outlook.

Thanks, Jeff. To begin, I would like to emphasize that the P&L metrics discussed today are non-GAAP measures. These measures exclude the impact of share-based compensation, amortization of acquired intangible assets, non-recurring charges, and discrete tax items and adjustments. There is a useful financial supplement available in the Investors section of our website that summarizes our GAAP and non-GAAP financial results as well as a summary of the balance sheet and cash flow information for the last several quarters. Fourth quarter revenues were $233 million aligning with the upper end of guidance. This represents a 10% increase from the previous quarter and a 15% increase year-over-year. Gross margin declined to 12%, which was lower than our expectations by about 300 basis points. This decline was primarily due to the higher level of direct manufacturing labor costs we added during the quarter to support the higher demand level in the back half of the fourth quarter and the first quarter of 2025 that we were not able to fully absorb within the quarter. Additionally, we experienced higher than anticipated inventory charges associated with our year-end physical inventory procedures, as well as unfavorable product mix, with the majority of the current revenue upside taking place in our built-to-print gas panel integration business. Operating expenses for Q4 were slightly below forecast at $22.3 million. Net interest expense was $1.7 million, while non-GAAP net income tax expense exceeded our forecast at $900,000. dollars. The resulting net income per share was eight cents. Now turning to the balance sheet, cash and equivalents at the end of the quarter totaled $109 million, an $8 million decrease from Q3. While our Q4 P&L generated over $8 million of positive cash flow, our net investment in working capital during Q4 was $11 million, primarily in inventory, given the revenue growth inflection in Q4. After $4.4 million of capital expenditures, free cash flow for the quarter was a use of $6.9 million. DSOs for the quarter were slightly lower than Q3 at 34 days and inventory turns increased from 3.1 to 3.4. We reduced debt by $1.9 million during Q4, bringing our year-end balance of total debt outstanding to $129 million, down from $250 million a year ago. Our net debt coverage ratio has declined to 1.6 times, down from 3.4 times a year ago. Now let us discuss our guidance for the first quarter of 2025. As Jeff mentioned, today we are increasing the high end of our preliminary outlook discussed in early January. With anticipated revenues in the range of $235 to $255 million, we expect gross margin in the range of 14 to 15%. At the midpoint of the range, or $245 million in revenue, and 14.5% gross margin, this equates to roughly 25% flow-through from our Q3 baseline, less about $1.5 million of residual impacts, ramping and training of our incremental machining headcount. Once these incremental cost headwinds are behind us, we anticipate returning to gross margins above 15% by the second quarter and flow through in the 25% to 30% range. Q1 operating expenses are projected to be approximately $23.5 million, reflecting the seasonal impact of payroll taxes resetting, audit fees, and other variable compensation costs. Given that we expect to remain at similar levels beyond Q1, today we are also lowering our expected OPEX increase for the full year to an anticipated 5 to 7 percent compared to fiscal 2024. Net interest expense for Q1 is expected to be approximately $1.6 million, and we expect this level to be relatively consistent through 2025, given recent announcements around a slowing of rate decreases this year. For modeling purposes, net interest expense for 2025 should be approximately $6 million. Our expected non-GAAP effective tax rate for 2025 is projected to be approximately 12.5%. For Q1 specifically, our EPS range of $0.20 to $0.32 reflects our expectation for $34.4 million in diluted shares outstanding. Operator, we are ready to take questions. Please open the line.

Thank you. We will now be conducting a Q&A session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would 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 key. One moment please while we poll for questions. Thank you. Our first question comes from the line of Craig Ellis with B Riley Securities. Please proceed.

Yeah, thanks for taking the questions and congratulations on the momentum that you're seeing in the business guys. I'll start with Greg and then move on with one for Jeff. So Greg, if gross margins in calendar 25 are going to be above 16%, which would be a 330 basis point increase year on year, can you just help us understand how much of that is a benefit from the new product progress that's being made, valves, gas panels, et cetera, volume versus the absence of some of the headwinds that might have been in play in 2024, like the inventory charges and some of the volume-related cost ramp-ups. see if I could get to all your points there yes quite a bit to get to the you

know we said the 16% by the end of the year for the full year you know the headwinds will go away as we said those will exit Q2 right so those won't won't materialize as we get through Q2. The internal branded products, right, that's gonna continue on the 25 to 30% improvement on the flow through from an incremental standpoint. Then as we get into the second half, as we get stronger, that will benefit as well.

So the tailwinds will go away. that'll benefit us exiting headwinds sorry tail headwinds Q2 the internal branded products will continue to benefit through through the rest of the year and then as as we you know get through the second half you know we expect those to be in the 15 to 16 percent and stronger and in Q4 And, Craig, I would tell you, similar to what we've talked about in the past, I'd say obviously some of the excursions that we have won't repeat, but really the new products are probably the largest driver, and then given that we're seeing volumes up year over year, then we get kind of the leverage of the core business, excluding some of the new stuff, and so that is how we'll do it. And obviously, you'll see these margins accrete as we go through the year because of this and how they layer in.

That's helpful, yeah. So I would just infer from that that we've got maybe 45% of the benefit on products, 35% on volume, and 20% from the absence of some of the headwinds we had last year. That's real helpful, guys. And then the second question was for you, Jeff. But it's great to see some confidence in demand being shown by just the build intensity quarter to date and what you're doing with the high end of the range. As you look at calendar 25 for I-Corps and think about the growth in the business, how would you force rank 3D NAND and its transition spend versus DRAM and high bandwidth memory versus gate all around and foundry?

That's a good question, Craig. I mean, obviously, I think we see foundry logic remaining pretty strong. I think, you know, you've heard TSMC's outlook, things like that. We don't see that going backwards. I think with GATE all around, I think that might see some increase. DRAM, our view today is it's going to stay pretty steady and strong. So really, you know, maybe the inflection that we're seeing to some degree is really wrapped around some of the NAND increases that we're seeing in the beginning of the year. for sure yeah and that would track with some of the things we heard last week too yeah yeah okay guys that's really helpful thank you very much I'll get back in the queue thank you thank you our next question comes from the line Brian Chin with Stiefel please proceed either good afternoon thanks for letting us ask a few questions um yeah maybe firstly in terms of it sounds like

you're Jeff you're talking about at the moment revenue levels kind of staying at sort of the Q1 level maybe through the balance of the year and so what I want to clarify that sort of the impression you're giving because and then kind of secondly you did pull forward those direct labor costs which sort of suggests that you expect business maybe even to pick up and so are you being sort of conservative in terms of that stabilization outlook and is what you're really doing kind of putting more and higher levels of responsiveness into the business by prepping some of these costs now?

Obviously I think the way to think about it is demand strengthened in the quarter. We needed to add resources because we see this staying pretty sustained in the first half with a modest I would say at this stage you know our view of the second half is up modestly so we're comfortable adding the resources in I don't think it the thing that you guys can see is we talked about internal supply that's a whole nother demand driver that I would tell you is outgrowing the rest of the revenue on the company as we start to cut these things in so that is largely where a lot of these resources needed to get into as we completed some of the qualifications you know we needed to get in front of inventory builds and some of the demand for that so so I don't know if I answered your question entirely but I think for us we see you know we're not guiding Q2 but we see it pretty similar today the Q1 with a modest increase in the second half that some of that ties into the internal sourcing for some of the qualifications on existing gas definitely yeah certainly from a resource perspective a fair bit of it actually you know when you know in the second half like we talked about we see foundry logic pretty strong through the year DRAM pretty stable through the year but remember our litho business has been down we see that coming back towards the second half silicon carbide for example it's been pretty muted since the first half of 24 we see that starting to materialize again towards the second hand. So there's other things and share gains we've earned this year that'll help us in the back half of the year.

Okay. And this is a little tricky, but if you did see upside materialized from etching deposition, and let's say it's on more legacy gas panel designs, how are you thinking about that impact on sort of the sequential gross margin progression through the year? Or do you think some of these, some of your other margin initiatives can sort of help to balance that out as well as maybe seeing improvement in machine component business as well.

Yeah, what I would tell you is that if our mix goes heavier to gas panels, which I think is your question, if there's more upside to that than some of the other stuff, it would have a bit of a muting on the percentage of gross margin. Having said that, we're starting to get to the stage where we've got kind of, you know, we're utilizing our overheads and all that much more efficiently because we do have capacity in place that can support numbers well about this right from the 22 timeframe that we were marching towards so I don't I don't think it'll be you know as big of an issue is as we've seen this year because we were still trying to qualify we hadn't got our internal supply really going too strongly and and now as we turn this corner I'm pretty happy with where we've gotten to on that so that should help us call it add a tailwind to the margin that would offset any of those product mix issues okay great thank you thank

you our next question comes from the line of Charles C with Needham and company please proceed Charles your line may be on muted on your end right I think we may have lost charles here i'll go on to the next question our next question comes from the line of chris sankar with td cowan please proceed yeah hi thanks for taking my question i told them first one jeff you know last quarter you were very bullish on man recovering kind of

curious how to think about your nan shipments in december versus september how do you think about it in March versus December and the cadence of the rest of the year I would tell you that but one is it wasn't a huge part of our of our revenue you know obviously we're starting off a pretty low going but it was a pretty healthy uptick in the fourth quarter a reasonably similar level into the first quarter which I would expect would probably continue into the second quarter today i would tell you that visibility for us now is probably you know gone from three months really strong to four four maybe five so um that's kind of how i would call it at this stage given

our visibility got it got it okay that's helpful and then um you know when i look at your european semi-cap customers obviously you have two large ones one is the little one is the epi i'm kind of curious on the epi customer in uh europe how are you seeing the revenues trend because i remember that was one of the fastest growing do you think they could be a third largest or a 10 percent plus customer this year or do you think it's still small i think they're not not going to crest 10 i would tell you that they've done a terrific job we've uh we've expanded our share beyond epi which has helped us kind of grow market share in that particular customer

And so, but I don't think it'll press, but we do see it growing nicely in 2025 from 2024.

Got you. And then just one final question for Greg. I think the question came up earlier. I was just trying to figure out, can you just say last year to this year, what is exactly, how many basis points improvement in gross margin is coming from the proprietary gas That's given up a lot of information.

Let's just say it's a pretty large component of the gross margin accretion. Obviously, volume helps us year over year and just not having some of these excursions that we incurred in 2024. But I would say it's probably one of the largest of our accretion activities that we have year over year.

Got you. Thanks, Jeff. Thanks, Dave.

You bet.

Thank you. Our next question comes from the line of Tom Diffley with DA Davidson. Please proceed.

Yeah, good afternoon. Thank you for a few questions. So, Jeff, you know, most people now expect the WFE market to grow kind of mid-single digits this year. Your large OEM customers, because they're more etch-and-depth related, are growing above that. But at this point, can you say whether or not you believe you'll grow faster than your OEN customers?

I would say they're – obviously, we think Devin, actually, as you indicated, is going to outgrow Total WFE. And I think as we look at our customers, based on what you guys see, I won't talk specifically other than some of the analyst estimates, is that they will outgrow it. And we think we can outgrow that just a bit more. Yep.

Okay. That's helpful. And then when people are talking about the NAND market and how NAND is recovering this year, and that's great news, but you maybe put into perspective where NAND is versus the other markets and how maybe over the next couple years, there's quite a bit more growth than just this year left in NAND.

Yeah, I mean, like, I guess when we look at what we're doing as a company, we're kind of seeing it go from 5-ish percent of our revenue to about 7% of our revenue, which is actually sizable as our revenue grows, too. But it's still not getting to the size of what we think VRAM will be, and certainly not Foundry Logic. But we think for the last couple of years, memory has been about 25%, DRAM and NAND. We see that getting larger this year as a percentage of our revenue, certainly.

And then maybe a quick one for Greg as well. When you look at the cost that you've layered in, the extra employees you've layered in past you over the last couple of months, and right now you have revenue maybe going up to 255 in the first quarter what is the revenue capabilities of your current infrastructure so of our how much revenue yeah yeah just you know with your current installed base of both employees and you know physical footprint how much revenue could you process at this point without full Yeah, from a facility point of view, clean rooms, all that capacity, it's well north of 400, right?

And today we try and mirror our headcount being added as close to the demand profile. What you guys see is external revenue. We have a view of what we're cutting in and components and stuff that adds to that. But we're still, I would say, well below that 400 plus capacity. So it's really people dependent right now. I would say once we add The bulk of the resources that we're seeing in Q1 and if we have a modest back half It will be very little incremental people. We can probably do it with overtime and things like that All right, maybe one last quick question.

Do you have any components that you've processed?

Flying around in space right now yes of course we do obviously we have we have some business with SpaceX and so most of what we built for them goes up and doesn't come back thank you thank you our next question comes from the line of Christian swab with the Craig Hallam group please proceed great thanks I just most my question has been answered I just have a question on gross margins clarity did

you guys talk about being gross margins being greater than 16% as you exited the year or did you say that gross margin would be greater than 16% for calendar 25 I don't know if I heard that right I think we've kind of all so exiting exit in the year on a run rate north of 16% and then full year at that 16%. And then what do you think, you know, optimal gross margins with increased proprietary products are, you know, as maybe as we look to 26 if, let's say, WFP goes up again, you know, how good could gross margins get?

Well, what I would tell you is our model today is 19 to 20, and I think, you know, in general, the direction we're getting in communications is that 26 will be a stronger year than 25 from a growth perspective. I would certainly think, given where we're at, cutting in, certainly our passive products are really making good progress. even with those I think we can get pretty close to that in 2026 if the quarterly run rates kind of get up and up over maybe 300 at least because we need to have that to absorb some of our infrastructure no other questions thank you you bet Christian thank you our next question comes from the line of Edward Yang with Oppenheimer please proceed Jeff hi Greg thanks for taking my question just on your new products progress the gas panel deliveries that you had in 24 I think you had specified at 50 was that was that consistent with your expectation I think last quarter years targeting something around 55 yeah I said more than 50 so yeah it was it was pretty much aligned you always get a few movements here and there but we came in just about where we thought we would be and so we got most of these evaluations are active at device customers now and so at that stage our customers are managing that process and then unfortunately we haven't had any closed yet but we're optimistic that those will happen in the early part of 2025 certainly in the first half okay so were these all still for qualifying or did you have any commercial shipments I would say that as we're shipping to their customer evaluations we would call them commercial shipments I mean they're they're designed they're putting them on a tool there may be the first half of those or less or something we're probably what you would call kind of evaluations at our customers that are putting them onto their tools for the first time but once they make it to a customer we kind of treat them like a commercial shipment and I would tell you that the that is a much smaller component of our internally supplied components that's a bigger number so we're still in the early innings of the fully integrated new gas box got it and you commented on this in the January presentation but you still see no incremental impact from the export controls?

And do you have any preliminary thoughts on tariffs?

Yeah, I was glad to see them delayed for 30 days on tariffs. The rules were, just to be clear, the rules were very, to me, ambiguous. Most of Mexico is where we would have felt that we have very little that we procure out of China anymore. So any inbound tariffs from China are de minimis for us. It's mostly around Mexico. Most of what we build there comes from the U.S. So we were not very clear yet on what that is going to be. Having said that, I don't know where that will end up. I'm sure the rules will start to get more clarified. But it certainly moves into our cost plus gas box business. It gets passed forward, okay? And then the other question was the China export. I think all that's been baked into our visibility that we have. There's been no other downtake. Obviously, some customers have talked about the overall impact of their business, which has already been incorporated in any outlook we've provided.

Thanks a lot.

Thank you. There are no further questions at this time, I'd like to pass the call back over to Jeff Andresen for closing remarks.

I want to thank you for joining us on our call this afternoon. I'd like to thank our employees, suppliers, customers, and investors for their ongoing dedication and support. We look forward to our next quarterly update in early May for our Q1 earnings call. In the meantime, feel free to reach out to Claire directly if you'd like a follow-up with us. Operator, that concludes our call.