Ichor Holdings Ltd
NASDAQ:ICHR

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Earnings Call Analysis

Q4-2023 Analysis
Ichor Holdings Ltd

Ichor Reports Solid Q4 Growth, Bright 2025 Outlook

Ichor's Q4 2023 revenues hit $203 million, a 3% sequential increase. Efforts to trim inventory generated $35 million in free cash flow, aiding a significant $32 million debt reduction. Despite mix shifts tempering gross margins, the gas panel segment suggested the cycle's upturn. Key market expansions—particularly in EUV lithography and silicon carbide gas panels—fuel optimism. Silicon carbide revenue impact is projected to double in 3-4 years, boosting overall growth. Proprietary developments, especially in gas panel design, promise to push gross margins over 20%. Looking forward, steady revenues of $200 million are expected through H1 2024, with a ramp-up in H2, setting the stage for a leap towards $250-300 million-plus in 2025.

Navigating Through Demand Stability and Operating Challenges

In the context of a stable demand environment, the company reported fourth-quarter revenues at $203 million, which aligned with the upper range of their expectations and represented sequential growth of 3%. This growth largely stemmed from strategic inventory reductions intended to strengthen free cash flow and reduce debt. However, this decision impacted Q4's gross margin negatively due to the products being sold with no margin, alongside less favorable revenue mix and minor cost headwinds. This move enabled the company to achieve breakeven operating profits while lowering interest expenses as they reduced their debt by $32 million, and still adding $4 million to their cash reserves.

Strategic Optimism with a Long-term Vision

The outlook for future growth is positive with diversifying market exposure beyond the 25% memory WFE in 2023. Growth is expected in emerging sectors such as EUV lithography and silicon carbide applications for electronic vehicles (EVs), highlighted by a prominent new customer addition and improved market positioning. The silicon carbide market alone could double in size in the next 3-4 years, opening more avenues for revenue growth. Additionally, the company's evolving technology offerings, new design wins, and an ongoing emphasis on proprietary products like a next-generation gas panel are planned to significantly lift gross margins, targeting an expansion beyond the current 20% level.

Financial Indicators and Future Expectations

While Q4 exhibited a lower-than-expected gross margin of 10.4%, which was balanced by stable operating expenses and a net loss per share of $0.06, the company anticipates margin improvements throughout 2024. The first quarter of 2024 is projected to show gross margins improving to a range of 13% to 13.5%. With expected revenues of $190 million to $210 million in Q1, and aims to maintain operating expenses at around $22.3 million, the company is positioning itself for a stronger financial standing. Interest expenses should further decline, and a non-GAAP effective tax rate of 5% for the full year is anticipated, despite no tax expense or benefit expected for Q1.

Laying Foundations for Margin Expansion in 2025

Despite current pressures, the company is projecting a substantial recovery of its components business from mid- to high single digits to a more robust 20-25% of the business mix, which would contribute to achieving a gross margin goal of approximately 20%. This recovery, coupled with new design wins and the launch of new products, is expected to advance in late 2024, with material revenue implications anticipated for the following year. The strategy focuses on fostering growth in areas such as silicon carbide, advanced packaging, and etch and deposition techniques, paving the path towards a robust gross margin expansion, targeted to be around 17% when revenues exceed $225 million by Q4.

Earnings Call Transcript

Earnings Call Transcript
2023-Q4

from 0
Operator

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

C
Claire McAdams
executive

Thank you, operator. Good afternoon, and thank you for joining today's fourth quarter 2023 conference call. As you read our earnings press release and as you listen to this conference call, please recognize that both contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, and which could cause actual results to differ materially from such statements.

These risks and uncertainties include those spelled out in our earnings press release, those described in our annual report on Form 10-K for fiscal 2022 and those described in subsequent filings with the SEC. You should consider all forward-looking statements in light of those and other risks and uncertainties.

Additionally, we will be providing certain non-GAAP financial measures during this conference call. Our earnings press release in the financial supplement posted to our IR 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 Greg Swyt, our CFO. Jeff will begin with an update on our business, and then Greg will provide additional details about our results and guidance. After the prepared remarks, we will open the line for questions. I'll now turn over the call to Jeff Andreson. Jeff?

J
Jeffrey Andreson
executive

Thank you, Claire, and welcome to our Q4 earnings call. Our fourth quarter revenues came in at the upper end of our expectations at $203 million. This equates to a sequential growth of 3% from Q3 within an otherwise stable demand environment. I'd like to provide some color on our revenue movements within the fourth quarter. First, the majority of the upside in revenue growth above the midpoint of guidance was essentially passed through. This is because during the quarter, we elected to take the opportunity to reduce inventory levels in order to drive strong free cash flow generation, which in turn was used to reduce our debt levels and ongoing interest expenses.

We sold the inventory at 0 margin. And so while this decision carries a number of benefits for our ongoing financial performance, it did have a negative impact on our Q4 gross margin. Further, our Q4 revenue forecast had incorporated expectations of improved mix compared to Q3, but instead, our revenue mix actually became less favorable and this had the largest impact on our lower-than-expected gross margin. Our build-to-print gas panel business, which is our lowest margin business improved during the quarter to drive both the remaining upside to revenue as well as offset the decrease in our weldment business as our customers continue to focus on reducing inventory levels.

While this unfavorable mix shift did have an impact on our gross margin, strength in the gas panel segment of the business is a very good indicator that we are coming off the bottom of the cycle. So in total, we witnessed a temporary low in gross margin performance in Q4 and through a combination of unfavorable product and customer mix, the impact of inventory sales at costs and, to a lesser degree, continued E&O headwinds and slightly higher manufacturing costs. With OpEx just below the midpoint of guidance, operating profit was roughly breakeven. Interest expense came down quarter-over-quarter given our decision to deploy free cash flow towards reducing our debt levels.

During Q4, we generated $35 million in free cash flow and reduced our debt levels by $32 million, while still adding $4 million to our cash balance. Given the lower profit versus forecast, with the slightly lower OpEx and interest expense and a higher net tax benefit, the net loss per share was $0.06.

Now I'll turn to our outlook. There are many reasons to be optimistic about the growth ahead. First, we estimate that our exposure to memory WFE declined to just about 25% in 2023, which means we are well positioned to outperform industry growth as memory spending improved, in particular, within the NAND segment. Next, as our memory exposure has declined over the last few years, we have increased our exposure to a number of growing market segments of WFE, such as EUV lithography and epi gas panels for silicon carbide. As a result of our leadership in providing gas delivery for the EUV market, we added ASML as a third 10% customer for fiscal 2023.

We anticipate that our EUV sales will continue to expand in line with unit shipment growth in the years to come. We are also pursuing opportunities to expand our exposure to the overall lithography market and believe we are well positioned to benefit from next-generation platforms such as High-NA as well as win share in additional areas of lithography. We continue to shift production volume gas panels for the silicon carbide market and have been qualified on the next-generation epi systems.

Our design wins for epi applications resulted in strong growth from our fourth largest customer in 2023. And as the applications and market opportunities continue to grow in support of EV manufacturing in the years to come, we anticipate our silicon carbide exposure will continue to be a tailwind to our revenue growth. We estimate the silicon carbide market for gas delivery to be around $60 million in 2023 and expect it to double in the next 3 to 4 years. We are also seeing the emergence of new technology drivers and process inflections that require an increasing use of applications that are more highly dependent on the accuracy and repeatability of the gas delivery system. These include the growing use of certain etch and deposition techniques within advanced logic architectures, 3D DRAM and advanced packaging.

We recently refreshed our investor presentation to reflect the increased use of certain of these growing applications such as selective etch, ALD, deep silicon etch and more. We have a role providing fluid delivery to all of these applications as EUV adoption continues to proliferate across multiple device types. Our process tool customers are witnessing the need for more etch and deposition steps to help create smooth patterns and reduce line with roughness. Additionally, the growing importance of advanced packaging has revealed process challenges that require better film stress management, improved defectivity, enhance uniformly, increased material selectivity, all of which are enabled by more precise control of gas and fluid delivery. Outside of semiconductor, specifically for our IMG business, we are also driving cross-selling opportunities at our historical gas panel customers as well as opportunities to offer Ichor's components and capabilities to IMG's customer base in medical, aerospace and defense.

As these new technologies and drivers evolve and proliferate, we see opportunities for Ichor to expand our revenue potential and continue to add breadth and diversification to our customer base. All of these factors build a strong story for Ichor's revenue growth as the industry recovery accelerates. But it's our proprietary products, including our next-generation gas panel that we are most excited about as our key initiative to drive overall gross margin expansion within our business.

We have been qualified on 3 applications and are now supporting our customers' evaluation tools that are shipping to a device manufacturer. Our latest investor presentation includes a slight adjustment to our target model to reflect the higher level of investments we are making in R&D in order to develop additional proprietary products, which we believe in turn can drive our gross margin north of 20%. We are focused on the development of proprietary products that support our customers' long-term technology roadmaps. These periods of lower demand provide both Ichor and our customers the ability to work on new qualifications. We continue to make very good progress in our key focus areas. These include our next-generation gas panel and qualifications of our proprietary machine components. I'm very pleased with the progress of our new gas panel as we are now moving into qualifications at the device manufacturers.

We continue to work with multiple customers and expect to add additional customer evaluations over the course of 2024. Our new gas panel contains about 75% proprietary Ichor content compared to around 10% today, which will drive significant expansion of our gross margin profile. In the next several months, we expect to ship gas panels that will support 5 additional systems for end-user customer tool evaluations. This is a major milestone for the program. Our best estimate of when production systems will begin is late 2024. In our proprietary machine components, we continue to win new qualifications across our customer base. The ramp is taking longer as we work through the inventory on hand, but we are qualified and expect this to positively impact our first quarter gross margin and continue over the course of the year.

In summary, I'll remind everyone here today that our revenues tend to recover more sharply when industry spending rebounds. Furthermore, our business model and financial profile tend to generate significant operating leverage as revenues grow. Current industry expectations are that the business environment for WFE will persist at these levels through the first half of 2024, and given the modest mid-single-digit growth outlook for the full year, 2024 WFE will likely be more weighted towards the second half. Given our current visibility, we also expect our revenue run rate to continue around the $200 million level through the first half followed by the beginning of a revenue ramp in the second half. As we look ahead to an expected strong recovery year in 2025, we look forward to ramping revenues back towards the $250 million to $300 million-plus level in 2025.

We expect to be able to deliver significant earnings growth as revenue volumes increase, which is why we continue to make critical investments in our business in support of our future growth.

With that, I'll turn it over to Greg to recap our Q4 results and provide further details around our Q1 financial outlook. Greg?

G
Greg Swyt
executive

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 expense, amortization of acquired intangible assets, nonrecurring charges and discrete tax items and adjustments. There is a useful financial supplement available on 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.

In the fourth quarter, our revenues were $203 million at the upper end of guidance and up 3% from the prior quarter. With customer demand remaining relatively stable from Q3 levels, the majority of upside in revenues compared to the midpoint of guidance reflected pass-through inventory sales at 0 margin, as Jeff discussed. With the less favorable product and customer mix, the impact of the sale of our inventory at no margin and some continued E&O and slightly higher manufacturing cost headwinds, our gross margin was 10.4%, which was well below our expectations. We anticipate a significant improvement in margins as we move through 2024.

Q4 operating expenses were slightly lower than Q3 at $21.2 million and our operating income for Q4 was roughly breakeven. Our net interest expense was $4.7 million, and our non-GAAP net income tax benefit exceeded our forecast at $2.8 million. The resulting net loss per share was $0.06.

Now turning to the balance sheet. At the end of the quarter, our cash and equivalents totaled $80 million, a $4 million increase from Q3. We generated $37.6 million in cash flow from operations and after deducting $2.3 million of capital expenditures, our free cash flow was $35.3 million. Free cash flow for the quarter was particularly strong given the $37 million sequential decrease in accounts receivable, which drove DSOs to only 30 days. Inventory decreased to $21 million during the quarter to end the year at $246 million, and inventory turns increased to 2.8.

During the quarter, we paid down $31.2 million of debt and our net debt coverage ratio currently stands at 3.4x. Now let's discuss our guidance for the first quarter of 2024. With anticipated revenues in the range of $190 million to $210 million, we expect our Q1 gross margins will improve to a range of 13% to 13.5%. At this time, we expect Q1 operating expenses to be approximately $22.3 million. The increase reflects the seasonal impact of payroll taxes resetting, audit fees and other variable compensation costs. As we move beyond Q1, we expect OpEx to remain at a similar level as we are making targeted investments in IT and R&D.

Net interest expense for Q1 is expected to be approximately $4.3 million. Looking beyond Q1, we expect our net interest expense to continue to decline as a result of our focused efforts on reducing our debt levels as well as an anticipated favorable reduction in our interest rate later in 2024. For modeling purposes, you should model interest expense for 2024 to be approximately $16 million. We do not expect to record a tax expense or benefit for Q1. For the full year, we are forecasting a non-GAAP effective tax rate of 5%.

Operator, we are ready to take questions. Please open the line.

Operator

[Operator Instructions] Our first question comes from Craig Ellis with B. Riley Securities.

C
Craig Ellis
analyst

I wanted to start off just by clarifying the gross margin line item in the fourth quarter and then understanding how those dynamics played out through 2024. So Greg, can you just quantify the specific factors that were at play that caused gross margin to decrease so significantly? And then just help us understand the arc of those -- of how those come out of the model as we look through 2024.

J
Jeffrey Andreson
executive

Craig, it's Jeff. I'll let Greg chime in at the back end. But I think given the magnitude of this. I think I'd like to kind of walk you through it. I think first of all, we elected to sell some inventory at cost. As we looked at our inventory in months of supply, we had some inventory that we were able to go ahead and sell. Have we built that, that piece would have generated about, say, $1 million of kind of incremental profit off the bottom. And so as that side of our business, really the depth of the component side has been down. This orders mix was primarily kind of a much lower level of wellness than we had seen before. So that mix offset by the gas panel mix was the largest driver.

So as we look forward, I think in the gross margin that we've talked about, we see the mix staying relatively stable and coming out of this. And as you kind of look into next year, all of the key initiatives that we've been driving around internal supply and developing new products that we can integrate into our gas panels are going to help us recover some of this stuff. We also will see some normalization of some of the inventory reserves that have been bigger than we've seen in the past as well. And what I would like you guys to leave with, and I'm sure this question will come up again is as we kind of recover the $225 million or higher, which is what we maybe see late in the fourth quarter or around the fourth quarter, that's kind of our outlook. At this time, we think we can get it back up to around 17%. So from 13% to 17%, you're going to see increases as we kind of go through the calendar year. Hope that answer your question?

C
Craig Ellis
analyst

Yes. And then I wanted to follow up on your comments on the new gas panel product. And I like the fact that you've got that much higher content there, and that's going to be a gross margin tailwind [ chip ]. As you start to ship that later this year, can you just help us understand how the mix of that newer product will feather in with all the existing product that's part of current customer programs right now. Say differently, how abruptly can that ramp to significant majority of gas panel mix?

J
Jeffrey Andreson
executive

Yes. Another good question. As we're working through these qualifications, the first 3 applications that we won are essentially, I'll call them market share gains. There are applications we haven't had before and going forward. So as we kind of look later in the year, I would say this year, we're probably going to see kind of low single digits of revenue start to happen. It's really in 2025 that these qualifications start to layer on and get qualified at multiple customers that will start to see the inflection. Having said that, Craig, a lot of the internal components that are in the gas panel that's fully configured with about 75% of our content. We can work on the -- I'll call them the legacy gas panels.

The gas panels today, there's a lot of components we can still get qualified on. There's valves, fittings, substrates, things like that, that are adding content, and that's the internal supply that I referred to. So it's going to start to happen during the year. We've already won the qualifications. They're moving a little slower because of kind of our inventory position and some of our on-order position. But there's -- we're going to see that as a piece that helps us in Q1, specifically and going forward. And those are measured in kind of tens of millions of dollars, too. So you'll see those first before we get to the fully integrated gas panels affect our gross margin in 2024.

Operator

Our next question is from Brian Chin with Stifel.

B
Brian Chin
analyst

Thanks for allowing us to ask a few questions. Maybe first just to kind of go back to the gross margin, just maybe to lay things out, maybe a little bit to gain a little clarity here. We are modeling, say, like 14% for Q4 and the non-GAAP is 10.4%. If the revenue upside was kind of zeroed out gross margin, that's still only maybe like 30 basis points. And so there's still several hundred basis points there to kind of understand. So is there a way you can reconcile sort of higher inventory reserves, worse mix, other elements there that kind of to get us to the delta?

J
Jeffrey Andreson
executive

Yes. I think when you look at the mix and its product and customer mix, I would say that was probably somewhere around 2/3 of the challenge. Obviously, the gas panel business, the build to print is, as I said on the prepared remarks, our lowest margin versus our higher-margin products that the mix didn't -- we didn't achieve the mix we set out at the beginning of the quarter. So the pass-through, think of that as kind of 50 basis points or $1 million. I think I did the math right. And then the other kind of headwinds between 13% and 14%, where we ended last quarter and where we wanted to be this quarter, is really a little bit higher E&O than we expected, but really the slower ramp of some of the internal supply parts, which will recover again in Q1. So I hope that adds enough granularity and color for you.

B
Brian Chin
analyst

It does. And maybe kind of an add-on to that, but I'll move my second question. In terms of the rationale for kind of doing that pass-through, was that -- I mean, is this sort of a prioritization of cash flow over P&L for that given quarter. That's kind of a follow-up to that. But then kind of tied into that. When I look at your customers' balance sheet, and you can definitely see their inventory is moving in the right direction. They still have maybe 2 quarters plus worth of inventory. But when you drill down into what the excess is of your products, either gas panels and finished goods and machine components and raw materials inventory. How severe is that excess? And is that part of what gives you confidence that this destock will basically be over in first half?

J
Jeffrey Andreson
executive

Good question. I think you got a couple of parts. So first, this decision that we made specifically was around parts where we saw the usage, the months of on hand to be well out beyond a year. And so we took advantage of that to generate cash pay down. And it did have a P&L hit. We would have had wait a while before we could consume that. So that was a little bit around time value and money and our ability to pay down some debt and the fact that it would have taken us a while.

So the second part of your question is really around what's our confidence that will be through kind of our customers burn down. I think it obviously varies by, I'll call it, kind of business segment within ours. I think in general, gas panels, they're done, right? Like most of this is going to be in the weldments and machine components side. I think it will carry to some degree through even this year. Our inventories are [ two way ] about half our peak year inventory turns. So we're clearly carrying excess inventory that we're looking forward to ensure that we can burn it down. So we see a path for how we get back to more normalized turns, but it may take just a little bit beyond the end of this year to get there.

Operator

Our next question is from Charles Shi with Needham & Company.

Y
Yu Shi
analyst

First off, congratulations on winning the Applied Materials Supplier award. I have a question, Jeff, about the '24 revenue progression, the way you kind of described almost feel like you're going to be run rating around $200 million for 2 quarters. I mean, until June and December, you think you can approach that $250 million, that's quite a bit of a step-up. Are you expecting September to be somewhere in between because -- the reason why I asked this is your -- one of your 2 largest customers, Lam Research recently talked about more of a moderate -- I mean, a modest, actually not moderate, modest recovery, but actually a little bit stronger close to the year and I almost feel like in Q3, they are expecting not so much of an uptick. Are you seeing a little bit of the earlier uptick in Q3. And I mean, it's kind of embedded in the way you described about a year. Any color for that?

J
Jeffrey Andreson
executive

Yes, yes, yes. Let me -- it's a good question, Charles, because maybe my comments during our -- at the beginning, we talked about specifically, we're looking forward to getting back to those kind of $250 million, $300 million. So this is really looking into 2025. Q4, I don't think is going to get to $250 million, just to be clear, that wasn't the intent of what I was trying to get across. I think it's going to be a little in that kind of $225 million to $230 million range, maybe as our visibility today. And then Q3, it will be somewhere in between. Keep in mind that we have -- we're -- because we're still kind of working through the inventory reduction, we're going to see a different profile as those are our longer lead time parts. So those will kind of lead any kind of gas panel and further kind of growth.

But again, I think 2025, I think the confidence with us and with our customers is that's going to be a pretty good growth year. So I would expect that some of that has to occur in the back half of our year to support the beginning of their years and their revenue. So I hope that kind of helps you kind of position where we kind of see our year going.

Y
Yu Shi
analyst

Got it. That's great color. Maybe the other question I have would be, I mean, I mean in between the 2 largest customers I think that the prior person ahead of me asked about the Lam Research still carrying a good amount of inventory. Applied Materials, it looks like their inventory level seems to be relatively okay. Do you see a differential in terms of your revenue coming from Lam versus Applied that this year as your revenue from Applied are slightly better from Lam? Or -- the reason why I asked this is I really just want to figure out where the upside of your revenue from the 2 largest customers could -- is more likely to come from which customers.

J
Jeffrey Andreson
executive

Good question. Probably some stuff, I can't specifically answer at a customer level. But certainly, our 2 largest customers had different profiles. And I would say largely around where they were positioned primarily in the memory market. I mean, we do know our largest customer at a very, very high level of market share in the 3D NAND. That recovery is something when that comes back, then you would actually probably see that side of our business accelerate faster than foundry logic. Having said that, foundry logic, we view and is remaining fairly strong into next year. We don't see a massive drop-off in China shipments, and we're not getting any of those signals from our customer base as well. So beyond that, I don't want to get too specific around customer profiles.

Operator

Our next question comes from the line of Krish Sankar with TD Cowen & Company.

R
Robert Mertens
analyst

This is Robert Mertens on the line on behalf of Krish. I guess just the first one is, if you had any additional color on the expectations for the component business this year. I know inventory levels have seemed to be a headwind. But if you seen any change over the last few months. And then on top of that, just sort of what the tailwinds from design win ramping would look like this year? Or if that's more of a calendar '25 story?

J
Jeffrey Andreson
executive

Good question. Maybe the way I would answer the component side of our business is we're seeing very similar outlooks quarter-over-quarter in the first half for machining. We would expect that starts to go. Weldments will probably run a little longer. They have, I think, a higher level of inventory in the value chain going forward. Our kind of the totality of our components business, if you kind of went back to the '21 timeframe, '22, somewhere in there, probably ran somewhere between 20% and 25% of our business, maybe a little closer to 25%. It's kind of running kind of mid- to high single digits today. So that's the gap in the mix that we need to recover and that will help us accelerate towards our ultimate goal, which is to get our gross margin up in around 20%, but that probably will occur in 2025 as we kind of compound our new design wins and the gas panel 2.0, the recovery of our component mix.

Now your other part of the question is how do we kind of size some of the wins we've already had. And I would probably just say it's kind of tens of millions of dollars of wins, and we expect a pretty significant uptick of those, and it's going to help us continue to drive our gross margin back to that 17% when we get kind of north of $225 million by the fourth quarter.

R
Robert Mertens
analyst

Got it. That's helpful. And then maybe just one more. I know you talked through the next-gen gas panels. I just want to make sure I heard correctly that with those evaluation systems and shipments, you were thinking maybe a low single-digit millions in the later half of this year. And then the more material revenues should be next year. Did I hear that correct?

J
Jeffrey Andreson
executive

You did hear that correct. I mean anything -- we're qualified and with success at customers, how fast they move if the market starts to accelerate, obviously, that number will improve, I would imagine.

Operator

Our next question is from David Duley with Steelhead Securities.

D
David Duley
analyst

I was wondering if you could elaborate just a little bit more on your silicon carbide opportunity. I think you have one customer now and is there a possibility to sign up new customers in the next few quarters? And are there other opportunities for you guys outside of epi in silicon carbide.

J
Jeffrey Andreson
executive

Thanks, Dave. Good question. So the answer is yes. I think there's still opportunity for us in the deposition side, call it, it might not be an epi like thing, but there are other companies out there doing other processes that we've had some initial discussions with very early stage. I think the bigger opportunity is around the implant side of the business. And those discussions are ongoing. I would say we've -- in particular, we won a little bit of weldment business, pretty small, but it's a foot in the door at one of the implant suppliers, and we're going to continue to drive that. And I think that's kind of where we would probably see kind of an inflection point beyond our initial customer that's doing the epi silicon carbide.

D
David Duley
analyst

Do you think you can win further epi customers because there's like, I think, 4 or 5 of those guys?

J
Jeffrey Andreson
executive

Well, I mean, I think there's kind of 3 in total that we're kind of looking at. And the answer is it's probably -- this year, if we start -- we're just starting the discussions late last year. We haven't really done any evaluations or gotten deep enough. So it's not out of the question, but it's probably 2025 revenue driver versus 2024. 2024 would have to be similar to our new gas box stuff. It's the beginning of the conversations of what we can do. And when we talk to our customers, they obviously see the breadth of what we can do as a company from gas panels, weldments, machining, and we can manage a lot of their supply chain. And I think that's how we in essence, quickly won the first application, which is now kind of multiple generations of tools moving forward with our initial customer.

D
David Duley
analyst

Now I guess the other question I had is, you talked about a second half ramp in your core business. Are your large OEM customers coming in and talking to you about getting ready for this ramp or it's just the typical, I'm just wondering if there's a little bit more than rolling forecast behind the excitement about the second half.

J
Jeffrey Andreson
executive

I would say it's maybe less about the rolling forecast and more about the conversations we're having in preparation of the growth that they see kind of coming out of Q4 and into 2025. So I think it's a very consistent message out of our top 4 customers.

D
David Duley
analyst

So they're telling you to get ready for a ramp in the back half?

J
Jeffrey Andreson
executive

Yes.

Operator

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Jeff Andreson for closing comments.

J
Jeffrey Andreson
executive

Thank you. As Charles kind of noted, today, we won an award from Applied Materials for a supplier excellence award in quality for 2023. This is quite an honor to be recognized by the company and the contributions we have made to our customer over the past year and looking forward to future years. So it's always great to see these awards occur. I want to really thank everybody for joining us on this call this quarter. I'd like to thank our employees, our suppliers, our customers, our shareholders, for their ongoing dedication and support as we continue to navigate this highly dynamic business environment. We look forward to updating you again on our Q1 earnings call scheduled for early May. Operator, that concludes our call.

Operator

Thank you. This concludes our call for today. You may disconnect your lines at this time, and we thank you for your participation.

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