Sheri Brumm - VP of Finance Casey Eichler - CFO Clarence Granger - Chairman and CEO

Edwin Mok - Needham & Company Patrick Ho - Stifel, Nicolaus Dick Ryan - Dougherty & Company

Good afternoon. My name is Jennifer and I will be your conference operator today. At this time, I would like to welcome everyone to the Ultra Clean Technology Fourth Quarter and Fiscal Year 2013 Financial Results Conference Call. All lines have been placed on mute to prevent any background’s noise. After the speakers’ remarks there will be a question-and-answer session. (Operator Instructions) Joining us today is Mr. Casey Eichler, Chief Financial Officer; Mr. Clarence Granger, Chairman and Chief Executive Officer; and Ms. Sheri Brumm, Vice President of Finance. Ms. Sheri Brumm, you may begin the conference.

Thank you. Welcome to our fourth quarter and fiscal year 2013 financial results conference call. Presenting today are Clarence Granger, Ultra Clean's Chairman and Chief Executive Officer; and Casey Eichler, Ultra Clean's Chief Financial Officer. Casey will begin by presenting the financial results for our fourth quarter and fiscal year 2013 and Clarence will follow with some remarks about the business. A few moments ago, we issued a press release reporting financial results for the fourth quarter and fiscal year 2013 ended December 27, 2013. The press release can be accessed from the investor relations section of Ultra Clean's website, along with the information for the tape delay and replay of the live webcast at uct.com. Together with our recently issued press release, this conference call enables the Company to comply with the SEC regulations for fair disclosure. Therefore, investors should accept the contents of this call as the Company's official guidance for the first quarter of fiscal 2014. Investors should note that only the CEO and CFO are authorized to provide Company guidance. If at any time after this call we communicate any material changes in guidance, it is our intent that such updates will be done officially via public forum, such as a press release or publicly announced conference call. The matters that we discuss today include forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995, related to matters including our future financial performance, new product orders and shipments and industry growth. Investors are cautioned that forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those projected in the forward-looking statements. Some of those risks and uncertainties are detailed in our filings with the Securities and Exchange Commission. The Company disclaims any obligation to publicly update or revise any such forward-looking statements or to reflect events or circumstances that occur after this call. Now here is Casey to present the fourth quarter and fiscal 2013 results.

Thank you, Sheri. Revenue for the fourth quarter was 126.3 million, an increase of approximately 17.8% from the prior quarter and an increase of 40.2% when compared to the same period a year ago. For fiscal year 2013 revenue was 444 million compared to 403.4 million in fiscal year 2012, an increase of 10% year-over-year. Semiconductor revenue for the fourth quarter was 118.3 million, an increase of 24.8% from the prior quarter and non-semiconductor revenue was 7.9 million, a decrease of 36% when compared to the third quarter. Semiconductor revenue was 94% of total revenue for the quarter and 89% for fiscal 2013. Revenue outside of the U.S. was 29% in the quarter compared to 33% in the prior quarter and 29% for fiscal 2013. Three customers had revenues over 10% for the quarter. Gas delivery systems represented 64% of our revenue for the fourth quarter. Gross margin for the fourth quarter increased to 17.1% compared to 14.8% in the third quarter. For fiscal year 2013, gross margin was 15.2% compared to 13.8% in fiscal year 2012. This is our best gross margin achievement as a public company and the first time we have been over 15% on an annual basis. The credit for this significant accomplishment is shared by the entire team at UCT and the result of commitment and hard work. We continue to believe that 15% to 18% gross margin is an appropriate margin target for our business. Operating expenses were 11.8 million or a 9.3%, excluding amortization of intangibles as compared to 10.9 million or 10.2% in Q3. Our operating expenses as a percentage of revenue will be up slightly in the first quarter of 2014, due to an increase in outside services cost and payroll taxes. We continue to work on driving our operating expenses…

Thanks, Casey. During the fourth quarter of 2014, we continue to see a recovery in the semiconductor sector of our business with an increase in semiconductor revenue of nearly 25% quarter-over-quarter. At revenue of $126.3 million and gross margin of 17.1% for the quarter, we achieved revenue within our updated guidance range of $125 million to $127 million and slightly exceeded our guidance for gross margin of 16.5% to 17%. As Casey pointed out, this is the highest quarterly gross margin that UCT has achieved in our nearly 10 years as a public traded company and has been the combination of an extensive effort by our entire operations team. I am extremely pleased with this result. Also as previously stated, our revenue for Q4 was $126.3 million and our adjusted earnings per share was $0.26, excluding amortization charges. On our previous earnings calls, we had guided to Q4 adjusted earnings per share excluding amortization charges of $0.18 to $0.22 and revenue of $120 million to $125 million. We were excited that we were able to achieve revenue gross margin and earnings per share all above our guidance range for the quarter. I’ll now review highlights of our activities for the fourth quarter. The major accomplishment for the quarter was our gross margin achievement. Multiple factors have been favorably influencing this trend for some time, improved operational efficiency, further integration of AIT into UCT, higher revenues from our Asian factories and overall increase in revenues all contributed to this record. Our operational efficiency has improved in the areas of output per employee, increased inventory control and strengthening of our supply chain management organization. The integration of AIT continues with additional new business opportunities in Asia related to AIT. Utilization of AIT for manufacturing frames and further combination of best manufacturing practices.…

and:

(Operator Instructions) And your first question comes from the line of Edwin Mok with Needham & Company. Edwin Mok - Needham & Company: Thanks for taking my question, congratulation for a great quarter.

Thank you, Edwin. Edwin Mok - Needham & Company: You’re welcome, so first question I have actually it’s less -- going to the non-semi side. If I look at the December quarter, it looks like it dropped a lot and in the first quarter you guys are guiding for a pretty meaningful bounce back. Does it just come from the lumpiness of this one customer that you mentioned the one that you’ve raised the full year guidance between over $20 million or is it other customer you also see kind of these lumpy orders in the fourth quarter?

We saw some declines in some of our medical business that we expect to recover in Q4 that we expect to recover in Q1. So that along we’d seen some decline from one of our other smaller customers DWFritz and we’re seeing some of that coming back. But the bulk of it is the medical and the crystal growth opportunities that we’ve described. Edwin Mok - Needham & Company: I see, so basically that over $20 million order you expect to start ramping pretty meaningfully in the first quarter, because I think your guidance is almost both doubling your revenue?

That is correct. It should be meaningful in Q1. Edwin Mok - Needham & Company: I see. And then if I back out your 15% to 18% coming from non-semi, I arrive at a number that if I think the midpoint to little bit lower than the first quarter in terms of the semi side of business. Can you give some color on that, what’s the trend there obviously what’s really strong on December quarter maybe some digestion and do you have any visibility beyond the March quarter?

I would say that semi is probably a little bit flat and relatively flat to slightly down in Q1 but not hugely so certainly higher than in Q3. So overall I would say semi still looks very strong for us some analysts had said that there might be a slight air pocket in Q2 that one shock me, but overall our semi demand looks pretty strong through Q2. Edwin Mok - Needham & Company: I see, that sounds great. And then on the semi side any kind of incremental share gain that you guys can point to and obviously one of your largest customer are doing a huge acquisition. How do you kind of think that will play out for you guys beyond I guess after they got the deal done?

Yes. And so you said one of our largest customers is doing a huge acquisition I think that’s pretty obvious that you must be referring to AMAT & TEL. Edwin Mok - Needham & Company: Yes.

That is I would not anticipate any near-term impact associated with that. I am sure there is going to be a long-term digestion associated with that. We hope that that could lead to some eventual new business opportunities. We have a strong historical relationship with AMAT. They’ve been one of our greater than 10% customers for many, many years now. TEL is not a significant customer to UCT, so who knows in the long-term there could be some opportunity there. We certainly aren’t counting on anything for 2014. But we have seen stability in terms of the overall structure of the customers related business activities for a while there, there was a lot of concerns as companies combined what the impact would be on pricing pressure and other activities and that now seems to have stabilized. So, it feels like we’re in a pretty good situation from our existing customers and hopefully there is some opportunity from new customers or new customer potential on the semiconductor side as some of those combinations occur. Edwin Mok - Needham & Company: Great. That’s really good color. On the gross margins front with the mix shifting towards non-semi in the first quarter, do you expect gross margin to remain in this pretty elevated level that you did on the fourth quarter? And as you mentioned that your Asian revenue while increased the mix actually declined this quarter, right. Do you see that also have a impact on your gross margin as you look at the first quarter?

Sure, Edwin. All of those play into it as you know. It isn’t necessarily a mix between semi and non-semi. We tend to get the same general margin profile from all of our customers whether it be semi or non-semi, but even within customers there is product mix and then as you mentioned there is mix between more low cost region and another regions and so. All of that plays into the margin. I don’t see an unusual pressure one way or the other. Just like I think I made the comments earlier, that there wasn’t anything that was unusual in the quarter that it was kind of a one-time thing. Mix is always an issue as you know and sometimes it works for you and sometimes it can work against you a little bit. But there is nothing unusual that I see in the current quarter or the quarter that we just finished. Edwin Mok - Needham & Company: Great. One last question, I’ll go away. On the expense side, do you see a need to increase expense in the current quarter or the current year as your business seems to be growing pretty well this year?

Certainly we’re going to have to from a direct labor standpoint support the volume of business that we have and so that will flex depending on what we see in front of us. Kind of from an OpEx basis I think again I made the comment that, Q1 always has kind of the ramp-up of payroll taxes after the first of the year and outside service fees, most of the audit et cetera and this isn’t kind of hit in Q1. So you always have a little bit of happening, and it’s not unusual to this year. It’s just kind of the way it’s treated. So I think although I referenced, I think the OpEx will be up a little bit, it’s not necessarily a trend. And I think we’ve got the factories we need, the people we need and the infrastructure we need to continue to handle the increased revenue that we’ve been talking about. Edwin Mok - Needham & Company: Great. That’s all I have. Thank you.

You’re welcome.

And your next question comes from the line of Patrick Ho with Stifel, Nicolaus.

Thank you and congratulations as well quarter and the year.

Thank you, Patrick.

First off, in terms of the adjacent markets maybe just looking big picture for 2014 as a whole, at this point of the game which is the marketplaces that you -- or non-semi markets that you participated, do you see being the biggest contributors of getting you to that 15 to 18 percentage for 2014?

Well, Patrick 15% to 18% gross margin, is that what you’re talking about -- or 15% to 18% non-semiconductor?

The non-semiconductor, I’m sorry.

Okay, so the two big -- we do expect medical to be a key factor in that, probably the largest factor and then there is growth that we’ve got and the crystal growth customer. I think those two together along with some other smaller opportunities we’ve talked about, DWFritz, in the $5 million to $10 million kind of range. And we’ve got a couple other smaller players that we can’t name that are kind of in that range. I think those are probably the primary candidates; the medical, the crystal growth, and some of these other small industrial consumer products customers.

Great. Obviously the gross margin improvements have been significant over the past couple of cycles. Casey, maybe remind us from the last cycle when you started making these improvements, what kind of lessons have you learned or drawn from that it has helped you to flex labor and capacity this time around to help you maintain both gross margins at these higher levels as well as on the OpEx line?

Yes, I think certainly that we put in some different disciplines around purchasing. We put in global supply chain that we’ve talked about in the past. We’ve put in certain inventory discipline around our business, it’s been very helpful. Probably the key thing is over the last year to two years we have strengthened the team and the team has grown substantially in their ability and their maturity and their experience in dealing with the ramp, and then as you know the ups and downs of this business. So, it really is a broad team effort where I think we’ve got the bench strength across the board that we’ve never had as a Company before. And then we’ve done some things like building up the global supply chain, doing different inventory techniques and operational techniques that have been kind of added to that. But as you know in almost any business it all starts with good people and getting good people in the right place, and I really feel that we’re about as bench strength and deployed appropriately as we’ve never been.

Also I’d add Patrick, this is Clarence, that the integration with AIT has been very helpful. So, they’ve added some additional customers for us in Asia, but they’ve also added additional capabilities in frame manufacturing and we’re starting to integrate that into some of the UCT applications. And we’re also utilizing some of the supply chain expertise in the UCT side, we’ve helped drive down our overall cost associated with AIT as well. So, overall the AIT combination with UCT has worked out very well for us.

Great, final question from me on, in terms of the semi, you mentioned some of the increasing capital intensity in the process segments that you participate in, most notably etching deposition. Aside from just seeing the increasing capital intensity do you see additional business opportunities with those customers, whether it’s broader subsystems, gas delivery systems, particularly as they go to next generation systems serving those customer needs?

Yes, I don’t think we’re going to see anything specific, it does have more complexity the gas delivery subsystems and some of the other process modules we make and in some cases AIT even makes complete tools for some of our customers. So, some of those are adding more complexity to those tools and hence a little bit more revenue for UCT. But we would expect to be a beneficiary as those tools increase their complexity. We’re also looking into expanding into other areas, I’ve mentioned before that we’re now doing atmospheric robots for some of our semiconductor customers, so that’s bringing us some new opportunities as well.

Great. Thank you very much.

You’re welcome Patrick.

(Operator Instructions) And our next question is from the line of Dick Ryan with Dougherty. Dick Ryan - Dougherty & Company: Thank you. Good job on the quarter and strong guidance for Q1 guys. So I might have missed your comments Clarence on Gino’s departure, did you say he at a position that’s going to be filled or could you talk a little bit more about what his efforts were, were they more on the operating side or new business development side?

No, Gino’s efforts were -- well Gino did have both groups reporting to him, the operations groups and the new business development group. But I would say Gino’s greatest strengths have historically been on the operation side and he has been very effective at that. In terms of how we’re going to structure moving forward, we will initially look to internally structure that and then consider what we want to do longer term, but we’ve now got a very, very strong internal team in place, partly associated with Gino’s activities and recruits and we’re very, very pleased with our operational team. So we’re not looking at making any major changes, we’re looking at finding ways to continue what we’ve got in place and continue the extrapolation of that. Dick Ryan - Dougherty & Company: Okay, thanks. And your new business development team, I think earlier in your comments you mentioned you also saw some strength on an improving market for a flat panel, can you talk a little bit about that and can you give us a sense of how the new business pipeline has changed over the last quarter or two quarters, any quantifiable look at that pipeline.

Sure, first of all with regard to the flat panel, that’s not really new to us, we’ve had a major flat panel customer for many years so it’s just a question of their business does and we already have a very strong position with them so as they grow we will see growth in the flat panel. That looks to be a good market for us in 2014 and so we are seeing growth in that sector, and so we would expect to see that continue to grow, but the new business development team that we’re talking about, we have an existing accounts teams and those teams are focused on how they can grow business within existing accounts. But for the first time we’ve got a completely new business development team that’s totally focused on going after opportunities outside of our traditional space, outside of semiconductor and that team is a totally separate team, roughly six employees, six account managers in that team and driving new business opportunities and they’re the ones that are bringing in these DWFritz’s that we talked about and the crystal growth opportunities, and we think there’s more out there. They’re also going after new medical opportunities which we see as a good growth area for us as well. Dick Ryan - Dougherty & Company: Okay, thank you.

You’re welcome, Dick.

(Operator Instructions) And we have no further questions in queue at this time.

Great, well I appreciate it, appreciate the support and interest in the Company and feel free to contact us if you have any other further questions. Thanks a lot, bye-bye.

Thank you. This does conclude today’s conference call and you may now disconnect.