Ichor Holdings, Ltd. (NASDAQ: ICHR) Q2 2025 Earnings | 08/05/2025

16 days ago

38:20

Inside Ticker

Earnings Calls

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Summary of Ichor Holdings Q2 2025 Earnings Call

Key Participants:

Jeff Andreson (CEO) – Discussed operational progress and CEO transition plan.
Greg Swenson (CFO) – Reviewed financial results and outlook.

Financial Highlights:

Revenue: $240.3M (up 18% YoY, down 2% QoQ) – At high end of guidance.
Gross Margin: 12.5% (up 10bps QoQ, but low end of expectations due to hiring challenges).
Operating Expenses: $23.8M (flat QoQ).
Net Loss: $0.03 EPS (impacted by $3.2M tax expense due to Pillar 2 acceleration).
Cash & Equivalents: $92M (down $17M QoQ due to working capital investments).
Debt: $126M (net debt coverage ratio of 1.5x, well below covenant thresholds).

Operational & Strategic Updates:

1. Demand & Revenue Outlook

Q3 Revenue Guidance: $225–245M (similar to Q2).
2025 Revenue: Slightly front-half weighted due to Q2 pull-in (~$5M).
Key Demand Drivers:
- Foundry/logic & HBM (high-bandwidth memory) remain strong.
- NAND investments continuing into H2.
- Advanced packaging demand has plateaued.
- EUV litho slowdown and U.S. semiconductor capex delays impacting growth.

2. Gross Margin Challenges

Hiring & Retention Issues: Struggles ramping Minnesota cleanroom operations (post-machining roles).
External Sourcing Costs: Still buying some components externally, delaying margin benefits.
Q3 GM Guidance: 12.5–13.5% (improvement expected but cautious due to hiring delays).

3. Product Qualification Progress

Flow Control Product: First end-user qualification achieved (high-core gas box for advanced logic).
Valve Product Line: Third customer qualified, fourth in progress (pacing with capacity ramp).
New Proprietary Components: Two next-gen products in development to expand market reach.

4. Reiterated Long-Term Targets

20%+ Gross Margins remain achievable but require:
- Full internal sourcing ramp (valves, substrates, fittings).
- Higher revenue scale ($300M+/quarter).
- Flow controller adoption (high-margin driver).

CEO Transition Plan

Jeff Andreson (CEO since 2020) announced planned succession.
Will remain CEO until successor is named, then transition to strategic advisor.
Board leading search for new leader to drive next phase of growth.

Key Analyst Q&A Takeaways:

Hiring/Turnover Issues: Cleanroom roles in Minnesota remain challenging; wage adjustments and shift differentials being tested.
Market Share: No share loss in external revenue, but internal sourcing delays limit margin upside.
Tariffs (Section 232): 50% on steel/aluminum – Passing costs to customers, but regulations now clearer.
Tax Impact (Pillar 2): $3.2M Q2 charge (full-year tax estimate unchanged at $5.6M).
Competitive Landscape: Rival also pursuing vertical integration, but cross-supply relationships remain intact.

2025 Guidance & Outlook

Revenue: $55–57M (narrowed from prior $54–58M).
Gross Margin: 12.5–13.5% in Q3 (targeting sequential improvement).
OpEx: ~$23.7M/quarter (flat QoQ).
CapEx: 4% of revenue (~$9–10M for 2025).

Catalysts for H2 2025:

Flow controller production ramp (high-margin opportunity).
Valve qualification #4 (pending capacity alignment).
Potential WFE rebound (current view: 5–10% growth in 2025).

Conclusion:

Ichor’s near-term growth hinges on resolving hiring bottlenecks to meet demand for proprietary components. While gross margins remain pressured, progress in qualifications (flow control, valves) and internal sourcing supports a path to 20%+ margins at higher revenue scales. The CEO transition adds uncertainty, but the board’s search for a successor aims to ensure continuity.

Upcoming Investor Events: Oppenheimer Virtual Conference, Needham Semiconductor Conference, Jefferies (Chicago), B. Riley Tech Conference.
Next Earnings Call: Early November (Q3 results).

About this video

Ichor Holdings, Ltd. delivered Q2 2025 results marked by strong revenue growth but persistent profitability challenges amid sector volatility and internal operational shifts. For the quarter ended June 27, 2025, revenue rose 18.2% year-over-year to $240.3 million, surpassing the mid-point of guidance, thanks to robust demand from semiconductor capital equipment makers. However, gross margin slipped to 11.3% on a GAAP basis (12.5% non-GAAP), reflecting hiring and retention issues in U.S. operations, product mix headwinds, and ongoing reliance on external component suppliers. Operating income on a non-GAAP basis was $6.1 million, but the company reported a net GAAP loss of $9.4 million, or $(0.28) per share, compared to a net loss of $5.1 million ($(0.15)/share) a year ago. Non-GAAP EPS was just $0.03, missing consensus estimates. The quarter included significant restructuring charges connected to site consolidation and workforce reductions, particularly related to the shutdown of its Scotland facility. Cash and cash equivalents ended the quarter at $92.2 million, down $17.1 million sequentially, impacted by $7.5 million in negative operating cash flow and $7.3 million in capital expenditures. Working capital investments and strategic CapEx for capacity expansion, most notably in Malaysia, affected free cash flow, which turned negative for the period. Despite solid customer demand and the successful qualification of proprietary flow control products at key end users, the transition toward greater internal component sourcing has progressed slower than anticipated, impacting margin improvement efforts. Management reaffirmed its commitment to expanding proprietary product content, aligning manufacturing with customer requirements, and driving toward its long-term target of 20% gross margin. Looking ahead, Ichor issued Q3 2025 guidance for revenue of $225 million to $245 million and non-GAAP EPS of $0.06 to $0.18, signaling continued margin focus in the face of macro and operational challenges. The company also announced the initiation of a CEO succession plan, with Jeff Andreson to remain through the transition. About Inside Ticker: For more expert analysis and real-time updates on Ichor Holdings, Ltd. (NASDAQ: ICHR) and other market movers, follow Inside Ticker and visit InsideTicker.com for in-depth reports, financial insights, and the latest news on leading companies. #Ichor #ICHR #Q22025 #Earnings #FinancialResults #NetLoss #Revenue #GrossMargin #Semiconductors #CapitalEquipment #ProprietaryProducts #Manufacturing #OperationalExcellence #Growth #Restructuring #CapEx #MarketShare #Engineering #Guidance #InsideTicker #2025Outlook

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