ICHOR HOLDINGS, LTD. Q1 FY2025 earnings call

Jeff Andreson noted that Q1 revenues were midpoint of expectations, with 2025 expected to be a modest growth year for wafer fab equipment (WFE) outperforming overall WFE growth. Gross margin was challenged due to more external supply purchases than forecasted, labeled as 'growing pains'. Proprietary component qualifications progress included a 4th customer incorporating substrates, valve qualifications ongoing, and fittings progress. The company exited its refurbishment business in Scotland, impacting revenue and margin. Tariffs were a factor, with Mexico machining under USMCA exemption, and semiconductor export controls/tariffs expected in summer. For 2025, aim to reduce external supply in gas panels from 90% in 2024 to 75% in 2025, with next gen gas panels having 30% external parts.

First quarter revenues were $244.5 million, up 5% sequentially from Q4 and 21% year-over-year. Gross margin for the quarter was 12.4%, below the forecast. In terms of proprietary content in gas panels, prior to 2024, about 90% of the bill of materials was sourced externally. In 2024, this was reduced by ~5%, and in 2025, the goal is to reduce external supply to approximately 75% of the bill of materials. The next generation gas panels have roughly 30% external parts and 70% internal, incorporating proprietary flow control technology.

Q2 revenue guidance is $225 million to $245 million. Q2 gross margins expected to be 12.5% to 14%. Q2 operating expenses expected to be approximately $23.5 million, moderate in second half. Full year non-GAAP effective tax rate forecasted at 12.5%. Q2 EPS guidance range is $0.10 to $0.22.

Impact of steel and aluminum Section 232 tariffs, uncertainty around semiconductor export controls/tariffs. Slower inventory build and component ramping leading to more external supply purchases affecting gross margin. Decline in demand for refurbished products in Scotland leading to exit of the business, impacting revenue and margin.

Q: Brian Chin asks about the change in revenue outlook by segments.

A: Jeff Andreson mentions NAND is strong, lithography troughing in Q2, softer non-semi-business and silicon carbide.

Q: Krish Sankar asks about tariffs and customer impact.

A: Jeff discusses Mexico exemption, Malaysia facility, and customer collaboration on tariffs.

Q: Charles Shi asks about external component purchases.

A: Jeff explains supply chain challenges, not demand issues with external components.

Q: Craig Ellis asks about gross margin issues and monitoring.

A: Jeff talks about supply alignment and monitoring steps for gross margin.

Q: Tom Diffely asks about manpower, yields, and tariff impact.

A: Jeff and Greg discuss global expansion and tariff mitigation efforts.

Q: Edward Yang asks about customer outsourcing and tariffs.

A: Jeff talks about global footprint and sourcing strategies related to tariffs.

Q: Christian Schwab asks about Scotland operation revenue and gross margin targets.

A: Jeff discusses Scotland operation revenue and proprietary component targets for gross margin improvement