Ichor Holdings, Ltd. Q2 FY2025 earnings call

• CEO succession plan announced; Jeff Andreson will remain CEO until successor is identified and then serve as strategic adviser.
• Q2 revenues of $240 million were at the upper end of expectations, driven by gas panel integration. Gross margin was 12.5% due to hiring challenges.
• Key operational priority is ramping internal component supply to meet demand and qualify proprietary components.
• Made progress in qualifying flow control and valve products: flow control product qualified at a key end user, valves began shipping in production volumes, and progress on new proprietary components.
• Q3 revenue guidance $225M-$245M, gross margin 12.5%-13.5%, OpEx ~$23.7M, net interest expense ~$1.6M per quarter, tax expense ~$900k per quarter, EPS $0.06-$0.18.

Second quarter revenues were $240 million, at the upper end of expectations, driven primarily by the lower-margin gas panel integration business. Q2 gross margin was 12.5%, lower than expected due to hiring challenges limiting machine component output. Revenue contribution by product segment not specifically broken down further.

• Q3 revenue expected to be in the range of $225 million to $245 million.
• Q3 gross margin expected between 12.5% and 13.5%.
• Q3 and Q4 operating expenses expected to be approximately $23.7 million.
• Net interest expense for Q3 and Q4 expected to be ~$1.6 million per quarter.
• Tax expense in Q3 and Q4 expected ~$900,000.
• Full-year non-GAAP tax expense estimated at $5.6 million.
• Second half of 2025 expected slightly lighter than first half due to timing of shipments and market softness.

• Hiring and retention challenges impacting output volumes and gross margin.
• Delayed ramp of internal component supply affecting ability to meet customer demand and margin targets.
• Uncertainties in customer demand including lower EUV build, reduced investments by major U.S. semiconductor manufacturer, and softness in nontraditional markets like silicon carbide.
• Impact of tax regulations (Pillar Two, Section 232 tariffs) on costs and margins.

Q: Brian Chin asks about gross margin dynamics and hiring impact.

A: Hiring challenges in Minnesota led to lower gross margin, with retention issues affecting machine component production.

Q: Krish Sankar asks about demand sources and gross margin risks.

A: Demand from foundry logic, high bandwidth memory, NAND; gross margin risks due to inability to execute on product delivery due to hiring issues.

Q: Craig Ellis asks about market share issues.

A: Market share impact due to not capturing internal supply market share yet.

Q: Yu Shi asks about year-end outlook and demand differences.

A: EUV build and U.S. OEM CapEx shifts impacted upside, second half expected lighter than first half due to timing.

Q: Thomas Diffely asks about hiring challenges.

A: Hiring challenges in Minnesota due to post-machining work in clean rooms and off shifts.

Q: Christian Schwab asks about gross margin targets.

A: 20% gross margin target still the goal, with flow control qualifications moving towards higher margins.

Q: Hoonshik Yang asks about advanced packaging and vertical integration.

A: Advanced packaging growth slowing, cross exposure with competitors through component sales.

Q: Brian Chin asks about December quarter demand.

A: December quarter expected lower than prior due to timing of customer shipments.