Ultra Clean Holdings, Inc. Q1 FY2025 earnings call

• Missed Q1 revenue guidance by ~$12 million due to customer technical issues and softening demand.
• Semiconductor market recovery slowdown extended by geopolitical uncertainties and tariff wars.
• Focus on optimizing acquisitions, reviewing cost structures (headcount, footprint, discretionary expenses).
• Implemented localized supply chain strategy for better resilience.
• Tripled lithography portfolio, expanded sub fab onsite engineering support, and benefited from accelerated ramp of Arizona fab.

For the first quarter, total revenue was $518.6 million. Revenue from products was $457 million (down from $503.5 million in the prior quarter) with a gross margin of 14.9% (compared to 15.2% in Q4). Services revenue increased from $59.8 million in Q4 to $61.6 million in Q1, with a gross margin remaining flat at 29.8%. Products contributed approximately 88% of total revenue, and services contributed approximately 12%.

• Projected Q2 2025 revenue between $475 million and $525 million.
• Anticipated EPS in the range of $0.17 to $0.37.
• Expect revenue to bounce around current levels for the remainder of 2025.

• Geopolitical uncertainties and reciprocal tariff wars disrupting supply chains.
• Volatility in semiconductor market demand affecting revenue and margins.
• Uncertainty in timing of capital expenditure for chip revenue growth target.

Q: Want to learn about softening demand late in Q1 and China revenue percentage.

A: Softening demand related to two customers (Asian and European) with technical issues. China revenue slightly up quarter-over-quarter and expected to grow in second half.

Q: Question on customer behavior change impact.

A: Uncertain market with minor downturn expected, bouncing around $500 million per quarter range.

Q: Scenario analysis on tariffs impact.

A: China for China strategy mitigates tariffs, other products have potential tariffs but manageable.

Q: Color on China semicap business outlook.

A: Q2 numbers up from Q1, Q3/Q4 expected to recover. China less than 10% of overall business.

Q: Elaborate on cost reduction plans.

A: Reviewing headcount, footprint, and org structure; cost initiatives already started.

Q: Tariff cost passing to customers.

A: Pass tariffs on specified subcomponents by customers, work with customers on mitigation.

Q: WFE growth, tariffs pull-ins, CEO search.

A: WFE growth uncertain, no significant tariffs pull-ins, CEO search expected to take ~6 months with search firm.