Ultra Clean Holdings, Inc. Q3 FY2025 earnings call

• Notable improvement in gross margin due to structural/operational improvements and tariff recovery.
• Progress on new product introductions and component qualifications with customers.
• Substantially completed flattening of organizational structure to improve decision-making speed and efficiency.
• Streamlining business systems and integrating acquisitions like Fluid Solutions, Services, and HIS, with SAP business system installed in Fluid Solutions Group and alignment between Products Group and Fluid Solutions on qualification priorities.
• Focus on strengthening profitability, optimizing global footprint, and leveraging operation agility and innovation velocity to support customers and unlock growth.
• Industry is entering a new era fueled by AI, with UCT's deep technical and manufacturing expertise aligning with structural growth drivers.

In Q3 2025, total revenue was $510 million. Revenue from products was $445 million, which is 87.25% of total revenue, and services revenue was $65 million, making up 12.75% of total revenue. Products gross margin was 15.1% and services gross margin was 30%. Gross margin gains were supported by improved site utilization, higher value product mix, cost and efficiency initiatives, and tariff recoveries.

• Projected total revenue for Q4 2025 is between $480 million and $530 million.
• Expected EPS for Q4 2025 is in the range of $0.11 to $0.31.
• Renewed share repurchase program for an additional 3-year term, authorizing up to $150 million of repurchases with a maximum of $50 million per year.

• Dynamic macro landscape with near-term volatility and reduced visibility.
• Tariff environment impact on the supply chain.
• Inventory levels at customers delaying revenue synchronization from UCT's perspective.
• NPI cycle delays affecting timely revenue capture from new product introductions.

Q: Near-term industry demand outlook, including first half and second half next year?

A: James Xiao mentioned varying views from customers with some seeing flat first half and step function increase in second half, overall expecting mid- to high range year-over-year growth but timing to be seen.

Q: Q4 guidance being lighter than previous expectation, reason?

A: Sheri Brumm stated it's due to different forecasts from other customers causing a difference, with Q4 going back to first half '25 mix.

Q: China business recovery and revenue run rate?

A: Clarence Granger said China business is relatively flat at ~7% of total revenue, with migration of non-Chinese customer manufacturing out of China.

Q: Synergies from recent acquisitions, specifically Fluid Solutions?

A: Clarence Granger said SAP business system installed in Fluid Solutions, strategic alignment between Products Group and Fluid Solutions on qualification priorities, leading to improved margins as Fluid Solutions products replace external suppliers.

Q: Tariff recovery benefit in Q3 and outlook for December quarter?

A: Sheri Brumm said they will continue collecting tariffs, with Q3 having slightly more than anticipated, and a good process in place for go-forward.

Q: WFE outlook for 2026 and UCT's position to outgrow it?

A: James Xiao said it's hard to give concrete forecast due to inventory, NPI cycle, and product mix factors, but confident UCT will outgrow WFE longer term.

Q: Reduced visibility and order book offsets?

A: Cheryl Knepfler and James Xiao mentioned conflicting information from customers, remaining prudent, with visibility different for UCT compared to semi-cap OEMs.

Q: Plans for restarting growth engine at UCT?

A: James Xiao said focus on fundamental first, then expand business with OEM partners, continue vertical integration, and look at diversification and other areas as Horizon 2 or 3.