Sign in

You're signed outSign in or to get full access.

IH

ICHOR HOLDINGS, LTD. (ICHR)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $240.3M, a beat vs S&P Global consensus ($234.5M*) and above the mid-point of prior guidance; GAAP diluted EPS was $(0.28), while non-GAAP EPS was $0.03, a material miss vs consensus ($0.143*) due to hiring/retention constraints and an accelerated Pillar 2 tax expense that reduced EPS by ~$0.07 .
  • Gross margin landed at 11.3% GAAP and 12.5% non-GAAP, at the low end of expectations; management highlighted machining capacity and retention shortfalls mid-quarter that constrained component output and margin realization .
  • Q3 outlook maintained the revenue range ($225–$245M) but lowered both GAAP and non-GAAP EPS guidance vs Q2: GAAP $(0.12)–$0.00, non-GAAP $0.06–$0.18; CFO added color on gross margin (12.5–13.5%), OpEx ($23.7M), interest ($1.6M/quarter), and tax (~$0.9M) .
  • CEO succession announced alongside the print; proprietary product ramp advanced (first end-user qualification in flow control; initial production shipments of valves) — a medium-term margin expansion catalyst once internal supply and cost targets are met .

What Went Well and What Went Wrong

What Went Well

  • Revenue execution: Net sales reached $240.3M (Q/Q down ~2%, Y/Y up ~18%), finishing above guidance midpoint and beating Street consensus; “2025 is shaping up to be a solid revenue growth year for Ichor… we continue to expect to outperform the expected growth of the wafer fab equipment industry” .
  • Proprietary product milestones: “We achieved a major milestone with the successful qualification of our flow control product at a key end user… We began shipping valves in production volumes this quarter” — strengthening internal content and future margin leverage .
  • Consistent demand signals: Foundry/logic and HBM remained strong; NAND investments continuing; revenue pull-in from late Q2 reflected healthy customer activity despite EUV/litho softening .

What Went Wrong

  • Margin and EPS shortfall: GAAP gross margin 11.3% and non-GAAP 12.5% came in at the low end, with non-GAAP EPS $0.03 vs consensus $0.143*; mid-quarter hiring/retention issues in US machining limited component output, constraining margin flow-through .
  • Tax surprise: Non-GAAP net tax expense accelerated into Q2, lifting quarterly tax to ~$3.2M and cutting EPS by ~$$0.07, contributing to the earnings miss .
  • Cash burn and FCF: Operating cash flow of $(7.5)M and capex $(7.3)M drove Q2 free cash flow to $(14.8)M; cash declined by $17.1M Q/Q to $92.2M .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Millions)$203.2 $244.5 $240.3
GAAP Gross Margin %12.6% 11.7% 11.3%
Non-GAAP Gross Margin %13.0% 12.4% 12.5%
GAAP Operating Margin %(1.1)% (0.5)% (2.0)%
Non-GAAP Operating Margin %2.2% 2.7% 2.6%
GAAP Net Income ($USD Millions)$(5.1) $(4.6) $(9.4)
Non-GAAP Net Income ($USD Millions)$1.8 $4.2 $1.1
GAAP Diluted EPS ($USD)$(0.15) $(0.13) $(0.28)
Non-GAAP Diluted EPS ($USD)$0.05 $0.12 $0.03
Cash from Operations ($USD Millions)$17.5 $19.0 $(7.5)
Capital Expenditure ($USD Millions)$(2.8) $(18.5) $(7.3)
Free Cash Flow ($USD Millions)$14.6 $0.5 $(14.8)

Balance sheet KPIs

MetricQ2 2024Q1 2025Q2 2025
Cash & Equivalents ($USD Millions)$114.3 $109.3 $92.2
Accounts Receivable ($USD Millions)$65.2 $79.9 $80.8
Inventories ($USD Millions)$231.5 $263.5 $259.4
Long-term Debt, net ($USD Millions)$122.7 $119.3 $117.5
Current Portion of Debt ($USD Millions)$7.5 $7.5 $7.5

Segment breakdown

SegmentNotes
Fluid delivery subsystems (gas and chemical), precision componentsCompany reports as a unified business; no segment reporting in the 8‑K/press release. Primary offerings: gas/chemical delivery subsystems, precision components, valves, flow control, fittings .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q3 2025$225–$245 (stated “similar range as Q2 guidance”) $225–$245 Maintained
GAAP Diluted EPS ($USD)Q3 2025$(0.06)–$0.04 (Q2 guide) $(0.12)–$0.00 Lowered
Non-GAAP Diluted EPS ($USD)Q3 2025$0.10–$0.22 (Q2 guide) $0.06–$0.18 Lowered
Gross Margin % (non-GAAP)Q3 2025Not quantified previously12.5–13.5% New detail
Operating Expenses ($USD Millions)Q3 2025Not quantified previously~$23.7; Q4 similar New detail
Net Interest Expense ($USD Millions/quarter)Q3–Q4 2025Not quantified previously~$1.6 each quarter New detail
Tax Expense ($USD Millions)Q3–Q4 2025Not quantified previously~$0.9 each quarter New detail

Earnings Call Themes & Trends

TopicQ4 2024 (Prior-2)Q1 2025 (Prior-1)Q2 2025 (Current)Trend
AI/Technology initiatives (foundry/logic, HBM, memory)Strengthening demand, robust leading-edge foundry/logic; beginnings of memory recovery Demand signals consistent; expect to outgrow WFE; integrate internal components into gas panels Foundry/logic strong, HBM visible; NAND continuing; EUV/litho slower; advanced packaging plateaued Mixed (stable top-line, pockets softer)
Supply chain/hiring/capacityCost headwinds ramping labor; one-time inventory charges pressured GM Maturing internal component supply processes to drive GM improvement Hiring/retention issues constrained machining output and margins; proactive cost cuts Improving with execution, but constrained
Tariffs/macroGeneral caution in safe harbor Policy uncertainty in Washington clouded visibility Section 232 tariffs passed through; duty drawback limitation from April; mitigation underway Manageable with pass-through
Proprietary product performanceMix/inventory charges impacted GM Plan to drive GM via internal component integration First end-user qualification (flow control); initial production shipments (valves); two new proprietary products in development Positive commercialization
Regional trends/customer mixStrengthening customer demand environment Balanced H1/H2 view China a wildcard/strength; a large US OEM pushing out CapEx; litho down; NAND steady Varied by region/tool
Regulatory/legal——CEO succession announced; search underway Transition underway

Management Commentary

  • Strategy: “Our new product strategy is taking hold… we achieved a major milestone with the successful qualification of our flow control product… began shipping valves in production volumes” — expected to support margin expansion as internal supply scales and cost targets are met .
  • Margin drivers and constraints: “If not for the hiring challenges… which limited our output of machine components, today we would have been announcing Q2 gross margins of over 13%” .
  • Outlook framing: “With our current visibility, our revenue guidance remains in the same range… the key differences… Q2 revenue pull-in now indicates 2025 is likely to be slightly front-half weighted… we are more conservative on expected hiring ramp and guiding gross margin” .
  • Balance sheet and tax: “Non-GAAP net income tax expense… came in well above forecast due primarily to the acceleration of the Pillar Two tax into Q2… impacted EPS by $0.07” .

Q&A Highlights

  • Hiring/retention dynamics: Management detailed off-shift hiring challenges and clean-room retention issues mid-quarter, which constrained machining throughput and margin realization; mitigation includes shift differentials and revised hiring approaches .
  • Demand by end market: Foundry/logic and HBM remain strong; NAND investments continue; EUV/litho lower; advanced packaging growth has plateaued as capacity comes online; China remains a source of strength .
  • Pricing and tariffs: No notable change in pricing pressure; Section 232 tariff impacts are largely passed through and better understood; company is working to reduce net impact across the supply chain .
  • Market share/internal content: External buys persist until internal capacity ramps; first valve production shipments and flow control qualification mark progress toward internal content capture .
  • CEO succession: Board launched search; CEO to remain during transition and then serve as executive advisor through August 2026 .

Estimates Context

Q2 2025 actuals vs S&P Global consensus

MetricConsensus Mean*ActualSurprise
Revenue ($USD)$234.5M*$240.3M +$5.8M (Beat)
Primary EPS ($USD, non-GAAP)$0.143*$0.03 $(0.113) (Miss)

Q3 2025 guidance vs S&P Global consensus

MetricConsensus Mean*Company Guidance (Midpoint)Commentary
Revenue ($USD)$235.1M*$235.0M In line
Primary EPS ($USD, non-GAAP)$0.119*$0.12 In line (range $0.06–$0.18)

Note: *Values retrieved from S&P Global.

Key Takeaways for Investors

  • Revenue beat but EPS miss: The quarter demonstrated demand resilience (beat on revenue) with execution issues (labor/retention, accelerated tax) driving the EPS miss; watch near-term hiring progress as a margin catalyst .
  • Proprietary component ramp is the structural margin lever: Initial valve shipments and a key flow control qualification validate the branded strategy; scaling internal supply and hitting cost targets are critical to moving non-GAAP GM toward mid-teens .
  • Q3 guide maintains revenue but lowers EPS: GM guided 12.5–13.5% with OpEx ~$23.7M and tax ~$0.9M per quarter; execution on machining output in Q3/Q4 will drive whether GM can step up into year-end .
  • Cash discipline: Negative FCF in Q2 (capex and working capital) and cash down $17.1M Q/Q to $92.2M — monitor inventory turns and component insourcing cadence to improve cash conversion .
  • Macro mix: Foundry/logic and HBM supportive; NAND steady; EUV/litho softer; China strength a wildcard — keep an eye on tool mix and regional exposures into Q3/Q4 .
  • Leadership transition: CEO succession is underway; continuity plans in place; medium-term thesis hinges on execution of proprietary products and internal content ramp .
  • Trading implications: Near-term stock moves likely driven by EPS miss vs revenue beat and visibility on hiring/GM trajectory; medium-term rerating requires sustained margin expansion from internal content and consistent cash generation .