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IH

ICHOR HOLDINGS, LTD. (ICHR)·Q3 2025 Earnings Summary

Executive Summary

  • Revenue of $239.3M exceeded the midpoint and topped consensus; non-GAAP EPS of $0.07 came in below Street while GAAP gross margin was pressured by a $16.7M inventory impairment tied to a consolidation restructuring plan .
  • Management cited strong etch/deposition demand and gas panel pull-ins, but weakness in non-semi (IMG) reduced gross margin by ~100 bps; Q4 is guided as the trough on lower IMG and smaller semi-customer volumes .
  • Q4 guidance: revenue $210–$230M, GAAP EPS $(0.33)–$(0.17), non-GAAP EPS $(0.14)–$0.02; CFO guided Q4 gross margin 10%–12%, OpEx ~$23.7M, net interest ~$1.7M, tax ~$0.9M .
  • CEO transition: CTO Phil Barros named CEO; 2026 framed as a “year of transition” to drive margin improvement via proprietary components and footprint realignment .
  • Stock-relevant narrative: cyclical strength in etch/deposition vs. non-semi and certain OEM slowdowns; restructuring charges and Q4 trough frame near-term headwinds, while proprietary content ramp and mid-teens GM target at ~$250M/quarter underpin medium-term margin upside .

What Went Well and What Went Wrong

What Went Well

  • Etch/deposition demand was strong; gas panel delivery pull-ins placed revenue at the upper end of expectations: “demand environment for etch and deposition strengthened…acceleration of gas panel integration deliveries” .
  • Year-to-date revenue of $724M (+18% YoY) outperformed WFE growth; non-GAAP profitability remained positive (EPS $0.07) despite mix headwinds .
  • Strategic progress: internal components ramp and next-gen proprietary components (flow control, valves) advancing; first beta units targeted early 2026; new CEO emphasized executing to drive earnings faster than revenue .

What Went Wrong

  • GAAP gross margin fell to 4.6% on $16.7M inventory impairment under a consolidation restructuring plan; GAAP EPS was $(0.67) .
  • Non-semi (IMG) demand softened; CFO called out ~100 bps gross margin impact and expects lower IMG run-rate through Q4 .
  • Q4 outlook trimmed by forecast reductions at the #3 and #4 customers; gross margin guided to 10%–12% on lower IMG and smaller semi customer volumes .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($M)$211.139 $244.465 $240.285 $239.296
GAAP Gross Margin %13.2% 11.7% 11.3% 4.6%
Non-GAAP Gross Margin %13.6% 12.4% 12.5% 12.1%
GAAP Operating Margin %(0.2)% (0.5)% (2.0)% (8.1)%
Non-GAAP Operating Margin %3.0% 2.7% 2.6% 2.2%
GAAP Diluted EPS$(0.08) $(0.13) $(0.28) $(0.67)
Non-GAAP Diluted EPS$0.12 $0.12 $0.03 $0.07
Free Cash Flow ($M)$2.171 $0.496 $(14.799) $2.099

KPIs and Balance-Sheet Highlights

KPIQ3 2024Q1 2025Q2 2025Q3 2025
Cash & Equivalents ($M)$116.447 $109.281 $92.224 $92.500
Cash from Operations ($M)$8.591 $18.977 $(7.508) $9.247
Capital Expenditures ($M)$6.420 $18.481 $7.291 $7.148
Inventories ($M)$239.359 $263.454 $259.373 $241.680

Notes:

  • Q3 GAAP results included $18.3M of restructuring costs (inventory, fixed asset, personnel and facility shutdown related) .
  • Free cash flow = CFO less capex per company definitions .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ4 2025n/a (first issuance)$210M–$230M New
GAAP Diluted EPSQ4 2025n/a$(0.33)–$(0.17) New
Non-GAAP Diluted EPSQ4 2025n/a$(0.14)–$0.02 New
Gross Margin %Q4 2025n/a10%–12% (non-GAAP) New
Operating ExpensesQ4 2025n/a~$23.7M New
Net Interest ExpenseQ4 2025n/a~$1.7M New
Tax ExpenseQ4 2025n/a~$0.9M New
Share CountQ4 2025n/a~34.5M New

Q3 2025 Guidance vs Actual (for context)

MetricPrior Guidance (Aug 4)ActualOutcome
Revenue$225M–$245M $239.3M Within range
Non-GAAP Diluted EPS$0.06–$0.18 $0.07 Near low end

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current (Q3 2025)Trend
Etch/Deposition demandStable-to-strong across foundry/logic; Q2 pull-ins; expecting second-half strength tied to AI/HBM “No question” demand strengthened; Q3 revenue benefited from accelerations; Q4 pull-ins normalized Stable/Strong
Proprietary components (valves, flow control, fittings)Multiple customer qualifications; first end-user flow control qualification; production valve shipments begin; internal content push to 25% in 2025 Continued progress; two next-gen components, beta early 2026; expand addressable markets Advancing
Internal component ramp & machining capacityQ1/Q2: hiring/retention challenges in Minnesota limited gross margin; external buys diluted flow-through Progress, but IMG mix overshadowed; gross margin still impacted by mix/charges Improving but mixed headwinds
Non-semi (IMG)Q1: program issues and redesign costs; softer non-semi outlook Orders slowed; ~1pp GM impact; expected lower run-rate in Q4 before recovery in 1H26 Soft near term
EUV lithography & SiCQ1: litho softer; SiC pushed into 2026 Continued softness vs core etch/dep; #3/#4 customers revised lower Soft
Tariffs/PolicySection 232 steel; pass-through efforts; global footprint flexibility; Mexico exempt under USMCA Regulations clearer; impacts managed via pass-through and sourcing; still a watch item Manageable
Macro/ChinaCautious outlook; back half-weighted; watch export controls Q4 seen as trough; back-half 2026 stronger; potential tailwind from “elimination of the 50% ownership threshold” Cautiously positive medium term

Management Commentary

  • CEO (outgoing) on demand/mix: “demand environment for etch and deposition strengthened…acceleration of gas panel integration deliveries… [but] softening within…other served markets…pressured…gross margin and profitability” .
  • CFO on Q3 drivers: “gross margin for the quarter was 12.1%…slowdown in our non-semi business impacted Q3 gross margin by 100 basis points” and $18.3M in restructuring costs recorded .
  • CEO (incoming) strategic priorities: “2026 will be a year of transition…realign our global footprint and cost structure…focused on improving our product margins…aimed at driving our earnings growth faster than our revenue” .
  • Medium-term margin targets: plan to reach mid-teens gross margin at a ~$250M quarterly run-rate in 2H26; longer-term aspiration remains ~20%, with flow control as key enabler .

Q&A Highlights

  • IMG softness quantified: Q3 ~-$2.5M vs plan; similar decline expected in Q4 with recovery beginning in Q1 and more visible by Q2; drivers include delays in funding flows for new programs; impact was higher due to IMG’s strong contribution margins .
  • Pull-ins vs customer mix: Q3 pull-ins largely from the largest customer; smaller customers (#3/#4) drove Q4 reductions; pull-ins offset part of IMG softness .
  • Margin bridge: ex-IMG mix, gross margin would have improved sequentially; focus remains on internal components (valves) achieving target margins early next year; global footprint rationalization to support long-term margin expansion .
  • Outlook cadence: Q4 guided as trough; early signs of Q1 recovery; 2026 back-half weighted with stronger trends into 2027 .
  • Financing: credit facility refinanced, revolver reduced to $225M with accordion; five-year extension; term loan ~$125M; net leverage ~1.5x .

Estimates Context

  • Q3 2025: Revenue $239.3M vs S&P consensus $235.14M* (beat); non-GAAP EPS $0.07 vs S&P Primary EPS consensus $0.119* (miss). Note: we compare company’s non-GAAP diluted EPS to S&P “Primary EPS” which typically reflects Street non-GAAP EPS .
  • Q4 2025: Guidance midpoint revenue $220M vs S&P consensus $220.56M* (in line); non-GAAP EPS guidance midpoint $(0.06) vs S&P Primary EPS consensus $(0.059)* (in line) .
ItemQ3 2025 ActualS&P Consensus*Result
Revenue ($M)$239.296 $235.140*Beat
EPS (non-GAAP vs Primary EPS)$0.07 $0.119*Miss
ItemQ4 2025 Guidance MidS&P Consensus*Result
Revenue ($M)$220 $220.565*In line
EPS (non-GAAP vs Primary EPS)$(0.06) $(0.059)*In line

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term: Q4 guided as trough on lower IMG and smaller customer volumes; gross margin step down to 10%–12% with non-GAAP EPS range of $(0.14) to $0.02, implying limited near-term earnings power .
  • Execution lever: Internal component ramp (valves/flow control/fittings) and footprint consolidation are central to margin recovery; expect margins to improve as proprietary content rises and costs normalize .
  • Demand backdrop: Core etch/deposition supported by AI/HBM and NAND upgrades; non-semi (IMG), EUV, and certain OEM programs remain softer, creating mixed near-term demand .
  • Capital structure: Refinancing reduced revolver size, extended maturity; leverage modest (~1.5x), providing flexibility through the trough .
  • 2026 setup: Company targets mid-teens gross margin at ~$250M quarterly run-rate in 2H26; longer-term aspiration to ~20% hinges on flow control penetration and mix improvements .
  • Modeling: Use Q4 revenue $210–$230M, GM 10–12%, OpEx ~$23.7M, interest ~$1.7M, tax ~$0.9M, shares ~34.5M; watch IMG recovery cadence and valve margin attainment .
  • Watch items: Tariffs (Section 232) pass-through/mitigation; timing of customer qualifications; pace of non-semi recovery; China policy impacts and potential incremental demand from rule changes .

Citations:

  • Press release/8‑K Q3 2025 results and guidance .
  • Press release Q3 2025 narrative .
  • Q3 2025 earnings call transcript (prepared remarks, CFO detail, Q&A) .
  • Prior quarters: Q2 2025 PR and call . Q1 2025 PR and call .
  • CEO appointment press release .