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
KPIs and Balance-Sheet Highlights
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
Q3 2025 Guidance vs Actual (for context)
Earnings Call Themes & Trends
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) .
*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 .