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Ultra Clean Holdings, Inc. (UCTT)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue was $518.6M, down 7.9% q/q from $563.3M and up 8.6% y/y from $477.7M; non-GAAP EPS was $0.28 vs. $0.51 in Q4, reflecting late-quarter demand softening and customer shipment delays .
  • Results came in below S&P Global consensus: revenue $526.1M* (-1.4% miss) and EPS $0.3125* (-10% miss); management highlighted two customer technical issues (~$12M impact) and broader uncertainty from tariffs .
  • Q2 2025 guidance: revenue $475–$525M; GAAP diluted loss per share $(0.06)–$(0.26); non-GAAP diluted EPS $0.17–$0.37; management expects to “bounce around” ~$500M per quarter near-term while executing cost actions .
  • Stock-relevant narrative: tariff mitigation via “China-for-China” localization and pass-through of customer-specified component tariffs, cost reductions/footprint optimization, and AI/leading-edge exposure (lithography portfolio growth, subfab services, Arizona fab ramp) .

Values retrieved from S&P Global.*

What Went Well and What Went Wrong

What Went Well

  • Services revenue increased sequentially to $61.6M (from $59.8M), with services non-GAAP operating margin at 10.2% (vs. 9.7% in Q4), aided by two top customers and the Arizona fab ramp “scaling up twice as staffed as originally planned” .
  • Non-GAAP gross margin held at 16.7% (vs. 16.8% in Q4) despite volume/mix headwinds, showing resilience in margin structure quarter-to-quarter .
  • Strategic positioning and share gains: “tripled our portfolio in lithography” and expanding subfab engagement including on-site engineering support, reinforcing AI/leading-edge alignment .

What Went Wrong

  • Products revenue fell to $457.0M (from $503.5M), with non-GAAP operating margin compressing to 4.6% (from 6.6%) as late-quarter demand softened and two customers faced technical issues delaying shipments (~$12M impact) .
  • GAAP swung to a net loss of $(5.0)M (diluted $(0.11)) from Q4 GAAP net income $16.3M (diluted $0.36), with GAAP operating margin down to 2.5% (from 4.6%) amid lower volumes and higher OpEx typical in Q1 .
  • China demand and inventory digestion persisted; management expects slight Q2 improvement but noted ongoing uncertainty (China “less than a 10% customer overall”) and macro/tariff-related extended recovery .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Millions)$477.7 $563.3 $518.6
GAAP Diluted EPS ($)$(0.21) $0.36 $(0.11)
Non-GAAP Diluted EPS ($)$0.27 $0.51 $0.28
GAAP Gross Margin (%)17.3% 16.3% 16.2%
Non-GAAP Gross Margin (%)17.9% 16.8% 16.7%
GAAP Operating Margin (%)3.6% 4.6% 2.5%
Non-GAAP Operating Margin (%)6.5% 7.0% 5.2%
GAAP Net Income (Loss) Attrib to UCT ($M)$(9.4) $16.3 $(5.0)
Non-GAAP Net Income Attrib to UCT ($M)$12.1 $22.9 $12.7

Segment breakdown (Revenue, Margins):

Segment MetricQ4 2024Q1 2025
Products Revenue ($M)$503.5 $457.0
Services Revenue ($M)$59.8 $61.6
Products GAAP Gross Margin (%)14.9% 14.6%
Services GAAP Gross Margin (%)28.1% 28.1%
Products Non-GAAP Gross Margin (%)15.2% 14.9%
Services Non-GAAP Gross Margin (%)29.8% 29.8%
Products GAAP Operating Margin (%)4.7% 2.2%
Services GAAP Operating Margin (%)4.0% 4.6%
Products Non-GAAP Operating Margin (%)6.6% 4.6%
Services Non-GAAP Operating Margin (%)9.7% 10.2%

Selected KPIs and Balance Sheet:

KPIQ1 2024Q4 2024Q1 2025
Cash and Equivalents ($M)$293.0 $313.9 $317.6
Cash from Operations ($M)$9.8 $17.1 $28.2
Capital Expenditure ($M)$18.0 —$12.4
Non-GAAP Effective Tax Rate (%)19.7% 14.5% 20.0%
Diluted Shares (Non-GAAP, Millions)45.1 45.4 45.4

Non-GAAP adjustments include amortization of intangibles, stock-based compensation, restructuring, acquisition costs, fair value adjustments, debt refinancing costs, legal-related costs, and tax effects .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)Q2 2025n/a$475–$525 New
GAAP Diluted EPS ($)Q2 2025n/a$(0.06)–$(0.26) New
Non-GAAP Diluted EPS ($)Q2 2025n/a$0.17–$0.37 New
Revenue ($M)Q1 2025$505–$555 Actual $518.6 Below midpoint (softness late quarter)
Non-GAAP Diluted EPS ($)Q1 2025$0.22–$0.42 Actual $0.28 Within range

Management added qualitative outlook: expect revenues “bouncing around” ~$500M per quarter for the remainder of 2025 given uncertainty and tariff dynamics .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
AI/technology initiativesQ3: AI infra demand; vertical integration edge . Q4: AI-related CMP/adv. packaging drove products; aiming to outperform WFE by 5–10% .Lithography portfolio “tripled”; subfab engagement expanding; optimism about long-term AI megatrends .Continued strategic alignment; execution emphasis while demand uneven.
Supply chain/localizationChina-for-China manufacturing ensured local shipments; export controls did not impact shipments .By mid-to-late Q3 2025, “all products we are manufacturing in China will be for China” (no cross-shipments) .Further localization to mitigate tariff/export risk.
Tariffs/macroQ4: noted air pockets; 2025 first half flattish; monitoring mix/tax .Reciprocal tariff war disruptions; tariff pass-through for customer-specified components; alternative suppliers and free trade zones to mitigate; expect minimal long-term financial impact .Elevated uncertainty; mitigation plans active.
Product performanceQ3/Q4: products strong on AI; services modest decline in Q4 .Products down q/q; services up q/q; services margin improved .Mixed; services resilient, products impacted by delays.
Regional trends (China)Q3: domestic China spend sustained ; Q4: $40M Q4 and $215M 2024 China-for-China; softness expected H1 .Slight Q2 uptick expected; China less than ~10% of total; inventory digestion and qualification delays persist .Gradual recovery expected H2; still fluid.
Regulatory/legalExport controls manageable via local footprint .Multiple investor legal alerts post-quarter; legal costs included in non-GAAP adjustments .Ongoing; limited direct ops impact per management.
Cost structure/R&D executionQ4: reviewing expense structure and balance sheet alternatives .Active headcount and footprint optimization; benefits starting to show in Q2 EPS guidance resilience .Cost-down actions accelerating.
LeadershipQ4 call CEO absent for health; Q1: CEO transition.Interim CEO appointed Mar 5; CEO search underway (target ~6 months) .Transition in progress; continuity via interim CEO.

Management Commentary

  • “We missed the midpoint of our revenue guidance range by about $12 million… related to 2 customers… an Asian customer and a European customer… technical issue with their customers” .
  • “We are… going to be bouncing around these revenue levels [~$500M] for the remainder of this year” .
  • “All of the products that we are manufacturing in China will be for China… there should be almost no impact to us from the China counter tariff wars” .
  • “We have tripled our portfolio in lithography and continue to see incremental share gains at our third largest customer” .
  • “Accelerated ramp of the Arizona fab… scaling up twice as staffed as originally planned. This benefits our services business” .
  • “We’ve already started some headcount reductions… footprint optimization… you’ll start to see those benefits” .

Q&A Highlights

  • China demand and inventory: Q1 softness tied to customer technical delays and inventory digestion; slight Q2 increase expected, with H2 improvement; China under ~10% of total revenue .
  • Tariff impact: Majority of tariff costs tied to customer-specified components and will be passed through; alternative sourcing/free trade zones considered; management expects minimal long-term financial impact .
  • Cost actions: Headcount and footprint under review; initiatives underway with expected benefits in coming quarters; OpEx reductions targeted without a specific announced magnitude yet .
  • WFE outlook: More downside risk than upside in 2025; some customers reducing capex (e.g., Intel buildings); industry could be ~$100B as per peer commentary; UCT aims to outpace recovery .
  • CEO search: Interim CEO in place; search firm engaged; ~6-month timeline targeted .

Estimates Context

MetricConsensus*ActualSurprise
Revenue ($USD Millions)$526.1*$518.6 -$7.5M (-1.4%); miss
Primary EPS ($)$0.3125*$0.28 -$0.0325 (-10.4%); miss

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Near-term trajectory: Expect revenues to hover around ~$500M per quarter with Q2 guide $475–$525M; non-GAAP EPS resilience ($0.17–$0.37) reflects early cost actions despite volume pressure .
  • Miss drivers were idiosyncratic: ~$12M revenue impact from two customers’ technical issues; not UCT execution-related; monitor normalization in Q2/Q3 .
  • Tariff risk manageable: Localization and pass-through mechanics should limit P&L impact; watch data collection and controls execution as tariffs evolve .
  • Services strength as buffer: Sequential services growth and higher margins, plus Arizona ramp, provide steadier profitability vs. more volatile products .
  • AI/leading-edge positioning: Lithography portfolio expansion and subfab services deepen customer engagement; supports share gains into the next node transitions .
  • China outlook improving modestly: Slight Q2 uptick and potential H2 recovery, but uncertainty remains; China <10% of revenue tempers risk concentration .
  • Trading lens: Weak print vs. consensus with cautious guide may pressure shares near-term; evidence of cost-down actions and tariff pass-through could stabilize estimates; catalysts include customer ramp resolution and services momentum .

Appendix: Source References

  • Q1 2025 8-K 2.02 earnings press release and exhibits:
  • Q1 2025 earnings press release:
  • Q1 2025 earnings call transcript:
  • Q4 2024 press release and call transcript (prior quarter):
  • Q3 2024 press release (trend):
  • March 5, 2025 CEO transition press release: