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Ultra Clean Holdings, Inc. (UCTT)·Q2 2025 Earnings Summary

Executive Summary

  • Revenue of $518.8M beat Wall Street consensus of ~$500.8M; non-GAAP EPS of $0.27 matched consensus, while GAAP EPS of $(3.58) reflected a $151.1M goodwill impairment charge . Q2 2025 consensus: revenue ~$500.8M*, EPS $0.27*; actual: revenue $518.8M, EPS $0.27 .
  • Segment mix remained stable: Products $454.9M and Services $63.9M; non-GAAP gross margin 16.3% and operating margin 5.5% improved slightly versus Q1 (16.7%, 5.2%) on OpEx reductions .
  • Q3 outlook: revenue $480–$530M; GAAP diluted loss per share $(0.09)–$(0.29); non-GAAP diluted EPS $0.14–$0.34; management signaled cost actions and new business wins (Czech) support an upward bias into Q4 .
  • China revenue stepped up to ~$35M (vs ~$21M in Q1) and is tracking toward a $40–$50M quarterly run-rate; tariff reimbursement delays and ~$2–$3M annual admin costs remain a near-term risk .

What Went Well and What Went Wrong

What Went Well

  • Revenue beat consensus with stable mix and Services strength; non-GAAP operating margin rose to 5.5% from 5.2% on lower OpEx: “our actions to reduce operating expenses are well underway” .
  • Clear internal execution priorities: “NPI and component qualifications,” “flattening the organization,” and “business systems and final integration” to drive efficiencies and margin uplift (Fluid Solutions qualifications to enhance margin in early 2026) .
  • China-for-China strategy gaining traction: $35M Q2 revenue (vs $21M Q1), management targets $40–$50M per quarter and notes multi-decade customer ties supporting continuity .

What Went Wrong

  • Large GAAP loss driven by non-cash goodwill impairment ($151.1M), lowering reported gross-to-operating margins and EPS despite steady non-GAAP performance .
  • Tariff reimbursements from major customers are slow; UCT incurred ~$0.5M in Q2 with ~$3M of charges tied to customer-specified components, plus ~$2–$3M annual admin burden to process reimbursements/documentation .
  • Visibility remains limited; management expects to “bounce around” ~$500M per quarter near term as broader WFE recovery timing is pushed out amid tariff and macro uncertainty .

Financial Results

Consolidated metrics vs prior year and prior quarter

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Millions)516.1 518.6 518.8
GAAP Diluted EPS ($)0.42 (0.11) (3.58)
Non-GAAP Diluted EPS ($)0.32 0.28 0.27
Gross Margin % (GAAP)17.1% 16.2% 15.3%
Gross Margin % (Non-GAAP)17.7% 16.7% 16.3%
Operating Margin % (GAAP)4.4% 2.5% (27.3)%
Operating Margin % (Non-GAAP)6.9% 5.2% 5.5%

Consensus vs Actual (Q2 2025)

MetricConsensusActualBeat/Miss
Revenue ($USD Millions)500.83*518.80 Beat
EPS (Primary, $)0.27*0.27 In line

Values retrieved from S&P Global.*

Segment breakdown

MetricQ1 2025Q2 2025
Products Revenue ($USD Millions)457.0 454.9
Services Revenue ($USD Millions)61.6 63.9
Product Gross Margin % (GAAP)14.6% 13.5%
Services Gross Margin % (GAAP)28.1% 28.0%
Product Gross Margin % (Non-GAAP)14.9% 14.4%
Services Gross Margin % (Non-GAAP)29.8% 29.9%

KPIs and balance sheet

KPIQ1 2025Q2 2025
Cash & Cash Equivalents ($USD Millions)317.6 327.4
Operating Expenses (Non-GAAP, $USD Millions)59.4 56.1
Cash from Operations ($USD Millions)28.2 29.2
Share Repurchases (Shares / $USD Millions)—182,000 / 3.4
Goodwill Impairment ($USD Millions)—151.1
China Revenue ($USD Millions)~21 ~35
Non-GAAP Tax Rate (%)20.0% 20.0%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q2 2025475–525 (4/28/25) Actual: 518.8 Achieved near high end
GAAP Diluted EPS ($)Q2 2025(0.06)–(0.26) Actual: (3.58) Lower (impairment-driven)
Non-GAAP Diluted EPS ($)Q2 20250.17–0.37 Actual: 0.27 In range
Revenue ($USD Millions)Q3 2025N/A480–530 New
GAAP Diluted EPS ($)Q3 2025N/A(0.09)–(0.29) New
Non-GAAP Diluted EPS ($)Q3 2025N/A0.14–0.34 New
Tax Rate (Non-GAAP)FY 2025Low–mid 20s Low–mid 20s Maintained
OpEx TrendQ3–Q4 2025Cost actions underway SAP go-live costs in Q3; broader cost savings reduce OpEx over time Near-term up, LT down

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
AI/WFE outlook“Positioned to benefit” from AI; outperformed WFE in 2024 WFE 2025 risk skewed down; cautious stance AI investment acceleration noted; benefits longer term; no near-term orders tied directly Cautious near term, constructive LT
Supply chain & operationsCapacity to support $4B run-rate Localized supply chain strategy; cost structure review NPI wins; flattening org; SAP integration; site consolidations Execution on internal efficiency
Tariffs/macroNot explicitChina-for-China by mid/late Q3 to mitigate; pass-through for customer-specified parts ~$0.5M Q2 tariff costs; ~$3M charges on specified parts; $2–$3M annual admin burden; reimbursements slow Admin cost drag; reimbursement timing risk
Product performanceServices grew Q/Q in Q4 Services up; product soft late Q1 Services $63.9M (solid); products steady; margins mixed with volume mix Services resilience
Regional (China)N/A in PRExpect slight Q2 increase; H2 improvement $21M → $35M; aiming $40–$50M/quarter; relationships strong Improving run-rate
Regulatory/legalLegal-related costs in non-GAAP reconciliation Legal-related costs Legal-related costs and prior cybersecurity incident in adjustments Continued but manageable in non-GAAP

Management Commentary

  • “Although we expect near-term revenue to remain relatively stable, our actions to reduce operating expenses are well underway, and we anticipate realizing the benefits of these actions later this year.” — Clarence Granger, Interim CEO .
  • “We anticipate bouncing around the $500 million revenue for the balance of this year… focused on NPI qualifications, flattening the organization, and integrating acquisitions into core systems.” — Clarence Granger .
  • “We have already been awarded some new business in our Czech Republic facility that should result in an incremental revenue increase in Q4… Fluid Solutions qualifications… will enhance our margin profile. We expect to see the benefits… beginning early in 2026.” — Clarence Granger .
  • “Operating expense for the quarter was $56.1M vs $59.4M in Q1 … SAP go-live costs flowing into Q3; broader cost-saving actions will further reduce OpEx over the long term.” — Sheri Savage, CFO .
  • “We are confident our China-for-China strategy… revenue out of our Chinese-based customers… about $40 to $50 million a quarter.” — Clarence Granger .

Q&A Highlights

  • China sustainability: Revenue rose to ~$35M in Q2 from ~$21M in Q1; management targets $40–$50M/quarter and sees low risk of going to zero given local manufacturing and long-standing customer ties .
  • Q4 trajectory: Upward bias driven by cost reductions, Czech new business, and Fluid Solutions integration; not ready to formally guide Q4 but “feels like” improvement .
  • Tariffs: ~$0.5M Q2 costs vs ~$3M related to customer-specified components; reimbursements delayed; admin burden ~$2–$3M annually; pass-through expected but timing uncertain .
  • WFE 2026 outlook: Potential high single-digit/low double-digit growth; UCT expects to outperform WFE in an upturn via mix and share gains .
  • Goodwill impairment: Triggered by lower market cap vs carrying value; non-cash; assumptions more conservative now, but management remains bullish on acquired businesses .

Estimates Context

  • Q2 2025: Revenue beat consensus (~$500.8M*) with actual $518.8M; EPS matched consensus at $0.27* non-GAAP .
  • Q3 2025: Consensus before print was $505.2M* revenue, $0.22* EPS; company guided revenue $480–$530M and non-GAAP EPS $0.14–$0.34, bracketing consensus .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Revenue resilience with Services strength and OpEx reductions drove stable non-GAAP margins; headline GAAP loss was a one-off impairment rather than operational deterioration .
  • China-for-China execution is mitigating export risks and supporting a $40–$50M quarterly run-rate, reducing regional downside skew amid broader macro/tariff uncertainty .
  • Tariff reimbursements are a near-term working capital/timing risk; expect admin drag of ~$2–$3M annually until processes stabilize, but costs largely pass-through for customer-specified components .
  • Q3 guide brackets consensus; cost actions and Czech wins point to a constructive setup into Q4; watch for OpEx cadence (SAP costs in Q3, reductions thereafter) .
  • Segment margins show Services approaching 30% non-GAAP gross margin and steady Product margins; Fluid Solutions qualifications should enhance consolidated margin in 2026 .
  • Balance sheet liquidity improved (cash $327.4M); modest buybacks signal confidence while maintaining flexibility during limited visibility .
  • Monitor CEO transition timing (announcement imminent) and any tariff policy changes; both could affect sentiment and near-term execution narrative .