Q2 2025 Ichor Holdings Ltd Earnings Call
Operator: Good day, ladies and gentlemen, and welcome to Ichor Holdings' second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. For operator assistance, please press star zero on your telephone keypad. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Claire McAdams, Investor Relations for Ichor Holdings. Please go ahead.
As a reminder, this call is being recorded.
I would now like to introduce your host for today's conference Claire McAdams investor relations for ichor. Please go ahead.
Claire McAdams: Thank you, operator. Good afternoon, and thank you for joining today's second quarter 2025 conference call. As you read our earnings press release and as you listen to this conference call, please recognize that both contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control and which could cause actual results to differ materially from such statements. These risks and uncertainties include those spelled out in our earnings press release, those described in our annual report on Form 10-K for fiscal year 2024, and those described in subsequent filings with the SEC. You should consider all forward-looking statements in light of those and other risks and uncertainties. Additionally, we will be providing certain non-GAAP financial measures during this conference call.
Thank you, operator. Good afternoon and thank you for joining. Today's second quarter 2025 conference call.
As you read our earnings press release and listen to this conference call, please recognize that both contain forward-looking statements within the meaning of the federal securities laws.
These 4 word looking statements are subject to a number of risks and uncertainties. Many of which are beyond our control, and which could cause actual results to differ materially from such statements.
These risks and uncertainties include those spelled out in our earnings press release.
those described in our annual report on Form 10-K for fiscal year 2024 and those described in subsequent filings with the SEC.
You should consider all forward-looking statements in light of those and other risks and uncertainty.
Claire McAdams: Our earnings press release and the financial supplement posted to our IR website each provide a reconciliation of these non-GAAP financial measures to their most comparable GAAP financial measures. On the call with me today are Jeffrey Andreson, our CEO, and Greg Swyt, our CFO. Jeff will begin with an update on our business, and then Greg will provide additional details about our results and guidance. Jeff will make a few additional remarks before opening the line for questions. I will now turn over the call to Jeff Andreson. Jeff?
Additionally, we will be providing certain non-gaap Financial measures during this conference call.
Our earnings press release and the financial supplement posted to our IR website each provide a reconciliation of these non-GAAP financial measures to their most comparable GAAP financial measures.
On the call with me today are Jeffery Andreson, our CEO, and Greg Swyt, our CFO.
Jeff will begin with an update on our business, and then Greg will provide additional details about our results and guidance.
Jeff will make a few additional remarks before opening the line for questions.
I'll now turn over the call to Jeff Anderson. Jeff.
Jeffrey Andreson: Thank you, Claire, and welcome, everyone, to our Q2 earnings call. Thanks for joining us today. This afternoon, along with our second quarter earnings release, we announced our CEO succession plans, which I will further discuss towards the end of our prepared remarks. Second quarter revenues of $240 million came in at the upper end of our expectations, reflecting a modest acceleration of customer demand into the first half of the year. With the Q2 revenue upside driven primarily by our lower margin gas panel integration business, Q2 gross margin of 12.5% was at the lower end of our expectations for the quarter. That being said, through most of the second quarter, we were on track to achieve the midpoint of gross margin guidance.
Thank you, Claire and welcome everyone to our Q2 earnings call.
Thanks for joining us today. This afternoon, along with our second quarter earnings release.
We announced our CEO's succession plans, which I will further discuss towards the end of our prepared. Remarks.
In the second quarter, revenues of $240 million came in at the upper end of our expectations, reflecting a modest acceleration of customer demand into the first half of the year.
With the Q2 Revenue upside driven, primarily by our lower margin, gas panel, integration business.
Due to gross margin of 12.5%, was at the lower end of our expectations for the quarter.
Jeffrey Andreson: If not for the hiring challenges we experienced starting halfway through the quarter, which limited our output of machine components, today we would have been announcing Q2 gross margins of over 13%. We continue to face hiring and retention challenges, which has continued to impact our output volumes in the third quarter to date. Ramping internal supply is a key enabler of the strong gross margin flow-through. Therefore, as we focus on securing the necessary headcount in our U.S. machining operation, we are proactively reducing costs elsewhere in the organization. As we reflect on the customer demand environment, industry and peer reports continue to indicate that 2025 will be a modest growth year for wafer fab equipment, or WFE. With our first half revenues up 20% year over year, we continue to expect our revenue growth this year will outperform overall WFE growth for 2025.
That being said, through most of the second quarter, we were on track to achieve the midpoint of gross margin guidance. And if not for the hiring challenges we experience starting halfway through the quarter.
Which limited our output of machine components today, we would have been announcing Q2 gross margins of over 13%.
We continue to face hiring and retention challenges, which has continued to impact our output volumes in the third quarter to date.
And ramping. Internal supply is a key enabler of the strong. Gross margin flow through.
Therefore as we focus on securing the necessary, headcount in our us Machining operation, we are proactively reducing costs elsewhere in the organization.
As we reflect on the customer demand environment.
Industry and peer reports. Continue to indicate that 2025 will be a modest growth year for wafer Fab equipment or wfe.
And with our first half revenues up 20% year-over-year, we continue to expect our revenue growth this year will outperform overall WFC growth for 2025.
Jeffrey Andreson: While revenue growth outperformance versus the industry is an expected highlight of our financial performance this year, the most critical operational priority for Ichor Holdings in 2025 is bringing our internal component supply fully up to speed in order to meet strong customer demand and increasing momentum qualifying our proprietary component products. This is what we absolutely must accomplish in order to see the benefits of the new product wins through the P&L via strong flow-through and gross margin expansion. Our new product strategy is taking hold and gaining traction. With continued new customer qualifications, as we successfully ramp our internal supply, we are confident that our strategies will materialize in stronger gross margins as we progress forward. In order to track our progress, here are some key benchmarks to look for from us over the next few quarters. The first is building momentum in our top line.
So while Revenue growth outperformance, versus the industry is an expected highlight of our financial performance this year.
The most critical operational priority for ichor in 2025 is bringing our internal component Supply, fully up to speed in order to meet strong customer demand and increasing momentum qualifying. Our proprietary component products
This is what we absolutely must accomplish in order to see the benefits of the new product wins through the p&l Via strong flow through and gross margin expansion.
Our new product strategy is taking hold and gaining traction.
With continued new customer qualifications.
As we successfully ramp our internal supply, we are confident that our strategies will materialize in stronger gross margins as we progress forward.
In order to track our progress here, are some key benchmarks to look for from us over the next few quarters.
Jeffrey Andreson: Year to date, further expansion of our revenue scale beyond the current $240 million run rate has been stalled by a slowing EUV build, reduced investments by a major U.S. semiconductor manufacturer, and the continued lack of demand for additional capacity in some of our non-traditional markets, such as silicon carbide. In order to see our structural improvements to gross margin materialize, we need the additional tailwind of revenue momentum above the $250 million run rate, which is what we had planned for in the second half of 2025 as we entered the year. The next sign of progress will be continued qualifications of our new products by the end device manufacturers. Finally, progress will continue as we provide updates that we have scaled our internal supply to sufficient levels and that our output is aligned with our customer needs and cost targets.
Current $240 million run rate has been stalled by a slowing EUV, reduced investments by a major U.S. semiconductor manufacturer, and the continued lack of demand for additional capacity in some of our non-traditional markets, such as silicon carbide.
In order to see our structural improvements, to gross margin, materialize, we need the additional Tailwind of Revenue momentum above. The 250 million run rate, which is what we have planned for in the second half of 2025 as we entered the year.
The next sign of progress will be continued qualifications of our new products by the end of device manufacturers. And finally,
Progress will continue as we provide updates that we have scaled our internal supply to sufficient levels and that our output is aligned with our customer needs and cost targets.
Jeffrey Andreson: Turning to our momentum qualifying additional proprietary components with our key customers. In Q2, we made meaningful progress across multiple fronts: qualification, commercialization, and market expansion. Most notably, we achieved a major milestone with the successful qualification of our flow control product at a key end user. This marks our first end user qualification for this product line, which serves as a strong validation of its performance in high-demand production environments. We believe this success lays the foundation for broader adoption and additional end customer qualifications. We also reached an important inflection point with our valve product line. During the quarter, we secured a third customer qualification and we're actively working toward a fourth. That said, we are intentionally pacing the fourth qualification to align with our internal capacity ramp. This ensures that we can support volume demands without compromising quality or delivery commitments.
Turning to our momentum, qualifying additional proprietary components.
With our key customers in Q2, we made meaningful progress across multiple fronts.
Qualification commercialization and Market expansion.
Most notably, we achieved a major Milestone with the successful qualification of our flow control product at a key end user.
This marks our first end-user qualification for this product line.
Which serves as a strong validation of its performance in high demand production environments.
We believe this success lays the foundation for broader adoption and additional and customer qualifications.
We also reached an important inflection point with our valve product line.
During the quarter, we secured a Third customer qualification.
And we're actively working toward a fourth.
that said,
we are intentionally pacing the fourth qualification to align with our internal capacity ramps.
Jeffrey Andreson: Importantly, we began shipping valves in production volumes this quarter, a key milestone in scaling commercial success and realizing the margin benefits of internal sourcing. In parallel, we are making steady technical and operational progress on two new proprietary component products, which are designed to expand our addressable markets for both flow control and valves. These next-generation offerings will allow us to serve a broader range of applications and customer needs, further increasing our value across the semiconductor supply chain. As we move into the second half of the year, we remain focused on expanding manufacturing capacity and aligning production to meet our targeted product margins. For Q3 specifically, with our current visibility, our revenue guidance remains in the same range as we provided for Q2 a quarter ago. The customer demand environment has remained relatively steady since May, and our full-year outlook is largely unchanged.
This ensures that we can support volume demands without compromising quality or delivery commitments.
Importantly, we began shipping valves in production volumes. This quarter marks a key milestone in scaling commercial success and realizing the margin benefits of internal sourcing.
In parallel, we are making steady Technical and operational progress. On 2, new proprietary component products, which are designed to expand or addressable markets for both flow control. And valves,
These next-generation offerings will allow us to serve a broader range of applications and customer needs further, increasing our value across the semiconductor supply chain.
As we move into the second half of the year, we remain focused on expanding manufacturing capacity and aligning production to meet our targeted product margins.
For Q3 specifically, with our current visibility our Revenue, guidance remains in the same range as we provided for Q2 a quarter or a go.
The customer demand environment has remained relatively steady since May.
Jeffrey Andreson: The key differences between how we are looking at 2025 now compared to a quarter ago are: first, the Q2 revenue pull-in now indicates 2025 is likely to be a slightly front-half weighted year. While the second half customer demand environment hasn't changed materially, I would also add that the accelerations of demand leading to a stronger second quarter have now slowed a bit in advance of an expected slower quarter in December for etch and deposition. Additionally, we are marginally less confident about a few areas of potential upside materializing within this calendar year. Next, and more meaningful to our outlook, we are taking a more conservative view to our expected hiring ramp and guiding gross margin. For the third quarter, we are providing a similar range of expectations as we did for Q2.
And our full year outlook is largely unchanged.
The key differences between how we are looking at 2025 now compared to a quarter ago are.
First.
The Q2 Revenue pull in now indicates 2025 is likely to be a slightly front half weighted year.
While the second half customer demand environment hasn't changed materially.
I would also add that the accelerations of demand leading to a stronger. Second quarter. Have now slowed a bit in advance of an expected slower quarter in December for Edge and deposition
Additionally, we are marginally less confident about a few areas of potential upside materializing within this calendar year.
Next, and more meaningful to our outlook, we are taking a more conservative view.
To our expected hiring ramp, and guiding gross margin.
And for the third quarter, we are providing a similar range of expectations as we did for Q2.
Jeffrey Andreson: While we remain wholly confident that our strategy will materialize in steady progress towards our longer-term gross margin targets, we need to have improved visibility toward a more meaningful and sustainable top-line sequential growth in addition to achieving our product cost targets before we will significantly raise the bar on our expectations for gross margin expansion. While we currently expect to deliver sequential improvements to our gross margin for the fourth quarter, even on similar revenue levels, at this time, we will refrain from guiding significantly stronger gross margins until we deliver the expected gross margin performance for Q3. With that, I'll turn it over to Greg to recap our Q2 results and provide further details around our financial outlook. Greg?
While we remain wholly confident that our strategy will materialize in steady progress towards our longer-term gross margin targets.
We need to have improved visibility toward a more meaningful and sustainable Topline sequential growth in addition to achieving our product cost targets before, we will significantly raise the bar on our expectations for gross margin expansion.
Even on similar Revenue levels. At this time we will reframe from Guiding significantly stronger gross margins until we deliver the expected gross margin performance per Q3
With that, I'll turn it over to Greg to recap our Q2 results and provide further details around our financial outlook. Greg.
Greg Swyt: Thanks, Jeff. To begin, I would like to emphasize that the P&L metrics discussed today are non-GAAP measures. These measures exclude the impact of share-based compensation, amortization of acquired intangible assets, non-recurring charges, and discrete tax items and adjustments. There is a useful financial supplement available on the investor section of our website that summarizes our GAAP and non-GAAP financial results, as well as a summary of the balance sheet and cash flow information for the last several quarters. Second quarter revenues were $240.3 million at the upper end of guidance, up 18% year over year and 2% lower than Q1. The gross margin for the quarter was 12.5%, an increase of 10 basis points from Q1, but at the low end of expectations, largely due to hiring challenges limiting our ability to achieve the expected ramp of our machine's components.
thanks Jeff.
To begin. I would like to emphasize that the p&l metrics discussed today are non-gaap measures.
These measures exclude the impact of share-based compensation, amortization of acquired intangible assets.
Non-recurring charges and discreet tax items and adjustments.
There's a useful Financial supplement of available on the investor section of our website at summarizes, our gaap and non-gaap financial results, as well as a summary of the balance sheet and cash flow information for the last several quarters.
Second quarter revenues were 240.3 million at the upper end of guidance.
Up 18% year-over-year and 2% lower than Q1.
Gross margin for the quarter was 12.5%, an increase of 10 basis points from Q1. However, this was at the low end of expectations, largely due to higher challenges limiting our ability to achieve the expected ramp of our machine components.
Greg Swyt: With operating expenses roughly flat to Q1 at $23.8 million, operating income for Q2 was $6.1 million. Our net interest expense was aligned with our expectations at $1.6 million. However, our non-GAAP net income tax expense of $3.2 million came in well above forecast, due primarily to the acceleration of the Pillar Two tax into Q2. For the full year, our estimated income tax is currently $5.6 million compared to the $6 million estimates as of May. Therefore, while the full-year tax estimate is largely unchanged, the acceleration into Q2 impacted EPS by $0.07. The resulting EPS for the quarter was $0.03 per share. In our GAAP results, you may note that year to date in 2025, we have been executing towards various strategies to consolidate and align our global operations capacity with our customers' largest global production and supply chain centers.
With operating expenses roughly flat to Q1 at $23.8 million, operating income for Q2 was $6.1 million.
Our net interest expense was aligned with our expectations at 1.6 million. However, our non-gaap net income tax expense of 3.2 million came in. Well, above forecasts, due primarily to the acceleration of the pillar to tax into Q2
For the full year, our estimated income tax is currently $5.6 million compared to the $6 million estimates. As of May,
Therefore, while the full year tax estimate is largely unchanged the acceleration into Q2 impacted EPS by 7 cents.
The resulting EPS for the quarter was 3, cents per share.
Greg Swyt: Between Q1 and Q2, we recorded charges of $5.7 million for exit costs related to personnel, fixed assets, and facility-related costs. We anticipate there may be additional charges in Q3 and Q4 as we complete the analysis. Turning to the balance sheet, our cash and equivalents totaled $92 million at the end of the quarter, down $17 million from Q1, reflecting working capital investments as well as $7 million in capital expenditures. Our planned CapEx investments for 2025 are still expected to total about 4% of revenue. Our total debt at quarter end was $126 million, and our net debt coverage ratio was 1.5 times, well below any potential threshold for covenants. Now I will discuss our guidance for the third quarter of 2025. With anticipated revenues in the range of $225 million to $245 million, we expect our Q3 gross margins to be between 12.5% and 13.5%.
In our Gap results, you may note that there that year-to-date in 2025, we have been executing towards various strategies to consolidate and align our Global operations capacity with our customers largest global production and supply chain centers.
Between q1 and Q2, we recorded charges of 5.7 million for exit costs related, to Personnel, fixed assets and facility related costs.
We anticipate there may be additional charges in Q3 and Q4 as we complete the analysis.
Turning to the balance sheet, our cash and equivalents totaled $92 million at the end of the quarter, down $17 million from Q1.
Reflecting working capital Investments as well as 7 million dollars in capital expenditures.
Our planned capex investments for 2025 are still expected to total about 4% of revenue. Our total debt at quarter end was $126 million, and our net debt coverage ratio was 1.5 times, well below any potential threshold for covenants.
Greg Swyt: We expect Q3 operating expenses to be approximately $23.7 million, and we expect Q4 OpEx to be at a similar level. Net interest expense for Q3 and Q4 are expected to be approximately $1.6 million per quarter. We expect to record a tax expense in both Q3 and Q4 of approximately $900,000, reflecting our current forecast for a non-GAAP tax expense of $5.6 million for the full year. Finally, our EPS guidance range for Q3 of $0.06 to $0.18 reflects a share count of 34.4 million shares. I will now turn the call back over to Jeff.
Now, I will discuss our guidance for the third quarter of 2025, with anticipated revenues in the range of $225 million to $245 million. We expect our Q3 gross margins to be between 12.5% and 13.5%.
We expect up to Q3 operating expenses to be approximately $23.7 million, and we expect Q4 Opex to be at a similar level.
Net interest expense for Q3, and Q4 are expected to be approximately 1.6 million per quarter.
We expect to record a tax expense in both Q3 and Q4 of approximately 900,000 dollars.
Reflecting our current forecast for a non-gaap tax expense of 5.6 million for the full year.
Finally, our EPS guidance range for Q3 of $0.06 to $0.18 reflects a share count of 34.4 million shares.
I will now turn the call back over to Jeff.
Jeffrey Andreson: Thanks, Greg. Before turning the call over to Q&A, I would like to say a few words about the CEO succession plan we announced today. I joined the company in late 2017 as CFO, and after first becoming the company's President, I took over as CEO just as the COVID shutdowns were beginning to roll out in early 2020. There is no question that the operational challenges of the past five years have been greater than at any period in recent memory, and I am immensely proud of our successes winning multiple new product qualifications after embarking on Ichor Holdings' first-ever branded product development strategy. During the same period, we have integrated five acquisitions and successfully completed the recapitalization of our balance sheet.
Thanks Greg.
About the CEO succession plan we announced today.
I joined the company in late 2017 as CFO.
And after first, becoming the company's president I took over as CEO just as the coid shutdowns were beginning to roll out in early 2020.
There's no question that the operational challenges of the past 5 years have been greater than at any period in recent memory. And I am immensely proud of our successes when a multiple new product qualifications after embarking on eichorst first ever branded product development strategy.
Jeffrey Andreson: I love this company, and I strongly believe that we have many opportunities to transform the company's profit generation as we continue to bring our branded products to market. I also believe that the time has come to begin the search for a new leader who can drive Ichor Holdings to new levels of success. Ichor Holdings is a strong leader in the industry, enjoying tremendous customer partnerships and an amazing team of employees around the globe. This strong foundation will be attractive to the next leader of Ichor Holdings. In order to ensure a seamless transition, the board and I have entered into a transition agreement where I will remain CEO until my successor is identified and then continue as a strategic advisor to the company and our new CEO to assist in the leadership succession process.
During the same period, we have integrated 5 Acquisitions and successfully completed. The recapitalization of our balance sheet.
I love this company, and I strongly believe that we have many opportunities to transform the company's profit generation as we continue to bring our branded products to market.
I also believe that the time has come to begin the search for a new leader.
Can drive Ichor to new levels of success.
Ior is a strong leader in the industry. Enjoying tremendous customer Partnerships and an amazing team of employees around the globe.
This strong foundation will be attractive to the next leader of Ichor.
and in order to ensure a seamless transition,
the board and I have entered into a transition agreement.
Jeffrey Andreson: We have an excellent board of directors, and I have full confidence that they will find an outstanding new leader for the company. Operator, we are now ready for questions. Please open the line.
Where I will remain CEO until my successor is identified and then continue as a strategic advisor to the company, and our new CEO to assist in the leadership succession process.
We have an excellent board of directors, and I have full confidence that they will find an outstanding new leader for the company.
Operator: We are now ready for questions. Please open the line.
Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. We ask analysts to limit themselves to one question and a follow-up so that others have an opportunity to do so as well. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Our first question comes from Brian Chin with Oppenheimer and Company. Please proceed with your questions.
Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue.
We asked analysts to limit themselves to 1 question and a follow-up so that others have an opportunity to do so as well.
You may press *2 if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
1 moment, please while we pull for questions.
Our first question comes from Brian Chin with Steeple. Please proceed with your question.
Brian Chin: Hi there. Good afternoon. I guess firstly, Jeff, definitely wish you all the best. It sounds like you will be continuing on these calls, but as you wind your time down here, I just wanted to thank you for that. Also, thanks for letting us ask a couple of questions. Maybe to start with gross margins, can you unpack the dynamic that occurred mid-quarter in Q2 that took you off that trajectory? Maybe that could have taken you towards the midpoint or so of the gross margin guide, but maybe unpack what happened there in terms of the hiring and maybe some turnover. Then tied into that, I guess, is how that relates to the uptick in OpEx sequentially above plan.
Hi there. Good afternoon uh I guess firstly Jeff um definitely wish you all the best that sounds like you'll you'll be continuing on these calls but as you wind your time down here, just want to thank you.
Uh for that. And um also thanks for letting us ask a couple questions. Um,
Maybe to start with gross margins.
Uh, can you unpack the dynamic that occurred sounds like mid quarter uh, in Q2 that took you off that trajectory maybe that could have taken you towards the the midpoint or so.
Of the gross margin guy, but maybe kind of unpack what happened there in terms of the hiring and maybe some turnover.
Um, and then tie tied into that, I guess, is how that relates to sort of the uptick in Opex, sequentially above plan.
Jeffrey Andreson: So, you know, at the beginning of the quarter, we were doing pretty good at bringing people in. As you bring them in, these are very unique jobs. This is mostly our U.S. operation in Minnesota. A lot of them go into the clean room to do the post, we'll call it post machining. I'd say we did a pretty good job of getting the machinists. We have a lot of machine parts, but we couldn't get them all built. They're all off shift. We had some turnover that was offsetting what we were bringing in. By about the middle of the quarter or so, we just really hadn't netted as many people as we needed. It kind of continued towards the end of the quarter with very few folks. We've changed some approaches to how we hire in the off shifts and shift differentials, things like that.
Yeah. So um
You know, at the beginning of the quarter, we were doing pretty well at bringing people in. Then, as you bring them in, these are very unique jobs; this is mostly our U.S. operation in Minnesota.
Um a lot of them go into the clean room to do the uh post. We'll call it post machine and I'd say we did a pretty good job of getting The Machinist. We have a lot of machine parts but we couldn't get them all built. They're all off shift and we had some turnover that was offsetting what we were bringing in. So but about the middle of the quarter or so we just really hadn't met it as many people as we needed. Um,
Jeffrey Andreson: I would say entering this quarter, it's a little bit better, but it's where we would have wanted to be a quarter ago. It did start pretty good, but then the retention side of it, once they put on bunny suits and get in the clean room, we weren't able to retain everybody that we hired during the quarter.
And it kind of continued towards the end of the quarter with very few folks. We've changed some approaches to how we hire, um, in the off shifts and shift differentials, things like that. So I would say entering this quarter, it's a little bit better, but it's where we would have wanted to be a quarter ago. So um, it did uh, start pretty good. But then the retention side of it, once they put on bunny suits and get into a clean room, um, we weren't able to retain everybody that we hired during the quarter.
Brian Chin: Got it. That's sort of the kind of the spike up in the OpEx and sort of coming back down in Q3.
Got it. And that sort of the
Jeffrey Andreson: The spike up in the OpEx was a little unique around some of our, we have had some higher healthcare costs we had originally planned entering the year. Everything else was pretty much aligned with it. It is not related necessarily to the hiring in Minnesota. Having said that, most of our, had we stayed on the hiring trajectory that we saw in the first, say, month or so without the turnover, I think we would have been announcing pretty better than our midpoint of guidance is how we looked at it. We have taken a little more conservative approach on our hiring ramp this quarter, and that is why the guidance is around 13% for gross margin.
Of our had, we stayed on the hiring trajectory that we saw in the first 8 months or so. Without the turnover, I think we would have been announcing, um, pretty, uh, better than our midpoint of guidance, is how we looked at it. So we've taken a little more conservative approach on our hiring ramp this quarter and that's why the guidance is around, 13% for gross margin.
Operator: Our next question comes from Krish Sankar with TD Cowen. Please proceed with your question.
Krish Sankar: Yeah. Hi. Thanks for taking my question. Jeff, same here. Good luck. We are definitely going to miss you and your insights. I have two questions. One is on demand. I am just curious, into Q3, where are you seeing the demand coming in from? If you have that visibility, is it coming from NAND technologies? Is it China? I understand you already said that EUV is lower and probably Intel WFE is lower. I am just curious, where do you see the incremental demand coming from? I am going to add a follow-up.
Our next question comes from Chris Sankar with TD. TD Coen, please proceed with your question.
Jeffrey Andreson: Yeah. I think when you say incremental, or the strength of demand into the second half is what you probably are, I think, assuming. I think foundry logic is still strong, high bandwidth memory. We can see it. I would say maybe the advanced packaging has plateaued. Then I think the NAND technologies are continuing. We can clearly see that the NAND technologies investment is continuing into the back half. I mean, when you look at us pulling about $5 million forward, it is slightly down in the back half. Probably the biggest changes really have probably been around, again, a little bit of a reduction in our lithium business, which is well understood, and build volumes are down. Then I would say a large U.S. OEM continues to push out some of their CapEx investments here in the U.S. I would say everything else kind of held its own.
Yeah. Hi, thanks for taking my question. And Jeff, uh, senior, good luck, and you're definitely going to miss you and your insights. I have two questions. One is on demand—just kind of curious into Q3. Where are you seeing the demand coming in from, if you have that visibility? Is it coming from the U.S.? Is it China? You know, I understand you already said that the EU is lower and probably Intel WF is lower, but I'm just kind of curious: where do you see the incremental demand coming from? I'm going to add a follow-up.
Yeah. Um,
I think what would you say incremental or the strength of demand into the second half as as what you're probably? Uh, or I think, um, assuming I think Foundry logic still strong high bandwidth memory, we can see it. Um, I'd say maybe the advanced packaging has plateaued and um, and then, um, I think the nand is continuing, we can clearly see that.
Demand investment is continuing into the back half. I mean, when you look at us pulling about 5 million forward, you know, it's uh, slightly down in the back half and probably the biggest changes really have probably been around. Uh, again a little bit of a reduction in our, um, litho business, uh, which is, well, understood and build volumes are down. And then um, I would say a large US OEM has continues to push out some of their um, capex Investments here in the US and I'd say everything else kind of held its own
Krish Sankar: Got it. Got it. On the gross margin side, I am just kind of curious because this quarter, I understand the machining employment is an issue. Last quarter, the proprietary content. I understand some of this is probably on execution versus what you can manage. But bigger picture, are there any other issues you see on gross margin? In other words, are your big semi-cap customers trying to put more pricing pressure on you compared to in the past, given that their customer base is consolidating? Has any of that filtered down? Or do you think this is all manageable and just like, as you termed it last quarter, growing pains?
You got it, got it. I think all the growth inside, you know, I'm just going to cut you is because, you know, this is what I understand the Machining, uh, employment as an issue last quarter. So the proprietary content. Um, I understand some of this is probably your own execution versus what you can manage. Uh, but bigger picture, is there any other issues you see on gross margin? In other words are your big semi cap customers. Trying to put more pricing pressure on you compared to in the past given that their customer base is consolidating, or has any of that filtered down, or do you think this is all manageable and just like as it turned with last quarter of growing things?
Jeffrey Andreson: I would say our inability to execute and get the ramp to meet the customer demand that we have in front of us is hitting us both in the profitability we could get with the revenue numbers that we were projecting, as well as, as we talked about on the last call, we're still buying some externally that we're eventually going to make. Those two will move the needle fastest. I would say pricing pressure is always there. It hasn't really changed very much over the last year or so. It's always something you try and work on with your customers, reducing their costs and stuff. I would say from a tariff perspective, that's getting passed on. It's a lot better understood now. So I think that that is well understood by our customers that that's something that'll be passed on.
Um, I would say our inability to to execute and get the ramp to meet the customer demand that we have in front of us is hitting us both in the profitability, we could get with the, the revenue numbers that we were projecting as well as as we talked about, on the last call, we're still buying some externally that we're eventually going to make those 2 will move the needle as fast as I would say. The pricing pressure is always there. It hasn't really changed, um, very much, um, over the last year or so, it's so, it's always something you try and work on with your customers, reducing their costs and stuff. Um, I would say, from a tariff perspective that's getting passed on, it's a lot better understood now. And so, I think that that is well understood by our customers, that that's something, that'll be passed on.
Krish Sankar: Thanks, Jeff.
Thank you.
Jeffrey Andreson: Thanks, Krish.
Thanks Chris.
Operator: Our next question comes from Craig Ellis with B. Riley Securities. Please proceed with your question.
Our next question comes from Craig Ellis with B. Riley Securities. Please proceed with your questions.
Craig Ellis: Yeah. Thanks for taking the question. Jeff, I will echo the sentiment of the other two analysts, just expressing thanks for all the help over the years and wishing you the best as you evolve to your role at some future time. Yeah, you are welcome. I wanted to just go back to the last line of inquiry because it sounds like there may be some issues just impacting your ability to deliver product at the time that you would like. So the question is, are there any market share issues that you have seen arise either as a result of some of the things that surfaced in Q1 or any of the hiring or retention-related issues that you are seeing in Q2?
Yeah. Thanks for taking the question and check all Echo. The sentiment of the other 2 analysts just expressing. Thanks for all the help over the years and, and wishing you the best, as you evolve to the role of some future time. Yeah, you're welcome. I I wanted to just go back, uh, to the last line of inquiry because it sounded like
Jeffrey Andreson: I would say from a market share, it is largely, you would think about it, the internal supply. When you are still buying some externally, we are not capturing that market share until we get the operation ramped up. That is where we are seeing it. I would say kind of what we would call on our external revenue, we are not seeing any shifts there.
There may be some issues just impacting your ability to deliver product that the time that you'd like. And so the question is, are there any market share issues that you've seen arise either? As a result of some of the things that surfaced in 1 Q or any of the hiring or retention related issues that you're seeing in 22.
Where we're seeing and I would say, kind of what we would call on our external Revenue. We're not seeing any shifts there.
Craig Ellis: Got it. I just wanted to go back to the demand view and the fact that we might be down a little bit, second half, half on half. I thought we had heard from another large front-end company a view that WFE this year was evolving to a higher level, more positive level, one potentially leading towards 10% WFE growth versus 5%. Your revenues would track well versus that. I am just trying to reconcile the dissonance between those two and wondering if there is any help you can provide.
Got it. And and then I just wanted to go back to uh the the demand View and the fact that we might be down a little bit, second half half on half. I thought we had heard from another large. Um, front-end company, a view that WIP this year was evolving uh to a higher level more positive level. Um 1 potentially leading towards 10%, wfp growth versus 5%. Your revenues would uh, track well versus that. But I'm just trying to reconcile the dissonance between those 2 and wondering if there's any help you can provide
Jeffrey Andreson: I do not know that we disagree with them. I think we have always kind of thought it was going to be 105 or better. I think the wild card seems to be China again as a strength, which will benefit as our customers sell end users and things like that. But our growth year over year is still outpacing that level of WFE. So I do not know that it is materially changed. I will tell you, there is a wide range of expectations out there. Some are higher than the kind of the 5% to 10% that have been discussed on prior calls.
um, I don't
agree with with them. I think we've always kind of thought it was going to be 105 or better. I think the Wild Card seems to be China again as a strength, which will benefit as our customers sell end users and things like that. But our our growth year over year is still outpacing, you know, that level of, uh, wfe. So, I don't know that it's materially changed. I'll, we'll tell you, there's a wide range of expectations out there. Some are higher than the, the kind of the 5% to 10 that have been uh discussed on that prior calls. So
Craig Ellis: Thanks, Jeff.
Jeffrey Andreson: Okay.
Thanks.
Okay.
Operator: Our next question comes from Charles Shi with Needham and Company. Please proceed with your question.
Brian Chin: Hi, Jeff. Greg. Hey, Jeff. Similar to other analysts, I really enjoyed our conversation on the calls and in other various meetings with you over the past few years. Appreciate that.
Our next question comes from Charles Shy with Needham & Co. Please proceed with your question.
Hi. Um, hi Jeff. Uh, Greg, uh, hey Jeff. Similar to other analysts, I really enjoyed our conversation on the calls and, uh, in other various meetings with you over the past few years.
Uh, appreciate that.
Jeffrey Andreson: Thank you.
Brian Chin: Yeah. Maybe a question about the remainder of the year, the outlook. It looks like you are basically saying versus 90 days ago, there is some conservatism, that incremental conservatism out there. One thing you said really caught me. I think you said that there were some upside for the fiscal year you thought that could have materialized, but that looks like it is not. It sounds like it is more about revenue. May I ask, what were the upsides you were expecting a little bit earlier this year that you are not seeing?
Um, thank you. Yeah. Maybe your question about the the remainder of the year. The Outlook, uh, looks like, um, you are basically saying first, is 90 days ago. Uh, there is some conservatism, uh, that
The incremental conservatism out there. Um, I 1 thing, you said really caught me. Um, I think you said uh there were some uh upside for the fiscal year. You stopped that would put the materialized but that looks like it's not uh, sounds like it's more about revenue and the may I ask, for what, what, what would the upsides you were expecting a little bit earlier this year.
Jeffrey Andreson: Yeah, yeah, good question. I think what we have seen stop in that we thought we would start to see build rates in our EUV business start to go up in the fourth quarter. We have not seen that yet. I would say we have seen, and you know we do not see all the sell-through, but we have seen some of the U.S. OEM stuff shipped out of fiscal year 2025. Those are probably the two biggest catalysts to, I do not know, it is about a $5 million haircut in our outlook from a quarter ago. So versus, I do not know, $950 or $960 rollout, that is a pretty small range. There could be things that pop up into the fourth quarter, and we will give you an update on that on the next conference call.
That you're not seeing.
Yeah, good, good. Good question. I think what we've seen, um,
Stop. And we, we thought we would start to see build rates in our auv business start to go up in the fourth quarter. We haven't seen that yet and I would say um, we've seen and and you know, we don't see all the sales through, but we've seen some of the US OEM stuff shipped out of uh, fiscal year 25.
Jeffrey Andreson: Those are the two big moving pieces we have seen since the last call.
Brian Chin: Got it. Got it. So a little bit less than that, and that sounds like that was the upside that is no longer really seen at the moment. Jeff, the other question, you said you now expect the second half is going to be slightly lighter than the first half. I would think before Lam reported, I would agree with you, but now Lam had a huge Q3 guidance upside and they no longer see the second half being really lighter than the first half. If I look at AMAT and the other customers of yours, I am kind of scratching my head a little bit because almost no customers of yours are actually seeing the second half being lighter right now. How do I square the differences off here? What any insights there? Thanks.
And so those are probably the 2 biggest Cadillac catalysts to, I don't know. It's got It's about a 5 million dollar haircut in our Outlook from a quarter ago. So versus I don't know, 950 or 960 roll out that's a pretty small range. Um, there could be things that pop up, um, into the fourth quarter and we'll, we'll give you an update on that, um, on the next conference call. But those are the 2, big moving pieces. We've seen since the last call.
Got it, got it so a little bit less. So a little bit about that and hatch sounds like um that that that that would upside at that no longer really seeing at the moment.
Um, so so Jeff, but the other question, uh, you you said, uh, you you now expect a second half.
Going to be slightly lighter than first half. I, I would think before a lamb, uh, reported, I, I would agree with you about that, but now lamb had a huge, uh, Q3 guidance upside then that they no longer see second half being really, the lighter than the first half. And if I look at the aad, um, and the other customers of yours, I I I'm kind of scratching my head a little bit because
Almost no, no customers of yours are actually seeing the second half in a lighter light right now. So how do I square the differences off here and what any insights are there? Thanks.
Jeffrey Andreson: Well, one is I think it's a relatively small moving number versus our last time. I think some of this is really about the timing of when we ship. We ship about a month before they can recognize revenue. I would say we had a pretty healthy tail end of the quarter, which is why you saw the $5 million pulled in. Had that not pulled forward, then this is mostly about timing. We'd be pretty equally weighted. Our customers don't remember our customers don't have exactly the same profile of earnings, revenue, excuse me. Each one's a little bit different. I'd say we're pretty aligned to what we see at each one of those and what they've talked about.
Yeah. Well, I think it's a relatively small moving number versus our last time, and I think some of this is really about the timing of when we ship.
Bit different. So, um, I'd say we're pretty aligned to what we see at each one of those and what they've talked about. So.
Brian Chin: Thank you. Maybe the last question, thank you, you didn't really bring it up this time. It's about tariffs, especially the steel and aluminum-related tariffs. Are you seeing any impact or any change in your view on the degree or magnitude of the impact? Thank you.
Jeffrey Andreson: It is in Section 232, which is what you are talking about. It is 50%. The original 232 has got duty drawback. So we work with our customers and we pass it on, then they are able to draw it back for whatever leaves the U.S. The second wave that started in April, you cannot do duty drawback. That is where we are seeing it and passing it on to the customers. I would say the regulations are much more clear now. It is not 100% of the value that comes in. It is just driven by weight and the percentage that is non-U.S. source metals. We have done a lot of work on that area. So we are working to reduce the impact across our supply chain and customers. It has not changed, but I think we have clearer views of how to manage it.
Thank you. Um, maybe in the last question, uh, since you didn't really bring it up this time, uh, it's about tariffs, especially the steel a steel and the luminance related tariffs. Are you seeing any impact or, or any change? Uh, uh, in your view on the, on the, on the, on the degree or magnitude of the impact? Thank you.
Yeah, it's a section. 2302 is what you're talking about, it's 50%. Um, the original, 232 is got Duty drawbacks, so we work with our customers and we pass it on, and then they are able to draw it back for whatever leaves, the US, the second way that started in, I think April, um, you can't do Duty drawback and that's where we're seeing it and passing around the customers. Um, I would say the regulations are much more clear now. Um, it's not a 100% of the value that comes in. It's it's driven by weight and the percentage that's non uh non us Source metals. And so we've done a lot of work on that area. And so we're, we're working to reduce the impact across our supply chain and customers.
So, it hasn't changed, but I think we have clear views of how to manage it.
Brian Chin: Thank you. That is all from me.
Jeffrey Andreson: Yeah. Thanks.
Thank you. That's all from me.
Yeah, thanks.
Operator: Our next question comes from Tom Diffely with D.A. Davidson. Please proceed with your question.
Our next question comes from Tom Disley with DA Davidson. Please proceed with your question.
Tom Diffely: Yeah. Good afternoon. Thank you for a couple of questions here. I'm just curious, you know, the issues that you're seeing with both the hiring and the retention, is this a new issue or is this something you battle constantly?
Yeah, good afternoon. Thank you for a couple questions here. Uh, Jeff, curious, you know the issues that you're seeing with both the hiring and the retention. Uh, is this a new issue or is this something you battle constantly?
Jeffrey Andreson: I would say we have ramped our machining operation in Minnesota in the past. I mean, you can go back seven, eight years. We have had different cycles. This has been a little bit more challenging because we were chasing machinists. Now we have what we would call post-machining operations, so a lot more assembly work and things like that where you are in the clean room and they are off shift. We run 24 by 7 there. They have been a little more challenging than the last two ramps, I would say.
All right, I would say um we have ramped our Machining operation in Minnesota uh in the past. I mean you can go back 7, 8 years, we've had different cycles and um
and this has been a little bit more challenging because, uh, we were chasing machinists. Now, we have what we would call Post Machining operations so a lot more assembly work and things like that. Where you're in the clean room and they're off shift. So we run 24 by 7 there so they've been a little more challenging than the last 2 ramps. I would say.
Tom Diffely: Is it just a matter of, I guess, finding the people who are willing to do the job specifically, or is it, you know, higher wages, or what are the options here?
Jeffrey Andreson: Wages we can measure and adjust for, and we do that annually. We look at it during the year if we see any kind of compression in the skilled workforce. A little bit, but not a whole heck of a lot there. I would say it is the off shift and it is the clean room and a bunny suit and all that stuff. We have done a better job of ensuring they understand what that is really like before they take the jobs and move into it.
This is just a matter of, um, you know, I guess finding the people who are willing to do the job specifically, or is it, you know, higher wages, or what are the options here? Um, well,
Tom Diffely: Okay. Got it. Makes sense. As a follow-up, Greg, one of your peers talked about a pretty big tax impact from the one big beautiful bill this year. You kind of touched on it very briefly, but I am curious, as you go through that new bill, are you seeing any meaningful tax implications going forward?
Wages we can measure and and adjust for and we do that annually and and we look at it during the year if we see any kind of compression and skilled Workforce, um, a little bit but not a whole heck of a lot there. I would say it's the off-shifts and it's the clean room and a bunny suit and all that stuff. And so we've done a better job at ensuring, they understand what that's really like, before they take the jobs and and move into it, so okay, got it makes sense. Um, then as a follow-up, uh, Greg
You know, what have your peers talked about? A pretty big tax impact from the 1, big beautiful, bill this year, and you, you kind of touched on a very briefly, but I'm curious as you go through that new bill. Uh, are you seeing any meaningful texts is going forward?
Greg Swyt: Hey, Tom. Good question. Not on the near term, mainly because of where we are in our tax position in the U.S. We will not see, at least for a period of time, any material benefit on the various factors that we could take a benefit on, like depreciation, things like that. There is no benefit for us, at least in the near term, that we are anticipating.
Um,
um,
Not on the near term uh mainly because of our where we are in our tax position in the US.
Uh, we will not see at least for a period of time.
Any material benefits on on the various uh, factors that we could take a benefit on like appreciation. Uh, things like that. So there is no benefit for us at least in the near term that we're anticipating.
Tom Diffely: Okay.
Jeffrey Andreson: Yeah. That will flow through the P&L because of the NOLs. We will take advantage of it and use it later.
Tom Diffely: Yep. Okay. Makes sense. Thank you.
Okay. Yeah, that'll flow through the P&L because of the NOLs. We'll take advantage of it and use it later. So, yep. Okay, makes sense. Thank you.
Operator: Our next question comes from Christian Schwab with Craig-Hallum. Please proceed with your question.
Our next question comes from Christian Trob with Craig Allen. Please proceed with your question.
Krish Sankar: All right. Jeff, good luck on whatever's next. A year ago, we talked about this tremendous movement into sourcing internally and driving 20%, maybe 20% plus type of gross margins. Is that something that you guys still feel is an opportunity set? Obviously, the smoother manufacturing, but also higher revenue. But say the business, we have a good WFE in the future. We get to $300 billion a quarter, plus or minus. Is 20% gross margins still the bogey, or do you think that maybe that was too optimistic when you said it before?
Great. Uh, Jeff, good luck on whatever's next. Um, you know, a year ago, we talked about this tremendous movement into, you know, sourcing internally and driving, you know, 20%—maybe 20% plus—type of gross margins.
You know, is that something that you guys still feel is um
An opportunity set obviously, with the smoother manufacturing but also higher revenue, would say the business. We have a good WFE in the future; we get to $300 million a quarter, plus or minus.
You know, it was 20%.
Jeffrey Andreson: Well, one is I would say it is not something that we can attain. I would say we have to attack it in two. One is the passive components is primarily where we've been getting the qualifications and the valves and the substrates and fittings and along the way. Those will move us up. But until we actually get some level of the flow controller and then our prepared comments, we actually now have one of our first full integrated Ichor Holdings content gas boxes that got qualified at our customers' end customers. As that now kind of goes into production and the timing of their production ramp, which is not clear to us right now, that is what's going to move us up into the flow controllers because you don't need $100 million of those to move the needles.
Optimistic, when you said it before.
Well I I well 1 is I would say it is not something that we can attain. I would say we we have to attack it and it's too late.
What 1 is the, the passive components is, primarily, where we've been getting the qualifications and the valves and the substrates and fittings. And, um, along the way, those will move us up, but until we actually get some level of the flow controller and then our prepared comments, we actually now have 1 of our first
Jeffrey Andreson: Those will be our highest margin, highest IP content product going forward. No, 20% is still, I hate to use the word bogey. It's the target for the company to get to.
Full integrated, our core content. Gas boxes that got qualified in at our customers and customer. So, um, that now kind of goes into production and the timing of their production ramp, which is not clear to us right now. Um, um, that is what's going to move us up into the 20s because you don't need a hundred million dollars of those to move the needle. Those will be our highest margin, highest IP content product going forward. So, um, no, 20% is still, I hate to use the word bogey, it's the target for the company to get to.
Krish Sankar: Great. Great. Then as we look to the second half of the year, is there any puts or takes that you could imagine where gross margins get any worse than the current kind of, call it, 12.5%, 13% level other than revenue is seen by a dramatic amount?
Great, great. And then and and as as we as we look to the second half of the year, uh, I mean, is there any, you know, puts or takes?
You know, that you could imagine where gross margins get any worse than the current kind of, you know, like 12 and a half. 13% level other than, you know, revenue for seen by a dramatic amount.
Jeffrey Andreson: I would say if you go back a quarter, we had some operational issues. By the way, hiring is operational. When we are down to getting the people in place to meet the demand, it is not production and getting the cost down and all that. We were making progress along all of the fronts that we have been attacking since the beginning of the year. Those are progressing well. I think once we get the people in place, we still have some time to go. I would not say all of our products will be at our target cost until probably the end of Q1 of next year. Substrates are doing very, very well, and they are very close. The fittings are moving in the right direction. It is valves that we are attacking. This is the first quarter of production shipments for those.
Yeah, I would say, if you go back a quarter, we had some operational issues. And by the way, hiring is operational. But when we're down to getting the people in place to meet the demand, it's it's not it's it's not production and getting the cost down and all that we were making progress, along all of the fronts that we have been attacking since the, you know, the beginning of the year and so those are progressing. Well, I think once we get the people in place, um, we still have some we still have, uh, some time to go. Uh, I wouldn't say all of our products will be at our Target cost, um, until probably end of the first quarter of next year. But um, you know, substrates are doing very, very well and they're very close. And the fittings are are are moving in the right direction. So it's valves is what we're attacking and this is the first quarter of production shipments for those
um,
Krish Sankar: Great. Thank you. No other questions. Thanks.
Great. Thank. You know other questions. Thanks.
Jeffrey Andreson: Thanks.
Operator: Our next question comes from Edward Yang with Oppenheimer and Company. Please proceed with your question.
Thanks.
Our next question comes from Edward Yang with Oppenheimer. Please proceed with your question.
Brian Chin: Hi, Jeff. I just wanted to wish you all the best. I really appreciated learning from you. You will be missed.
Hi Jeff uh just wanted to wish you all the best uh really appreciated learning from you. You'll be missed.
Jeffrey Andreson: Thank you.
Thank you.
Brian Chin: My question, you mentioned advanced packaging plateaued in response to an earlier question. I just wanted to unpack that a little bit more. Is that end market driven, or are you seeing market share shifts between your customers?
Uh, my question, uh, you mentioned events, packaging, uh, plateaued in response to an earlier question. I just wanted to unpack that a little bit more is that uh, and Market driven or uh, you know, are you seeing markets Fair shift? Uh, between your customers.
Jeffrey Andreson: No. I think most of the biggest side of that is the advanced packaging plating tool that we do, and that has had a tremendous amount of growth. Both sides of that and the cleaning tool that we support have had great high trajectory growth for maybe the last two years. I would say they are just starting to slow now as the capacity is coming online in those areas. We do not believe that there is any kind of share shift there today. Our share is not as big as it is in gas panels, that is for sure.
Uh, know, I think most of, uh, the biggest side of that is the advanced packaging, um, plating. Um, tool that we do and that, um,
That is had a tremendous amount of growth. Um both sides of that and the cleaning tool that we support have had great, High trajectory growth for, maybe the last 2 years. And I would say they're just uh starting to slow now as the capacity is coming online in those areas.
So we don't believe that there's any kind of share shift there today. I mean our share is not as big as it is in gas panels, that's for sure.
Brian Chin: Got it. And it sounds like one of your public competitors is also talking about increasing their own internal content, local content. Sounds like a familiar strategy. Just wondering, as both you and this competitor become more vertically integrated, are there any cross-exposure or possibility of displacement where one or the other of you two sell to each other?
so,
got it.
And um, it sounds like um, 1 of your public competitors. Also talking about uh, increasing, you know, their their own internal content, local content. Uh, you know, sounds like a familiar strategy. Uh, just wondering um, as both you and this competitor become more vertically integrated. Are there any cross exposure or, you know, possibility of displacement where 1 or the other of you 2 uh sell to each other?
Jeffrey Andreson: We sell to each other today in certain areas because if they build boxes and they got a component that is qualified for us and they buy it from us, we buy heaters from them. That has been occurring for years and years and years between the two of us. But I have noticed their comments have been a little more aligned with the branded strategy that we have in bringing products together. I think that is what the market is looking for.
Um, we sell to each other today certain uh certain areas because if they build boxes and they got a component that's qualified for us and they buy it from us, we buy heaters from them. So that's that's that that's been occurring for years and years and years between the 2 of us. Um but yeah, I I have noticed their comments have been a little more aligned with the uh branded strategy that we have and bringing products together. I think it's a that's what the market is looking for.
Brian Chin: Okay. Thank you.
Jeffrey Andreson: You bet.
Okay, thank you.
You bet.
Operator: Our next question comes from Brian Chin with Stifel. Please proceed with your question.
Our next question comes from Brian Chin with People. Please proceed with your questions.
Brian Chin: Hi there. Just on that, I got cut off a little early earlier in the queue. Just one clarification, Jeff. I think you sort of suggested that, if I heard correctly, that into the December quarter, maybe consistent with some of your customer patterns, December could be lower than September, and that the second half would be a little bit down from a first-half weighted spending. Are we talking kind of like mid-single-digit decline, half-on-half?
By the way earlier in the queue. Um yeah, just 1 clarification, Jeff the
I think you sort of suggested that if I heard correctly that into December quarter, maybe consistent with some of your customer patterns December could be lower than September.
And that the second half would be a little bit down from the first half. Weighted spending, and are we talking kind of like mid-single-digit decline, half and half?
Jeffrey Andreson: I do not even know if it is low single digits is what I would say. It is about $5 million off of $480 something. So it is 1%. It is very close to flat. If we have a similar quarter, you could almost assume that it is timing.
Yeah, I I don't even know if it's it's slow. Single digits is what I would I would say. It's it's about 5 million off of
480 something. So it's, it's 1%, it's it's very it's very close to Flat um
You know, if we have a similar quarter end,
You could almost assume that it's timing.
Brian Chin: Okay. Got it. I missed some of that, but it sounds like you said a 1% decline in December quarter or something.
Okay, got it. I I missed some of that but sounds like you said, like, a 1% decline in December quarter or something.
Jeffrey Andreson: I would say that that's probably in the timing of just when our customers are building things versus us.
I would say that that's probably in the timing of just when our customers are, you know, building things versus us.
Brian Chin: Got it. Just to, I also wanted to touch on the flow control qualification. That is kind of a milestone relative to an important part of the insourcing strategy. You said sort of customer is customer. Can you give a sense of that sort of like a logic or DRAM application?
Got it. Um, and then just to I also wanted to touch on the flow control qualification that that is kind of a
Jeffrey Andreson: What I would say, and I think we've not said who the customer is, but we have said that these are almost all targeted on advanced logic opportunities.
A milestone relative to an important part of the insourcing strategy, and you said, sort of, customers' customer. Can you give us a sense of that, that sort of like a logic or DM application?
Brian Chin: Okay. Got it. Got it. Maybe just one last quick thing because I am back on the, can you give us, it sounds like from listening to the other questions that, you know, some of the slots that may have pushed out of the year in some cases kind of tied into maybe DRAM technologies, advanced packaging solutions, something like that?
What, what I would, what I say, and I think we've, we've we've not said who the customer is, but we have said that, these are almost all targeted on Advanced logic, uh, opportunities.
Okay.
Yeah. Got it. Maybe just 1 1 last quick thing because I'm back on the can. Can you give us it sounds like from listen to the other.
Uh, questions that, you know, some of some of the the the slots that may have pushed into, you know, out of the year in some cases kind of tied into, maybe dram Advanced Packaging.
Something like that.
Jeffrey Andreson: I'm not sure I follow. You're just talking about this, the North America IDM. I would say that's probably logic.
Um,
and that sure I followed you're you're just talking about this softness that the the North America IDM. I would say that's probably logic.
Brian Chin: Okay. Got it. Yeah. No worries. I appreciate it. Thank you.
Jeffrey Andreson: Okay. Thanks, Brian.
Okay, got it. Yeah, no worries. I appreciate it. Thank you.
okay, thank
Operator: We have reached the end of our Q&A session, and I would now like to turn the floor back over to Jeff Andreson for closing comments.
we have reached the end of our Q&A session and I would now like to turn the floor back over to Jeff for closing comments.
Jeffrey Andreson: I want to thank you for joining us on our call this quarter. I would like to thank our employees, suppliers, customers, and investors for their ongoing dedication and support. Our upcoming Q3 investor conferences include Oppenheimer's virtual conference next week, followed by Needham Semiconductor Conference, Jefferies in Chicago, and finally, B. Riley's Tech Conference in New York. After that, we look forward to our next quarterly update in early November for our Q3 earnings call. In the meantime, please feel free to reach out to Claire directly if you would like to follow up with us. Operator, that concludes our call.
I want to thank you for joining us on our call this quarter. I'd like to thank our employees suppliers customers, and investors for their ongoing dedication and support our upcoming Q3. Investor conferences include oppenheimer's virtual conference next week.
Followed by medium semiconductor conference.
Jeffries in Chicago and finally be Riley's Tech Conference in New York.
After that, we look forward to our next quarterly update in early November for our Q3 earnings call. In the meantime, please feel free to reach out to Clare directly. If you would like to follow up with us,
Operator, that concludes our call.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
This includes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.