Q4 2025 Ultra Clean Holdings Inc Earnings Call

February 23, 2026

Speaker #1: At this time, all lines are in listen-only mode. Following question-and-answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator.

Speaker #1: This call is being recorded in Monday, February 23, 2026. I would now like to turn the conference server to Rhonda Minetto, investor relations, please go ahead.

Speaker #2: Thank you, Operator. Good afternoon, everyone, and thank you for joining us. With me today are James Zhao, CEO; Sheri Savage, CFO; and Cheryl Knepfler, VP Marketing.

Speaker #2: James will begin with some prepared remarks about the industry and highlight some of the opportunities ahead for UCT. Sheri will follow with the financial review, and then we'll open up the call for questions.

Rhonda Minetto: Thank you, operator. Good afternoon, everyone, and thank you for joining us. With me today are James Zhao, CEO, Sheri Savage, CFO, and Cheryl Knepfler, VP Marketing. James will begin with some prepared remarks about the industry and highlight some of the opportunities ahead for UCT. Sherry will follow with the financial review, and then we'll open up the call for questions. Today's call contains forward-looking statements that are subject to risks and uncertainties. For more information, please refer to the Risk Factors section in our SEC filings. All forward-looking statements are based on estimates, projections, and assumptions as of today, and we assume no obligation to update them after this call. Discussion of our financial results will be presented on a non-GAAP basis. A reconciliation of GAAP to non-GAAP can be found in today's press release posted on our website.

Speaker #2: Today's call contains forward-looking statements that are subject to risks and uncertainties. For more information, please refer to the Risk Factors section in our SEC filings.

Speaker #2: All forward-looking statements are based on estimates, projections, and assumptions as of today, and we assume no obligation to update them after this call. Discussion of our financial results will be presented on a non-GAAP basis.

Speaker #2: A reconciliation of GAAP to non-GAAP can be found in today's press release posted on our website. And with that, I would like to turn the call over to James.

Speaker #2: James, please go ahead.

Speaker #3: Thank you, Rhonda, and good afternoon, everyone. And thank you for joining us. This is my first solo earnings call as CEO. And as I approach nearly six months in a row, I remain very energized by the opportunity ahead of us.

Rhonda Minetto: With that, I would like to turn the call over to James. James, please go ahead.

James Zhao: Thank you, Rhonda, and good afternoon, everyone, and thank you for joining us. This is my first solo earnings call as CEO, and as I approach nearly six months in a row, I remain very energized by the opportunity ahead of us. We've spent a significant time across our global sites, meeting with employees, customers, and partners, and have developed an even deeper conviction in the strength of our team, our strategic position, and have refined our long-term growth strategy and vision, which I now call UCT 3.0. I want to thank our employees worldwide for their focus, resilience, and commitment to operational execution during this transition.

Speaker #3: We've spent a significant time across our global sites meeting with employees, customers, and partners, and have developed an even deeper connection in the strengths of our team, our strategic position, and have refined our long-term growth strategy and vision which I now call UCT 3.0.

We will spend significant time across our global sites.

Meeting with employees, customers, and partners.

Speaker #3: I want to thank our employees worldwide for their focus, resilience, and commitment to operational execution during this transition. Their dedication to our customers, and to continuous innovation and improvement, is fundamental to our performance.

and have developed an even deeper connection in the strength of our team, our strategic position, and have refined our long-term growth strategy and vision, which I now call UCT 3.0.

Speaker #3: And it positions us well as we enter a new phase of AI technology-driven industrial growth. Where speed, scale, and execution will become defining advantages for long-term winners like UCT.

James Zhao: Their dedication to our customers and to continuous innovation and improvement is fundamental to our performance and it positions us well as we enter a new phase of AI technology-driven industrial growth, where speed, scale, and execution will become designing advantages for long-term winners like UCT. As you have heard recently from our customers and their customers, we're no longer preparing for a semiconductor recovery. We're entering a structural expansion of wafer fab equipment driven by AI infrastructure and physical AI demand. The long-term outlook for the semiconductor market remains very strong. Industry projections now suggest the market could reach $1 trillion in annual revenue of semiconductors by 2027, possibly earlier, which is significantly ahead of prior expectations. What we are witnessing is not a normal cyclical upturn. It is an AI technology inflection.

I want to thank our employees worldwide for their focus, resilience, and commitment to operational execution during this transition.

Speaker #3: As you have heard recently from our customers and their customers, we're no longer preparing for a semiconductor recovery. We're entering a structural expansion of wafer fab equipment, driven by AI infrastructure and physical AI demand.

Their dedication to our customers and to continuous innovation and Improvement is fundamental to our performance and its positions, as well, as we enter a new phase of AI technology-driven industrial growth.

Where speed scale and execution will become designing advantages for long-term winners like UCD.

As you have heard recently from our customers and their customers,

Speaker #3: The long-term outlook for the semiconductor market remains very strong. Industry projections now suggest the market could reach $1 trillion in annual revenue of semiconductors by 2027.

we're no longer preparing for a semiconductor recovery.

We're entering a structural expansion of wafer fab equipment.

Driven by AI infrastructure and physical AI demand.

Speaker #3: Possibly, earlier. Which is significantly ahead of prior expectations. What we are witnessing is not a normal cyclical upturn. It is an AI technology inflection.

The long-term outlook for the semiconductor market remains very strong.

Industry projections, not suggest the markets could reach 1 trillion in annual revenue.

Of semiconductors.

By 2027.

Speaker #3: The center of gravity has shifted from consumer electronics to AI infrastructure, physical AI, autonomous driving, and other AI applications. The evolving AI roadmap, from generative AI to physical and agentic AI, and ultimately artificial general intelligence or AGI, is driving greater end customer confidence and accelerating investment in AI infrastructure.

Possibly earlier.

Which is significantly ahead of prior expectations.

What we are. Witnessing is not a normal cyclical, upturn.

James Zhao: The center of gravity has shifted from consumer electronics to AI infrastructure, physical AI, autonomous driving, and other AI applications. The evolving AI roadmap from generative AI to physical and agentic AI, and ultimately artificial general intelligence, or AGI, is driving greater end customer confidence and accelerating investment in AI infrastructure. Stakeholders across the AI ecosystem are investing to support growing AI end market demand. Rising device complexity is accelerating wafer fab equipment spending, as the leading-edge fabs deploy new materials like molybdenum and new structures such as gate-all-around and high-bandwidth memory. These technologies require tight integrated solutions across deposition and removal, with increased depth etch CapEx intensity, which provide a tremendous growth opportunity for UCT. All these market drivers should lead to a multi-year WFE upturn once wafer fabs address their near-term clean room constraints. Our technology co-innovation is tightly aligned to our customers' roadmaps.

It is an AI technology inflection.

The center of gravity has shifted from consumer electronics to AI infrastructure.

Physically, AI autonomous driving. And the other

AI application.

The evolving AI enrollment.

Speaker #3: Stakeholders across the AI ecosystem are investing to support growing AI end market demand. Rising device complexity is accelerating wafer fab equipment spending as leading edge fabs deploy new materials like molybdenum, and new structures such as gate all-around and high-bandwidth memory.

From generative AI to physical and agentic AI, and ultimately, artificial general intelligence, or AGI.

Is driving greater and customer confidence and the accelerating investment in AI infrastructure.

Stakeholders across the AI ecosystem are investing to support growing AI and market demand.

Speaker #3: These technologies require tight integrated solutions across deposition and removal, with increased depth, edge, capex intensity. Which provide a tremendous growth opportunity for UCT. All these market drivers should lead to a multi-year WFE upturn once wafer fabs address their near-term clean room constraints.

Rising device complexity is accelerating wafer fab equipment spending as leading fabs deploy new materials like molybdenum.

And new structures such as gate-all-around and high-bandwidth memory.

These technologies required tight, integrated solutions across deposition and removal, with increased depth, edge capacity, and intensity.

Speaker #3: Our technology co-innovation is tightly aligned to our customers' roadmaps. We expect to see strengths around edge and deposition, especially ALD and high-precision edge. To support gate all-around and backside power distribution logic transitions, as well as high-bandwidth memory, advanced packaging, and greater than 300 layer NAND in memory.

Which provide a tremendous growth opportunity for UCT.

All these market drivers should lead to a multi-year WFE upturn, once we first address their near-term clean room constraints.

James Zhao: We expect to see strength around etch and deposition, especially ALD and high-precision etch, to support gate-all-around and backside power distribution logic transitions, as well as High-Bandwidth Memory, advanced packaging, and greater than 300 layer NAND in memory. This environment demands innovation, velocity, and operational agility. This is how UCT is positioned today, and will continue to evolve to win and create a sustainable, profitable growth. This strategic transformation is what we call UCT 3.0. Ramp readiness is our top priority now. We have been preparing for this moment, and this is where UCT has a distinct competitive advantage. Over the past several months, we have been focused on our business to operate with greater responsiveness and sense of urgency, efficiency, and accuracy.

Our technology coordination is tightly aligned to our customers' road maps.

We expect to see strengths around Edge and deposition especially ald and high Precision Edge.

Speaker #3: This environment demands innovation velocity and operational agility. This is how UCT is positioned today. And we'll continue to evolve to win and create a sustainable, profitable growth.

To support gate, or around and backside, power distribution and logic transitions.

As well as high-bandwidth memory advanced packaging.

And greater than 300 layer land in memory.

Speaker #3: This strategic transformation is what we call UCT 3.0. Ramp readiness is our top priority now. We have been preparing for this moment and this is where UCT has a distinct competitive advantage.

And operational agility.

This is how UCT is positioned today.

And will continue to evolve to win and create sustainable, profitable growth.

This strategic transformation is what we call UCT 3.0.

Speaker #3: Over the past several months, we have been focused on our business to operate with greater responsiveness and sensible urgency efficiency and accuracy. Leveraging our global talent and the footprint, we're driving operational execution initiatives to ensure we grow as the partner of choice for engineering support, development, and also the manufacturing support.

Ramp Readiness as our top priority now.

We have been preparing for this moment, and this is the word: UT has a distinct.

Competitive advantage.

James Zhao: Leveraging our global talent and the footprint, we're driving operational execution initiatives to ensure we grow as the partner of choice for engineering support, development, and also the manufacturing support. Through facility optimizations over the last several years, we have the capacity in place now to support approximately $3 billion in revenue today, with global utilization currently averaging 65%. Among our worldwide capacity, approximately 50% is currently in Asia, with plans to increase to 60%, which is strategically aligned to support our key customers' global manufacturing footprint. As volumes ramp quarter-over-quarter, we will be focused on improving operating leverage and generating meaningful margin expansion. While we expect 2026 demand to be second half weighted and increase into 2027, customers are encouraging us to position capacity ahead of that inflection.

Over the past several months, we have been focused on our business to operate with greater responsiveness and a sense of urgency, efficiency, and accuracy.

Leveraging our global talent and footprint.

Speaker #3: Through facility optimizations over the last several years, we have the capacity in place now to support approximately $3 billion in revenue today, with global utilization currently averaging 65%.

We're driving operational execution, initiatives to ensure we grow as the partner of choice.

For engineering support.

Development.

And also the manufacturing support.

Speaker #3: Among our worldwide capacity, approximately 50% is currently in Asia, with plans to increase to 60%, which is strategically aligned to support our key customers' global manufacturing footprint.

Through facility optimizations over the last several years.

We have the capacity in place now.

To support approach, mentally $3 billion in revenue today,

With global utilization, currently we're averaging 65%.

Among our worldwide capacity.

Speaker #3: As volumes ramp quarter over quarter, we will be focused on improving operating leverage and generating meaningful margin expansion. What we expect 2026 demand to be second half weighted and increase into 2027.

Approximately 50% is currently Asia with plans to increase to 60% which is strategically aligned to support our key customers Global manufacturing footprint.

As volumes ramp quarter over quarter.

Speaker #3: Customers are encouraging us to position capacity ahead of that inflection. Our largest customers are providing extended visibility enabling us to align capacity and service infrastructure in advance of increased other activity.

We will be focused on improving operating leverage and generating meaningful margin expansion.

While we expect 2026 demand to be second-half weighted, we also anticipate an increase into 2027.

Speaker #3: In parallel, we have identified and addressed product-specific supply chain and manufacturing constraint to ensure the readiness for a step function increase in orders. For UCT to support our long-term goal of a $4 billion annual run rate, only modest incremental clean room investment will be required.

James Zhao: Our largest customers are providing extended visibility, enabling us to align capacity and service infrastructure in advance of increased order activity. In parallel, we have identified and addressed product-specific supply chain and manufacturing constraints to ensure the readiness for a step function increase in orders. For UCT to support our long-term goal of a $4 billion annual run rate, only modest incremental clean room investment will be required. We do not expect infrastructure-related capacity to be a limiting factor during this cycle, provided we continue to build and retain the skilled workforce required and leverage automation and the lean capabilities to scale capacity efficiently. Having well-planned actual capacity entering a technology inflection of this magnitude is a strategic competitive advantage. This allow us to support customer roadmaps while capturing pull-in and drop-in opportunities, and responding rapidly to urgent need and frequent changes that others may struggle to support.

Customers are encouraging us to position capacity ahead of that inflection.

Our largest customers are providing extended visibility.

Enabling us to align capacity and service infrastructure in advance of increased order activity.

In parallel, we have identified and addressed

Speaker #3: We do not expect infrastructure-related capacity to be a limiting factor during this cycle. Provided we continue to build and retain the skilled workforce required and leverage automation and the lean capabilities to scale capacity efficiently.

Product-specific supply chain and manufacturing constraints to ensure the readiness for a start function. Increase in orders.

For support of our long-term goal of a $4 billion annual run rate.

Only modest incremental cleanroom investment.

Will be required.

Speaker #3: Having well-planned actual capacity entering a technology inflection of this magnitude is a strategic competitive advantage. This allows us to support customer roadmaps while capturing who in and dropping opportunities and responding rapidly to urgent need and frequent changes that others may struggle to support.

We do not expect infrastructure-related capacity to be a limiting factor during this cycle.

Provided we continue to build and retain the skilled workforce required, and leverage automation and lean capabilities to scale capacity efficiently.

Having well planned actual capacity entering a technology inflection of this magnitude.

Is a strategic competitive advantage.

Speaker #3: In addition to our ramp readiness initiatives, we're also accelerating the design to production cycle. Expanding our participation in high-value new product introductions at the leading edge nodes.

This allows us to support customer road maps, while capturing, holding, and dropping opportunities, and responding rapidly to urgent needs and frequent changes that others may struggle to support.

James Zhao: In addition to our ramp readiness initiatives, we're also accelerating the design-to-production cycle, expanding our participation in high-value new product introductions at the leading-edge nodes, and strengthening strategic technology integration with our customers. A key enabler of this is our expanded NPX strategy, which is comprised of new product introduction, new product development, and new product transition. Together, they will position UCT to co-innovate earlier, ramp faster, and manufacturing closer to customers, driving speed, responsiveness, and supply chain resilience at scale. Another important focus area is on digital transformation. By upgrading our systems, processes, and data infrastructure with AI-compatible solutions, we are further improving operational visibility, shortened cycle times, enhancing productivity, and enabling a faster response time to our customers. These digital initiatives set a solid foundation for our multi-year digital transformation, drive towards AI-enabled IT infrastructure and business processes to enhance operational agility and continuously improve productivity.

Speaker #3: And strengthening strategic technology integration with our customers. A key enabler of this is our expanded MPX strategy which is comprised of new product introductions, new product development, and new product transition.

In addition to our ramp Readiness initiatives.

Were also accelerating the design to production cycle.

Expanding our participation in high-value, new product introductions at the Leading Age nodes.

Speaker #3: Together, they will position UCT to a co-innovate earlier ramp faster, and manufacturing closer to customers. Driving speed, responsiveness, and supply chain resilience at scale.

And strengthening strategic technology integration with our customers.

A key enabler of this is our expanded MPX strategy, which is comprised of new product introduction, new product development and new product transition.

Speaker #3: Another important focus area is on digital transformation. By upgrading our systems processes and data infrastructure, with AI-compatible solutions, we offer further improving operational visibility, y, shorten cycle times, enhancing productivity, and enabling a faster response time to our customers.

Together, they will position UT to a co-innovate earlier.

Run faster.

And Manufacturing closer to customers driving, speed, responsiveness and supply chain resilience at scale.

Another important focus area is on digital transformation.

Speaker #3: These digital initiatives set a solid foundation for our multi-year digital transformation drive towards AI-enabled IT infrastructure and business processes to enhance operational agility and continuously improve productivity.

And data infrastructure with AI-compatible solutions.

We asked further, improving, operational visibility

Shorten cycle times.

Enhancing productivity and enabling a faster response time to our customers.

These digital initiatives provide a solid foundation.

Speaker #3: In closing, we remain focused on reaching our long-term $4 billion revenue target. Expanding margins over time and delivering durable shareholder value as a strategic co-innovator and manufacturing partner throughout the next cycle of technology inflection.

For our multi-year, digital transformation.

To drive towards AI-enabled IT infrastructure and business processes to enhance operational agility and continuously improve productivity.

James Zhao: In closing, we remain focused on reaching our long-term $4 billion revenue target, expanding margins over time, and delivering durable shareholder value as a strategic co-innovator and manufacturing partner throughout the next cycle of technology inflection. We will now turn the call over to Sheri, who will summarize our Q4 results and update you with our Q1 guidance. I look forward to your questions following the financial summary. Thank you.

In closing.

We remain focused on reaching our long-term 4 billion dollar Revenue Target.

Speaker #3: We will now turn the call over to Sherry who will summarize our fourth quarter result and update you with our first quarter guidance. I look forward to your questions following the financial summary.

Expanding margins over time and delivering durable.

Shareholder value as a strategic co-innovation partner throughout the next cycle of technology inflection.

Speaker #3: Thank you.

Speaker #1: Thanks, James, and good afternoon, everyone. Thanks for joining us. In today's discussion, I will be referring to non-gap numbers only. As James mentioned, we are entering a structural expansion of wafer fab equipment spend.

We will now turn the call over to Sheri, who will summarize our first quarter results and update you with our first quarter guidance.

I look forward to your questions following the financial summary. Thank you.

Sheri Savage: Thanks, James. Good afternoon, everyone. Thanks for joining us. In today's discussion, I will be referring to non-GAAP numbers only. As James mentioned, we are entering a structural expansion of wafer fab equipment spend, driven by AI infrastructure and physical AI demand. I'll now review our Q4 and full year results, as well as provide our Q1 guidance. For Q4, total revenue came in at $506.6 million, compared to $510 million in the prior Q3. Revenue from products was $442.4 million, compared to $445 million last Q3. Services revenue came in at $64.2 million in Q4, compared to $65 million in Q3. For the full year, total revenue was $2.1 billion, roughly flat with 2024 revenue.

Speaker #1: Driven by AI infrastructure, and physical AI demand. I'll now review our fourth quarter and full-year results as well as provide our first quarter guidance.

Thanks, James, and good afternoon, everyone. Thanks for joining us. In today's discussion, I will be referring to non-GAAP numbers only.

Speaker #1: For the fourth quarter, total revenue came in at $506.6 million, compared to $510 million, in the prior quarter. Revenue from products was $442.4 million, compared to $445 million, last quarter.

As James mentioned, we are entering a structural expansion of wafer fab equipment, with spend driven by AI infrastructure and physical AI demand. I'll now review our fourth quarter and full year results, as well as provide our first quarter guidance.

Speaker #1: Services revenue came in at $64.2 million, in Q4, compared to $65 million, in Q3. For the full year, total revenue was $2.1 billion, roughly flat with 2024 revenue.

Speaker #1: Due to facility optimization initiatives over the last several years, we have the capacity in place now to support approximately $3 billion in revenue, and are currently averaging $65% utilization.

For the fourth quarter, total revenue came in at $506.62 million.

Services revenue came in at $64.23 million.

Speaker #1: We believe that in order for UCT to support a $4 billion annual run rate, only investment will be required. We remain focused on aligning workforce capacity with demand while leveraging automation and lean disciplines to drive efficient and scalable growth.

Sheri Savage: Due to facility optimization initiatives over the last several years, we have the capacity in place now to support approximately $3 billion in revenue and are currently averaging 65% utilization. We believe that for UCT to support a $4 billion annual run rate, only modest incremental clean room investment will be required. We remain focused on aligning workforce capacity with demand, while leveraging automation and lean disciplines to drive efficient and scalable growth. Total gross margin for Q4 was 16.1%, compared to 17% last quarter. Products' gross margin was 14.1%, compared to 15.1% in Q3, and services was 29.7%, compared to 30% last quarter. Gross margin was impacted in Q4 due to a shift in product mix.

For the full year, total revenue was $2.1 billion, roughly flat with 2024 revenue.

Due to facility optimization initiatives over the last several years, we have the capacity in place now to support approximately $3 billion in revenue and are currently averaging 65% utilization.

Speaker #1: Total gross margin for the fourth quarter was $16.1%, compared to $17%, last quarter. Products gross margin was $14.1%, compared to $15.1%, in Q3. And services was 29.7%, compared to 30%, last quarter.

We believe that, in order for UCT to support a $4 billion annual run rate, only modest incremental clean room investment will be required.

We remain focused on aligning Workforce capacity with demand while leveraging Automation and lean disciplines to drive efficient and scalable growth.

Speaker #1: Gross margin was impacted in Q4 due to a shift in product mix. Total gross margin for 2025 was $16.5%, compared to $17.5%, in the prior year.

Total gross margin for the fourth quarter was 16.1% compared to 17% last quarter.

Products gross margin was 14.1%, compared to 15.1% in Q3.

Speaker #1: Margins continue to be influenced by fluctuations in volume, mix, manufacturing region, and related tariffs, as well as material and transportation costs, so there will be variances quarter to quarter.

And services was 29.7%, compared to 30% last quarter.

Sheri Savage: Total gross margin for 2025 was 16.5%, compared to 17.5% in the prior year. Margins continue to be influenced by fluctuations in volume, mix, manufacturing region, and related tariffs, as well as material and transportation costs, so there will be variances quarter-to-quarter. As production levels increase sequentially, we expect improved operating leverage and meaningful margin expansion. Operating expenses for the quarter was $56.6 million, compared to $57.7 million in Q3. As a percentage of revenue, operating expenses were 11.2% versus 11.3% in Q3. For the year, operating expense as a percentage of revenue was 11.2%, compared to 10.6% in the prior year.

Gross margin was impacted in Q4 due to a shift in product mix.

Speaker #1: As production levels increase sequentially, we expect improved operating leverage and meaningful margin expansion. Operating expenses for the quarter was $56.6 million, compared to $57.7 million, in Q3.

Total gross margin for 2025 was 16.5%, compared to 17.5% in the prior year.

Margins. Continue to be influenced by fluctuations in volume, mix manufacturing region and related tariffs as well as material and transportation costs. So there will be variances quarter to quarter.

Speaker #1: As a percentage of revenue, operating expenses were $11.2%, versus $11.3%, last quarter. For the year, operating expense as a percentage of revenue was $11.2%, compared to $10.6%, in the prior year.

As production levels increase sequentially, we expect improved operating leverage and meaningful margin expansion.

Operating expenses for the quarter was 56.6 million compared to 5 7. 7 0.

Speaker #1: Total operating margin for the quarter came in at $4.9%, compared to $5.7%, last quarter. Margin from our products division was $3.9%, compared to $4.9%.

As a percentage of revenue, operating expenses were 11.2%, versus 11.3% last quarter.

Speaker #1: And services margin was $12.4%, compared to $11.1%, in the prior quarter. For the full year, operating margin was $5.3%, compared to $6.9%, in the prior year.

For the year, operating expense as a percentage of revenue was 11.2%, compared to 10.6% in the prior year.

Sheri Savage: Total operating margin for the quarter came in at 4.9%, compared to 5.7% last Q3. Margin from our products division was 3.9%, compared to 4.9%, and services margin was 12.4%, compared to 11.1% in the prior Q3. For the full year, operating margin was 5.3%, compared to 6.9% in the prior year. Q4 tax rate came in at 21%, consistent with our expectations. Our mix of earnings between higher and lower tax jurisdictions can cause our rate to fluctuate throughout the year. For 2026, we expect our tax rate to stay in the low 20% range.

Total operating margin for the quarter came in at 4.9%, compared to 5.7% last quarter.

Speaker #1: Fourth quarter tax rate came in at 21%, consistent with our expectations. Our mix of earnings between higher and lower tax jurisdictions can cause our rate to fluctuate throughout the year.

Margin from our products division was 3.9%, compared to 4.9%.

And services margin was 12.4%, compared to 11.1% in the prior quarter.

Speaker #1: For 2026, we expect our tax rate to stay in the low 20% range. Based on 45.8 million shares outstanding, earnings per share for the quarter were $22 on net income of $10 million.

For the full year, operating margin was 5.3% compared to 6.9% in the prior year.

Fourth quarter, tax rate came in at 21%, consistent with our expectations.

Can cause our rate to fluctuate throughout the year.

Speaker #1: Compared to $28 on net income of $12.9 million, in the prior quarter. For the full year, earnings per share was $1.05 on net income of $47.7 million, compared to $1.44 on net income of $65.2 million, in 2024.

For 2 for 2026, we expect our tax rate to stay in the low, 20% range.

Sheri Savage: Based on 45.8 million shares outstanding, earnings per share for the quarter were $0.22 on net income of $10 million, compared to $0.28 on net income of $12.9 million in the prior quarter. For the full year, earnings per share was $1.05 on net income of $47.7 million, compared to $1.44 on net income of $65.2 million in 2024. Turning to the balance sheet, our cash and cash equivalents were $311.8 million, compared to $314.1 million at the end of last quarter. Cash flow from operations was $8.1 million this quarter, compared to breakeven last quarter, primarily due to working capital management.

Speaker #1: Turning to the balance sheet, our cash and cash equivalents were $311.8 million, compared to $314.1 million, at the end of last quarter. Cash flow from operations was $8.1 million, this quarter, compared to break-even last quarter, primarily due to working capital management.

For the full year, earnings per share was $15 on net income of 47.7 million. Compared to $1.44 on net income of 65.2 million in 2024.

Speaker #1: For the full year, cash flow from operations was $65.6 million, compared to $65 million, in the prior year. Looking ahead, we continue to see a strong structural backdrop for semiconductors, with industry estimates now calling for annual revenue to approximately $1 trillion, by 2027, possibly earlier, we continue to execute towards our longer-term $4 billion revenue goal, with a focus on expanding margins and generating durable shareholder returns.

Turning to the balance sheet, our cash and cash equivalents were 311.8 million compared to 314.1 million at the end of last quarter.

James Zhao: For the full year, cash flow from operations was $65.6 million, compared to $65 million in the prior year. Looking ahead, we continue to see a strong structural backdrop for semiconductors, with industry estimates now calling for annual revenue to approximately $1 trillion by 2027, possibly earlier. We continue to execute towards our longer-term $4 billion revenue goal, with a focus on expanding margins and generating durable shareholder returns. For Q1 2026, we project total revenue to be between $505 million and 545 million dollars. We expect EPS in the range of $0.18 to $0.34. With that, I'd like to turn the call over to operator for questions.

Sheri Savage: For the full year, cash flow from operations was $65.6 million, compared to $65 million in the prior year. Looking ahead, we continue to see a strong structural backdrop for semiconductors, with industry estimates now calling for annual revenue to approximately $1 trillion by 2027, possibly earlier. We continue to execute towards our longer-term $4 billion revenue goal, with a focus on expanding margins and generating durable shareholder returns. For Q1 2026, we project total revenue to be between $505 million and 545 million dollars. We expect EPS in the range of $0.18 to $0.34. With that, I'd like to turn the call over to operator for questions.

Cash flow from operations was $8.1 million this quarter compared to prior quarters, even last quarter, primarily due to working capital management.

For the full year, cash flow from operations was 65.6 Million compared to 65 million in the prior year.

Speaker #1: For the first quarter of 2026, we project total revenue to be between $505 million and $545 million, we expect EPS in the range of $0.18 to $0.34.

Looking ahead, we continue to see a strong structural backdrop for semiconductors, with industry estimates now calling for annual revenue to reach approximately $1 trillion by 2027, possibly earlier. We continue to execute towards our longer-term $4 billion revenue goal, with a focus on

Speaker #1: And with that, I'd like to turn the call over to Operator for questions.

Expanding margins and generating durable shareholder returns.

Speaker #2: Ladies and gentlemen, we will now begin the question-and-answer portion of the call. If you have a question, please press stars and the number one on your touchstone phone.

For the first quarter of 2026, we project total revenue to be between 505 million and 545 million. We expect Epps in the range of 18 cents to 34 cents,

Speaker #2: You will hear a beep that you've kind of just been raised. If you'd like to withdraw from the polling process, please press stars and the number two.

and with that, I'd like to turn the call over to operator for questions.

Operator: Ladies and gentlemen, we will now begin the question and answer portion of the call. If you have a question, please press star and the number one on your touchtone phone. You will hear a beep that your hand has been raised. If you'd like to withdraw from the polling process, please press star, then the number two. Ladies and gentlemen, we will now begin the question and answer portion. If you have a question, please press star, followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. If you would like to withdraw from the polling process, please press star followed by the number two. If you're using a speakerphone, please make sure to lift your handset before you press any keys. Your first question comes from the line of Charles Shi from Needham. Please ask your question.

Ladies and gentlemen, we will now begin.

Speaker #2: Ladies and gentlemen, we will now begin the question-and-answer portion. If you have a question, please press star, followed by the number one on your touchstone phone.

We will now begin the question and answer portion of the call.

If you have a question, please press star and the number 1 on your touchtone phone.

you will hear a

Speaker #2: You will hear a prompt that your hand has been raised. If you would like to withdraw from the polling process, please press star, followed by the number two.

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Speaker #2: If you're using a speakerphone, please make sure to lift your handset before you press any case. Your first question comes from the line of Charles Shi from Needham.

Speaker #2: Please ask your question.

Speaker #3: Hi. Good afternoon. Thanks for taking my questions. I want to start with your overall view on WFE. Back in January, I believe you talked about probably low to mid teens WFE growth.

Ladies and gentlemen, we will now begin the question and answer portion. If you have a question, please press star followed by the number 1 on your touchtone phone. You will hear a prompt that your hand has been raised. If you would like to withdraw from the polling process, please press star followed by the number 2. If you're using a speakerphone, please make sure to lift your handset before you press any keys.

Charles Shi: Hi, good afternoon. Thanks for taking my questions. I want to start with your overall view on WFE. Back in January, I believe you talked about probably low to mid-teens WFE growth. I saw your presentation, there's a $125 to 135 billion projection in the deck, but they're not so sure about your base numbers. Can you give us a little bit better sense of what's your WFE forecast this year? On a related question, the Q1 guidance looks like, at least on a year-over-year basis, it's at the midpoint of the guidance, it's only up a little bit. It looks like you may be predict, I mean, implying a very, very strong second half pickup.

Your first question comes from the line of Charles Shei from NEM. Please ask your question.

Speaker #3: I saw in your presentation there's one 25 to 135 billion projection in the deck, but the not so sure about your base numbers. So can you give us a little bit better sense of what's your WFE forecast this year?

Speaker #3: And on a related question, the Q1 guidance looks like at least on a year-on-year basis, it's at the midpoint of the guidance. It's only up a little bit.

Hi, good afternoon. Uh, thanks for taking my questions. I want to start with uh, your over overall view on wfe, uh, back in January. I believe you talked about, uh, probably low to mid, uh, teens wfg growth. Uh, or I saw your, you know, presentation there's 1, uh, 25 to 135 billion uh a projection in in the deck but the not so sure about your base numbers. So,

Speaker #3: So it looks like you may be implying a very, very strong second-half pickup. I wonder how the shape of the year could be. Thank you.

Speaker #4: Hi, Charles. Let me answer your questions, and I will have Cheryl Knepfler. So for as I explained to you in the Needham conference a month ago, we see the forecast increase week by week.

Charles Shi: I wonder how the shape of the year could, could, could, could be. Thank you.

Can you give us a little bit better sense. What's your wf4 forecast this year? And On a related question? Uh, the q1 guidance looks like at least on young year basis. Uh, it's, uh, it's, uh, at the midpoint of the guidance is only up, uh, a little bit. So, it looks like you may be predict, uh, I mean, implying a very, very strong second, half pickup, but wonder how the shape of the year, uh, could be. Thank you.

James Zhao: Hi, Charles. Let me answer your questions, and I will have Sharut chime in. As what I explained to you in a meeting conference a month ago, you know, we see the forecast increase week by week. Right now, our view on the overall WFE is bigger than a month ago, so we're looking at 15% to 20% year-over-year growth. In terms of your second question, yes, we do not see probably what you see the year-over-year, quarter-over-quarter from our customers, but we have a big bump from Q3 to Q4. If you take the average, the increase rate actually is kind of in line with our customers' growth rate. Okay?

Speaker #4: So right now, our view on the overall WFE is bigger than a month ago. So we're looking at 15 to 20 percent year-over-year growth.

Hi Charles uh let me uh answer your uh questions and I will have shared with him in. So for as as why I explained to you in the need and Conference

a month ago, you know, we see the

Speaker #4: And in terms of your second question, yes, we do not see probably what you see the year-over-year, quarter-over-quarter from our customers. But we have a big bump from Q3 to Q4.

Forecasts increase week by week. So right now, our view on the overall W is bigger than, uh, a month ago. So we're looking at 15% to 20% year-over-year growth.

Speaker #4: So if you take the average increase rate, actually, it's kind of in line with our customers' growth rate. Okay?

Speaker #3: Hi. Hi, James. So maybe a quick clarification. You said big bump. Basically, you're saying maybe the run rate for your revenue run rate, you see September will be a very strong pickup from June, maybe from a strong pickup again from September to December.

And in terms of your second question, yes. Uh, we do not see, probably, what you see year-over-year or quarter-over-quarter from our customers, but we have a big bump from Q.

Q Q3 Q4. So if you take the average,

The increase rate actually is kind of in line with our customers' growth rate.

Charles Shi: Hi, hi, James. Maybe a quick clarification. You said a big bump.

Okay.

James Zhao: Mm-hmm.

Charles Shi: Basically, you, you're saying maybe the run rate for your revenue run rate, you see, like, September will be a very strong pickup from June, maybe from a strong pickup again from September to December. Is that, is that what you, what you were speaking to? Yeah. Thanks.

Speaker #3: Is that to? Yeah. Thanks.

Speaker #4: Yeah. I think that you're right. So look forward, with WFE staff function increase in the second half of '26, and that's where we see the over-year we're very optimistic about the whole year growth.

James Zhao: Yeah, I think that you're right. looks, look forward, we definitely see a step function increase in the second half of 2026, and that's where we see the year-over-year, and we're very optimistic about the whole year growth.

Speaker #3: Thanks. Maybe may I ask a question about the growth margin? So can you provide a little bit of color March quarter? What's the implied growth margin?

Yeah I think that you're right. So look, look forward. We definitely see that function uh increase in the second half of 26.

And uh, that's where we see the overall year, and we're very often miss optimistic about the the whole year growth.

Speaker #3: Expectation under your revenue and the EPS assumptions? Thank you.

Charles Shi: Thanks. Maybe I may I ask a question about the gross margin? Can you can you provide a little bit color, Q1, what's the implied gross margin expectation under under your revenue and the EPS assumptions? Thank you.

Speaker #4: Hey, Charles. This is Brian Harding. I'll cover the margin question for you. Just quickly, yeah, we expect growth margins in Q1 to be roughly the same, maybe slightly up to Q4.

Speaker #4: And then sequentially up from there through the year.

Thanks. Um, maybe I uh, may I ask a question about the gross margin so um uh. Can you uh can you provide a little bit of color? Uh March quarter. What's the implied? Gross margin expectation uh under under your revenue and EPS assumptions. Thank you.

Operator: Hey, Charles, this is Brian Harding. I'll cover the margin question for you. Just quickly, yeah, we expect gross margins in Q1 to be roughly the same, maybe slightly up to Q4, and then sequentially up from there through the year.

Brian E. Harding: Hey, Charles, this is Brian Harding. I'll cover the margin question for you. Just quickly, yeah, we expect gross margins in Q1 to be roughly the same, maybe slightly up to Q4, and then sequentially up from there through the year.

Speaker #3: Thank you.

Speaker #2: Your next question comes from the line of Krish Sankar from TD Cowan. Please ask your question.

Hey Charles, this is Brian Harding. I'll cover the margin question for you. Uh just quickly. Yeah, we expect gross margins in q1 to be roughly the same. Maybe slightly up to Q4 um and then sequentially up from there through the year.

Speaker #5: Yeah. I think this is a good question. James, I have two of them. One is if WFE is going to grow 15 to 20 percent, is it fair to assume you could outgrow that WFE this year?

Charles Shi: Thank you.

Thank you.

Operator: Your next question comes from the line of Krish Sankar from TD Cowen. Please ask your question.

Speaker #5: And would your revenues grow sequentially every quarter? Or is it really more backup rate that Q2 is going to be flattish? So just trying to figure out if you can outgrow WFE for ultra-clean revenues.

Operator 2: Yeah, I think this is my question. James, I have two of them. One is, if WFE is going to grow 15% to 20%, is it fair to assume you could outgrow that WFE this year? Would your revenues grow sequentially every quarter, or is it really more back-half-weighted that Q2 is going to be flattish? Just trying to figure out if you can outgrow WFE for Ultra Clean revenues.

Krish Sankar: Yeah, I think this is my question. James, I have two of them. One is, if WFE is going to grow 15% to 20%, is it fair to assume you could outgrow that WFE this year? Would your revenues grow sequentially every quarter, or is it really more back-half-weighted that Q2 is going to be flattish? Just trying to figure out if you can outgrow WFE for Ultra Clean revenues.

Your next question comes from the line of Kish Sankar from Ted Khan. Please ask your question.

Speaker #4: Yes. I think that what we look at is this year, we see really kind of a staff function growth. And of the WFE, so we're very confident we will kind of in line with the WFE growth.

Yeah, I think this is a good question. Uh, James, I have two of them. One is, uh, if W is going to grow 15% to 20%, does it say to assume you could outgrow that WFP this year, and, uh, would your revenues grow sequentially every quarter or is it really more back half weighted, that Q2 is going to be flattish? So just trying to figure out if you can outgrow WFP for Ultra Clean revenues.

James Zhao: Yes, I, I think that what we look at is, you know, this year, we see a really kind of a step function growth and, of, of the WFE. We're very confident, you know, we will kind of in line with the WF- WFE growth. We also see that because we have a well-planned extra capacity, that really can address $3 billion. We will capture more opportunities, leverage that extra capacity. We're pretty confident we will be on par with WFE growth or even higher.

Speaker #4: And we also see that because we have a well-planned extra capacity that really can address $3 billion, so we'll capture more opportunities to leverage that extra capacity.

Speaker #4: So we're pretty confident we will be on par with WFE growth or even higher.

Yes, I think that, uh, what we look at is, you know, this year, we see a really kind of uh, a step function growth and and of of the wfe. So we're very confident, you know, we will kind of uh in line with the w wfe growth. Um, and we also see that because we have a

Well planned.

Speaker #5: And would it be sequentially growing, or is it more really like Q3, Q4?

Speaker #4: I think that we'll see another growth in Q2 already, but more staff function in the second half.

Actual capacity that really can address 3 billion dollar. So we will capture more opportunities, leverage that extra capacity, so we're pretty confident. We will be on par with WFC growth or even higher.

Operator 2: Would it be sequentially growing, or is it more really like Q3, Q4?

Krish Sankar: Would it be sequentially growing, or is it more really like Q3, Q4?

Speaker #5: Got it. Got it. And then a quick follow-up. How much is China as a percentage of revenues last quarter? And how do you expect that to grow, especially given that the Chinese semi-cap customers seem to be doing pretty well?

And would it be sequentially growing, or is it more really like Q3, Q4?

James Zhao: I, I think that we'll see another growth in Q2 already, but more of that function in the second half.

Operator 2: Mm-hmm. Got it. Got it. Then a quick follow-up. How much was China as a % of revenues last quarter, and how do you expect that to grow, especially given that the Chinese semi-cap customers seem to be doing pretty well?

Krish Sankar: Mm-hmm. Got it. Got it. Then a quick follow-up. How much was China as a % of revenues last quarter, and how do you expect that to grow, especially given that the Chinese semi-cap customers seem to be doing pretty well?

Q2 already, but more of that function in the second half.

Speaker #4: It's a great question. I think that as you have already heard from our customer, the WFE in China is flattish. In 2026, I think because of the worldwide WFE is growing, substantially, I think the percentage of the China WFE will be lower.

Got it, got it, and then a quick follow-up. Uh, how much was China as a percentage of revenues last quarter? And how do you expect that to grow, especially given that the Chinese semi customers seem to be doing pretty well?

James Zhao: It's a great question. I think that, as you have already heard from our customer, you know, the WFE in China is flattish in 2026. I think because of the worldwide WFE is growing substantially, I think the % of the China WFE will be lower. For our business, for the China OEMs, we see also kind of flattish forecast for 2026. But overall, it's less than 7% of our overall revenue. I would not put too much of the emphasis on this.

Speaker #4: For our business, for the China OEMs, we see also kind of flattish forecast for 2026. But overall, it's less than 7% of our overall revenue.

Yes, you'll have already heard from our customer, you know, that, that be, uh, in China is flagged uh, in 2026.

Speaker #4: So I would not put too much of an emphasis on this.

Speaker #5: Got it. Thank you very much.

Speaker #2: Your next question is from the line of Edward Yang from Oppenheimer. Please ask your question.

Speaker #6: Hi, James. Thanks for the time. Just wanted to follow up on the growth margin assumption for the upcoming first quarter '26. I think Brian mentioned that you're expecting same or slightly up from third quarter.

Operator 2: Got it. Thank you very much.

Krish Sankar: Got it. Thank you very much.

I think because of the the worldwide wfp is growing substantially. I think the percentage of the China uh wfe will be lower uh for our business for the China oems with the uh also kind of flattish forecast for 2020 266. So but overall it's less than 7% of our uh overall uh Revenue. So I would not put the too much of the emphasize on this.

Got it. Thank you very much.

Operator: Your next question is from the line of Edward Yang from Oppenheimer. Please ask your question.

Edward Yang: Hi, James. Thanks for the time. Just wanted to follow up on the gross margin assumption for the.

Your next question is from the line of Edward Young from Oppenheimer. Please ask your question.

Speaker #6: So just wondering, what's driving that? Why aren't you seeing more operating leverage from that? And can you maybe talk a little bit more in detail about the mix issue that you saw in the fourth quarter?

James Zhao: Mm-hmm.

Edward Yang: upcoming Q1 2026. I think Brian mentioned that, you know, you're expecting same or slightly up from Q3. Just wondering, you know, what's driving that? Why aren't you seeing more operating leverage from that? Can you maybe talk a little bit more in detail about the mix issue that you saw in Q4?

James Zhao: Mm-hmm.

Speaker #4: Yeah. I think that I will answer that, and I'll maybe Brian can chime in. So overall, I really see, as I said, we're running at 65% of the utilization rate today.

Speaker #4: And we see definitely the demand is growing quarter by quarter. So by the end of 2026, we definitely see much higher utilization rate that will naturally expand our margin profile.

Hi James. Um, thanks for the time. Um, just wanted to follow up on the uh the gross margin. Assumption for the uh upcoming first quarter uh 26. Uh, I think Brian mentioned that, you know, you're expecting um, same or slightly up from uh, third quarter. So uh just wondering, you know, um what's driving, that yrg seeing more? Um, operating leverage from that and can you maybe talk a little bit more in detail about the mix issue that you saw on the fourth quarter?

James Zhao: Yeah, Ed, I, I, I think that, that I will answer that, and now maybe Brian can chime in. Overall, I really see, as I said, you know, we're, we're running at 65% of the utilization rate today, and we'll see definitely the demand is growing quarter by quarter. By the end of 2026, we definitely see much higher utilization rate that will naturally expand our margin profile. Also, we're, we're keeping very disciplined operation cadence, so we will not grow the OPEX and IDL as the revenue grow. That will also, that discipline, will also give us a margin expansion opportunities. Brian, maybe you want to talk more on the model standpoint.

Speaker #4: And also, we're keeping very disciplined operation cadence. So we will not grow the OPEX and IDL as the revenue growth. So that will also that discipline will also give us a margin expansion opportunities.

% of the utilization rate today, and we'll see. Definitely, the demand is growing quarter by quarter. So by the end of 2026, we definitely see a much higher utilization rate.

Speaker #4: And Brian, maybe you want to talk more on the model standpoint.

Speaker #3: Yeah. Sure. Just looking at Q3 to Q4, first off, Ed, we in Q3, we did have a favorable product mix. That didn't repeat again in Q4.

Speaker #3: And our margins do continue to fluctuate. With volume and mix and manufacturing regions as well as tariffs, and material transportation costs, a number of things impact our margins quarter to quarter.

That will naturally expand our margin profile. And also, we're, we're keeping very disciplined operation Cadence. So, we will not grow the old tax and ideal as the revenue growth. So that will also that discipline will also give us a a margin expansion opportunities.

Brian E. Harding: Yeah, sure. Just looking at, you know, pre, Q3 to Q4, first off, Ed, in Q3, we did have a favorable product mix that didn't repeat again in Q4. Our margins do continue to fluctuate with volume and mix and manufacturing regions, as well as tariffs and material transportation costs. A number of things impact our margins quarter-to-quarter. Going forward into Q1, I did say that we expect Q4 and Q1 to be roughly in line, maybe slightly better in Q1. As volumes come in, as James mentioned, in Q2, Q3, and Q4, we expect sequential margin expansion in a meaningful way.

Speaker #3: And going forward into Q1, I did say that we expect Q4 and Q1 to be roughly in line, maybe slightly better in Q1. But then as volumes come in, as James mentioned, in Q2, 3, and 4, we expect sequential margin expansion in a meaningful way.

Speaker #6: Okay. And I mean, this is a tough question to answer, but obviously, a lot of excitement around what's happening in memory. And that's a business that in the prior peak was 900 million in revenue for you.

And Brian. Maybe you want to talk more on the model standpoint? Yeah, sure. Just looking at, you know, Q3 to Q4 first off Ed. We um we in Q3 we did have a favorable product mix that didn't repeat again in Q4. Um and so and and our margins do continue to fluctuate with volume and mix and Manufacturing re regions as well as tariffs and material Transportation costs and a number of things impact. Our our margins quarter to quarter and going forward into q1. I did say that we'd expect Q4 and q1 to be roughly in line. Maybe slightly better in q1, but then as volumes come in as James mentioned, in Q2 3 and 4, we expect sequential margin expansion uh in a meaningful way.

Edward Yang: Okay. I mean, this is a tough question to answer, but, you know, obviously a lot of excitement around what's happening in memory, and that's a business that in the prior peak was, you know, $900 million in revenue for you. It's, it's down about $300 million from that peak. I would imagine that would have some significant upside as well. James, when you think about, I guess, this memory cycle, you know, what, what's your feeling in terms of, you know, how much longer it could go in terms of the, the strength on the upside and, you know, what are the, what are the sort of parameters we should be watching out for in terms of the slope of that upcycle and the duration of that upcycle? Thank you.

Speaker #6: It's down about 300 million from that peak. So I would imagine that would have some significant upside as well. So James, when you think about, I guess, this memory cycle, what's your feeling in terms of how much longer it could go in terms of the strength on the upside?

Speaker #6: And what are the sort of parameters we should be watching out for in terms of the slope of that up cycle and the duration of that up cycle?

Okay. And, uh, I mean, this is a tough question to answer, but, um, you know, obviously a lot of excitement around what's happening in memory, and that's a business that, um, in the prior peak was, you know, $900 million in revenue for you. It's down about $300 million from that peak. Um, so I would imagine that would have some significant upside as well. So, James, when you think about, I guess, uh, this memory cycle, um,

Speaker #6: Thank you.

Speaker #4: Thank you. Adam, this is a great question. I think that you hear from our customers' customer, right? So some of them are mentioning that the shortage will last until the 2028.

You know what, what what are what's your feeling in terms of, you know, how much longer it could go in terms of the strength on the upside? And you know, what are the what are the sort of parameters? We should be watching out for in terms of um the slope of that upcycle and the duration of that upcycle?

Speaker #4: And what we see is that they all three of them Micron, Samsung, and SK, they are really investing on greenfield. Will they continue to convert existing fab to really kind of address immediate demand?

Thank you.

James Zhao: Thank you. Ed, this is a great question. The thing that you hear from our customer's customer, right? Some of them are mentioning that the shortage will last until 2028. We see that, you know, the all three of them, Micron, Samsung, and SK, they are really investing on Greenfield. Will they continue to convert existing fab to really come address immediate demand? We really see this as a multi-year op term for the memory segment. Also, you look at the end market demand, HBM will compromise the nameplate, the capacity in the DRAM factories. You almost need more WFE, you know, investment to compensate that focus on HBM capacity expansion, while they still try to address the unbalance, the demand and supply in the regular DRAM market....

Thank you. Uh, as—as—as this is a great question. The thing that you hear from our, uh, customer's customer, right? So some of them are mentioning that the shortage will last until 2028.

Speaker #4: So we really see this as a multi-year upturn for the memory segment. And also, you look at the end market demand, HBM will compromise the nameplate, the capacity in the DRAM factories.

And we will see you at that. You know, they all 3 of them, uh, Mike from uh Samsung and SK. They are really investing on Greenfield.

Will they continue to convert existing Fab to really come address immediate demand? So

Speaker #4: So you almost need more WFE investment to compensate that focus on HBM capacity expansion while they still try to address the unbalanced demand and supply in the regular DRAM market.

We really see this as a multi-year upturn for, uh, for the memory, uh, segment.

Speaker #4: And also, I think that if you look at the NAND, you still see that upgrade from the 2XX to 3XX and 4XX. So that will continue you heard LAM is talking about that $40 billion over multiple years of NAND upgrade capacity and investment.

And also, you look at the, the end market demand hbm will compromise the name. Play the capacity in the drum factories, so you almost need more wfp, uh, you know, investment to compensate that, uh, focus on hbm capacity expansion, will they still try to address the the unbalanced? The demand and Supply in a regular dram Market.

James Zhao: I think that if you look at the NAND, you still see that upgrade from the 2xx to 3xx and 4xx. That will continue. You heard Lam is talking about that $40 billion over multiple years of NAND upgrade, capacity, and investment. They, they also mentioned that they're going to modify that model, seeing the demand even for the ESD, for example, right? I think that overall, we, we really believe this is a multi-year growth for the NAND, and customer are talking about for the AI-specific memory, they see a 22% bigger, or 2 to 3x of CapEx compared to the regular memory market.

Speaker #4: And they also mentioned that they're going to modify that model. Seeing the demand, even for the ESSD, for example, right? So I think that overall, we really believe this is a multi-year growth for the NAND and customer are talking about for the AI-specific memory, they see a 22% figure or 2 to 3X figure compared to the regular memory market.

And also I think that if you look at the land, you still see that upgrade uh from the uh Bleu XXX to 3x action for XXX. So that will continue. Uh you heard uh, lamb is talking about that 40 billion over multiple years of non upgrade uh capacity uh and investment. And they they also mentioned that they're going to uh

Modify that model.

Speaker #6: That's very helpful. Thank you.

Seeing the demand even for the essd, for example, right? So I think that overall, we, we really believe this is a multi-year growth for the nand, and customer talking about for the AI specific memory. They see.

Speaker #2: Your last question comes from the line of Christian Schwab from Keg Helm. Please ask your question.

Here, 22% bigger, uh, or 2 to 3x scatter compared to the regular memory market.

Edward Yang: That's very helpful. Thank you.

Speaker #4: Great. Thanks for taking my question. So James, with the 65% utilization rate, in your recent facility optimization over the last year and a half or two years, how should we be thinking about what utilization rate or what type of order visibility would be required to put, in essence, the billion dollars' worth of capacity that's available to you above and beyond the $3 billion you have today?

That's very helpful. Thank you.

Operator: Your last question comes from the line of Christian Frogg from Craig-Hallum. Please ask your question.

Christian Schwab: Great, thanks for taking my question. James, on with the 65% utilization rate in your recent, you know, facility optimization over the last 1.5 or 2 years, you know, how should we be thinking about it? What utilization rate or what type of order visibility would be required to put, in essence, the $1 billion worth of capacity that's available to you above and beyond the $3 billion you have today? How should we be thinking about that?

Your last question comes from the line of Christian fraud from kg Helen, please ask your question.

Great. Thanks for taking my question.

so, James on,

Organization rate.

Speaker #4: How should we be thinking about that?

Speaker #5: Yeah. I think that what we see today, Christian, is that week by week, we see a drop in forecast. So we're very optimistic from the run rate quarterly run rate standpoint.

Rate um for what type of order visibility uh would be required um, to put in essence, the billion dollars worth of capacity that's available to you, uh, above and beyond the 3 billion, you have today, uh, how should we be thinking about that?

James Zhao: Yeah, I think that, you know, what we see today, Christian, is that week by week, we see a drop in forecast. We're very optimistic from the run rate, quarterly run rate standpoint, we'll fill that capacity very quickly. Especially, we're actually shifting our focus to Asian manufacturing, you know, it's kind of in line with our customer's global manufacturing strategy. Very soon you will see our Asian factory will fill completely, and that will eventually represent 60% of our global capacity and well match the customer's manufacturing footprint. With the increasing utilization, with highly weighted Asian manufacturing, we'll see, you know, really the positive improvement on our margin profile.

Speaker #5: We'll fill that capacity very quickly. Especially we actually shifting our focus to Asian manufacturing. It's kind of in line with our customer's global manufacturing strategy.

Yeah, I think that, uh, you know, what we see today, uh, Kristen, is that, uh, week by week.

With the drop in forecast.

Speaker #5: So very soon, you will see our Asian factory will fill completely. And that will eventually represent 60% of our global capacity. A well-matched customer's manufacturing footprint.

So, we're very optimistic from the run rate, quarterly run rate standpoint. We'll fill that capacity very quickly, especially as we're actually shifting our focus.

To Asian manufacturing. Uh, you know, it's kind of in line with our customers' global manufacturing strategy.

Speaker #5: So with the increasing utilization with heavy-weighted Asian manufacturing, we'll see really the positive improvement on our margin profile.

So very soon you will see our Asian Factory will filled completely. And uh, that will eventually represent 60% of our Global capacity. A well-matched. The customers manufacturing uh uh footprint.

Speaker #4: Great. And then on the margin profile, understanding utilization rates having an impact, but as your customers then begin to, especially in memory, materially increase wafer starts per month, naturally, your services business, which is heavily influenced by wafer starts similar to what we saw in '20 and '21 when that mix of revenue was larger in a 29% gross margin plus or minus naturally kind of drives gross margins there without any material increase in product gross margin.

So, with the increase in utilization,

With Highway weighted Asian Manufacturing.

We'll see, you know, really the positive uh Improvement on our margin profile.

Christian Schwab: Great. On the margin profile, understanding, you know, utilization rates having an impact, but as your customers then begin to, especially in memory, materially increase, you know, wafer starts per month, naturally, your services business, which is heavily influenced by wafer starts, you know, similar to what we saw in 20 and 2021, when that mix of revenue was larger, you know, and a 29% gross margin, ±, naturally kind of drives gross margins there without any material increase in product gross margin. Am I thinking about that right?

Great and and and then on the, on the margin profile, um understanding you know, utilization rates having an impact. But as it, as your customers, then begin to, um,

especially in memory, uh,

materially increase, you know, wafer starts per month, um, naturally your services business, which is

Heavily influenced by, uh, wafer starts.

You know.

Speaker #4: Are you thinking about that right?

Speaker #5: Yes, you're right.

Speaker #4: Great. Great. So I think that yeah. So I guess the question is, what is the growth on the service business? So in that sense, we see double-digit growth in 2026.

Similar to what we saw in 20 and 21. When that mix of of Revenue was was larger, you know, in a 29%, gross margin plus, or minus naturally kind of drives gross margins there without any material increase in product growth margin, you're thinking about that, right?

James Zhao: Yes, you're right.

Yes, you're right.

Christian Schwab: Great. Great.

James Zhao: I think that-- Yeah, I guess the question is, what is the growth on a service business? In that sense, we see double-digit growth in 2026. Again, it's also weighted in the second half, our leading-edge foundry logic, logic customers ramp up their factories in US. We definitely see we're well positioned for that US foundry logic ramp, in addition to our current customer we're serving in US.

Speaker #4: Again, it's also weighted in the second half, when our leading-age foundry logic customers ramp up their factories in the US. We definitely see we're well positioned for that US foundry logic ramp.

Great great. So I think that yeah. So I guess the question is uh, what is the growth on the service business?

So in that sense we we see uh double digit growth in 2026.

Speaker #4: In addition to our current customer we're serving. In the US. Great. Got it. No other questions. Thank you.

Um, again, it's also weighted in the second half. One hour, Leading Edge Foundry, logic, logic customers run top their factories in the US.

Speaker #5: Thank you.

Speaker #2: Thank you. There are no further questions at this time. I would now like to turn the call back to James Shaw for closing comments.

We definitely see we're well positioned for that. Uh, US standard logic RAM, in addition to our current customer worth serving, uh, in US.

Christian Schwab: Great. Got it. No other questions. Thank you.

Speaker #2: Sir, please go ahead.

James Zhao: Thank you.

Speaker #5: Thank you for joining us today. This concludes our earnings call. I will have a follow-up with you guys at a private session. Talk to you later.

Right. Got it. No other questions. Thank you.

Thank you.

Operator: Thank you. There are no further questions at this time. I would now like to turn the call back to James Zhao for closing comments. Sir, please go ahead.

Thank you. There are no further questions at this time. I would now like to turn the call back to James Xiao for closing comments. Sir, please go ahead.

James Zhao: Thank you for joining us today. This concludes our earnings call. I will have a follow-up with you guys at a private session. Talk to you later.

Thank you for joining us today. This concludes our earnings call. I will have a follow-up with you all at the private session.

Talk to you later.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.

Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect

Q4 2025 Ultra Clean Holdings Inc Earnings Call

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