Q1 2026 Ichor Holdings Ltd Earnings Call

May 4, 2026

Claire McAdams: Risks and uncertainties. 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 Philip Barros, our CEO, and Greg Swyt, our CFO. Phil will begin with an update on our business, and then Greg will provide additional details about our results and guidance. After the prepared remarks, we will open the line for questions. I'll now turn over the call to Philip Barros. Phil?

Speaker #1: Risks and uncertainties. Additionally, we will be providing certain non-GAAP financial measures during this conference call. Our earnings press release and the financial supplement posted to provide a reconciliation of these non-GAAP financial measures to their most comparable GAAP financial measures.

Speaker #1: On the call with me today are Phil Barros, our CEO, and Greg Swyt, our CFO. Phil will begin with an update on our business, and then Greg will provide additional details about our results and guidance.

Speaker #1: After the prepared remarks, we will open the line for questions. I'll now turn over the call to Phil Barros. Phil?

Speaker #2: Thank you, Claire, and welcome everyone to our Q1 earnings call. Just a few months into a multi-year growth cycle, and we are already delivering upside to our outlook and demonstrating strong earnings leverage.

Philip Barros: Thank you, Claire, welcome everyone to our Q1 earnings call. Just a few months into a multi-year growth cycle, we are already delivering upside to our outlook and demonstrating strong earnings leverage. Q1 revenues of $256 million came in at the upper end of our expectations of 15% from Q4. Gross margins of 12.8% also approached the high end of our guidance, enabling us to more than triple our operating income versus Q4 and deliver our highest earnings per share in 3 years. The early investments we made in ramping labor headcount and pre-positioning inventory are paying off. These are enabling Ichor to deliver strong execution for our customers and achieve growth towards the high end of our demand forecast. Demand across our core markets has further strengthened since our last earnings call.

Phil Barros: Thank you, Claire, welcome everyone to our Q1 earnings call. Just a few months into a multi-year growth cycle, we are already delivering upside to our outlook and demonstrating strong earnings leverage. Q1 revenues of $256 million came in at the upper end of our expectations of 15% from Q4. Gross margins of 12.8% also approached the high end of our guidance, enabling us to more than triple our operating income versus Q4 and deliver our highest earnings per share in three years. The early investments we made in ramping labor headcount and pre-positioning inventory are paying off. These are enabling Ichor to deliver strong execution for our customers and achieve growth towards the high end of our demand forecast. Demand across our core markets has further strengthened since our last earnings call.

Speaker #2: Q1 revenues of $256 million came in at the upper end of our expectations of 15% from Q4. Gross margins of 12.8% also approached the high end of our guidance.

Speaker #2: Enabling us to more than triple our operating income versus Q4, and deliver our highest earnings per share in three years. The early investments we made in ramping labor headcount and pre-positioning inventory are paying off.

Speaker #2: These are enabling ICOR to deliver strong execution for our customers and achieve growth towards the high end of our demand forecast. Demand across our core markets has further strengthened since our last earnings call.

Speaker #2: Our visibility now extends deeper into 2026. Within this very robust demand environment, we expect Ichor to be a top performer both in terms of growth and earnings leverage.

Philip Barros: Our visibility now extends deeper into 2026. Within this very robust demand environment, we expect Ichor to be a top performer, both in terms of growth and earnings leverage. Our Q2 forecast now reflects unconstrained demand exceeding $300 million. This is one of the steepest ramps witnessed in Ichor's history, representing growth well over 30% in just 2 quarters. Not only that, with stronger visibility since our last earnings call, we continue to expect every quarter in 2026 will be a growth quarter for Ichor. We enter the year with increased momentum and a clear strategy. Our higher confidence today reflects Ichor's critical role within the WFE industry and strong progress towards our strategic objectives. The technology transitions and strategic capacity expansions underway, largely in support of AI hyperscaling, favor Etch and Deposition applications, which favors Ichor.

Phil Barros: Our visibility now extends deeper into 2026. Within this very robust demand environment, we expect Ichor to be a top performer, both in terms of growth and earnings leverage. Our Q2 forecast now reflects unconstrained demand exceeding $300 million. This is one of the steepest ramps witnessed in Ichor's history, representing growth well over 30% in just two quarters. Not only that, with stronger visibility since our last earnings call, we continue to expect every quarter in 2026 will be a growth quarter for Ichor. We enter the year with increased momentum and a clear strategy. Our higher confidence today reflects Ichor's critical role within the WFE industry and strong progress towards our strategic objectives. The technology transitions and strategic capacity expansions underway, largely in support of AI hyperscaling, favor Etch and Deposition applications, which favors Ichor.

Speaker #2: Our Q2 forecast now reflects unconstrained demand exceeding $300 million. This is one of the steepest ramps witnessed in Ichor's history, representing growth well over 30% in just two quarters.

Speaker #2: Not only that, but with stronger visibility since our last earnings call, we continue to expect every quarter in 2026 will be a growth quarter for Ichor.

Speaker #2: We entered the year with increased momentum and a clear strategy. Our higher confidence today reflects Ichor's critical role within the WFE industry and strong progress towards our strategic objectives.

Speaker #2: The technology transitions and strategic capacity expansions underway largely in support of AI hyperscaling, favor etch-and-deposition applications, which favors ICOR. A great example of this is the 30% increase in the number of process steps required to produce leading-edge logic with Gate all-around architectures.

Philip Barros: A great example of this is the 30% increase in the number of process steps required to produce leading-edge logic with gate-all-around architectures. Increased investments in gate-all-around technology are significant tailwinds for Ichor's growth. Our objective is to gain share through this cycle, and the steps we have taken to pre-position inventory and ramp labor headcount will allow us to continue to perform for our customers, and this is how we will win. Turning to an update on our strategic initiatives we introduced last quarter, Q2 is shaping up to be a major step forward in our global footprint realignment. As a reminder, this initiative is aimed at driving three primary benefits. First, we are structurally eliminating the margin challenges we faced previously in order to drive stronger cross-cycle performance and greater predictability in our business.

Phil Barros: A great example of this is the 30% increase in the number of process steps required to produce leading-edge logic with gate-all-around architectures. Increased investments in gate-all-around technology are significant tailwinds for Ichor's growth. Our objective is to gain share through this cycle, and the steps we have taken to pre-position inventory and ramp labor headcount will allow us to continue to perform for our customers, and this is how we will win. Turning to an update on our strategic initiatives we introduced last quarter, Q2 is shaping up to be a major step forward in our global footprint realignment. As a reminder, this initiative is aimed at driving three primary benefits. First, we are structurally eliminating the margin challenges we faced previously in order to drive stronger cross-cycle performance and greater predictability in our business.

Speaker #2: Increased investments in gate all-around technology are significant tailwinds for Ichor's growth. Our objective is to gain share through this cycle, and the steps we have taken to pre-position inventory and ramp labor headcount will allow us to continue to perform for our customers, and this is how we will win.

Speaker #2: Turning to an update on our strategic initiatives we introduced last quarter, Q2 is shaping up to be a major step forward in our global footprint realignment.

Speaker #2: As a reminder, this initiative is aimed at driving three primary benefits. First, we are structurally eliminating the margin challenges we faced previously in order to drive stronger cross-cycle performance and greater predictability in our business.

Speaker #2: Second, we are enabling more efficient, scalable, high-volume manufacturing of our ICOR-branded products. Which will get us to our cost targets for these components. Third, by driving higher level of ICOR content within the systems we build, we will deliver significant improvements in gross margin flow-through and earnings leverage as revenues ramp.

Philip Barros: Second, we are enabling more efficient, scalable, high-volume manufacturing of our Ichor-branded products, which will get us to our cost targets for these components. Third, by driving higher levels of Ichor content within the systems we build, we will deliver significant improvements in gross margin flow-through and earnings leverage as revenues ramp. We have made strong progress, and I'm proud of the team, especially given the scale of the ramp we are operating in. Just a few months into the year, and we have already installed and qualified half of the plant equipment moves, which is ahead of schedule. We are now performing all manufacturing steps for our substrate product line within the same four walls within Mexico. These are the types of efficiency gains that will structurally improve our product margins and drive higher gross margin flow-through within the gas panel manufacturing business.

Phil Barros: Second, we are enabling more efficient, scalable, high-volume manufacturing of our Ichor-branded products, which will get us to our cost targets for these components. Third, by driving higher levels of Ichor content within the systems we build, we will deliver significant improvements in gross margin flow-through and earnings leverage as revenues ramp. We have made strong progress, and I'm proud of the team, especially given the scale of the ramp we are operating in. Just a few months into the year, and we have already installed and qualified half of the plant equipment moves, which is ahead of schedule. We are now performing all manufacturing steps for our substrate product line within the same four walls within Mexico. These are the types of efficiency gains that will structurally improve our product margins and drive higher gross margin flow-through within the gas panel manufacturing business.

Speaker #2: We have made strong progress and I'm proud of the team, especially given the scale of the ramp we are operating in. Just a few months into the year, and we have already installed and qualified half of the plant equipment moves, which is ahead of schedule.

Speaker #2: We are now performing all manufacturing steps for our substrate product line within the same four walls within Mexico. These are the types of efficiency gains that will structurally improve our product margins and drive higher gross margin flow-through within the gas panel manufacturing business.

Speaker #2: In our valve product line in Q1, we achieved full customer qualification to manufacture in Mexico. This significantly expands our capacity for this product line, enabling us to source internally and cut our dependence on outside suppliers.

Philip Barros: In our valve product line in Q1, we achieved full customer qualification to manufacture in Mexico. This significantly expands our capacity for this product line, enabling us to source internally and cut our dependence on outside suppliers. We will continue to ramp up capacity through Q2 and expect to be at full production as we exit the quarter. The success and speed of both the moves and qualifications gives us the confidence to reinitiate valve qualifications on one of our major customers, which we had placed on hold due to capacity constraints. As we exit Q2, we will begin to see the gross margin impacts of our footprint realignment into Mexico, with these moves enabling increased levels of proprietary Ichor content in the gas panels we make. As we move through the remainder of the year, we will be ramping Malaysia, which will drive a richer mix of machining revenues.

Phil Barros: In our valve product line in Q1, we achieved full customer qualification to manufacture in Mexico. This significantly expands our capacity for this product line, enabling us to source internally and cut our dependence on outside suppliers. We will continue to ramp up capacity through Q2 and expect to be at full production as we exit the quarter. The success and speed of both the moves and qualifications gives us the confidence to reinitiate valve qualifications on one of our major customers, which we had placed on hold due to capacity constraints. As we exit Q2, we will begin to see the gross margin impacts of our footprint realignment into Mexico, with these moves enabling increased levels of proprietary Ichor content in the gas panels we make. As we move through the remainder of the year, we will be ramping Malaysia, which will drive a richer mix of machining revenues.

Speaker #2: We will continue to ramp up capacity through Q2 and expect to be at full production as we exit the quarter. The success and speed of both the moves and qualifications give us the confidence to reinitiate valve qualifications on one of our major customers.

Speaker #2: Which we had placed on hold due to capacity constraints. As we exit Q2, we will begin to see the gross margin impacts of our footprint realignment into Mexico.

Speaker #2: With these moves enabling increased levels of proprietary ICOR content in the gas panels we make. As we move through the remainder of the year, we will be ramping Malaysia, which will drive a richer mix of machining revenues.

Speaker #2: Driving higher volumes of machining revenues and completing cost reduction initiatives in our footprint realignment are the final two steps in achieving our near-term gross margin targets of at least 15%.

Philip Barros: Driving higher volumes of machining revenues and completing cost reduction initiatives in our footprint realignment are the final two steps in achieving our near-term gross margin targets of at least 15%. As a reminder, while we complete the ramp-up of Mexico, we are temporarily increasing external supply to ensure strong, consistent delivery in our integration business. Taking all of this into account, today we are guiding Q2 revenues of approximately $300 million ±$10 million and sequential improvement in gross margin from Q1 to expected range of 13% to 14%. Beyond Q2, we continue to expect approximately 100 basis points per quarter in gross margin expansion as we complete our transitions into H2.

Phil Barros: Driving higher volumes of machining revenues and completing cost reduction initiatives in our footprint realignment are the final two steps in achieving our near-term gross margin targets of at least 15%. As a reminder, while we complete the ramp-up of Mexico, we are temporarily increasing external supply to ensure strong, consistent delivery in our integration business. Taking all of this into account, today we are guiding Q2 revenues of approximately $300 million ±$10 million and sequential improvement in gross margin from Q1 to expected range of 13% to 14%. Beyond Q2, we continue to expect approximately 100 basis points per quarter in gross margin expansion as we complete our transitions into H2.

Speaker #2: As a reminder, while we complete the ramp-up of Mexico, we are temporarily increasing external supply to ensure strong consistent delivery in our integration business.

Speaker #2: Taking all of this into account, today we are guiding Q2 revenues of approximately $300 million, plus or minus $10 million, and sequential improvement in gross margin from Q1 to an expected range of 13 to 14%.

Speaker #2: Beyond Q2, we continue to expect approximately 100 basis points per quarter in gross margin expansion as we complete our transitions into the second half.

Speaker #2: This level of gross margin expansion continues to support our expectation that gross profit dollars will grow around twice the rate of revenues as we move through the second half.

Philip Barros: This level of gross margin expansion continues to support our expectation that gross profit dollars will grow around twice the rate of revenues as we move through the second half. On today's call, I will reaffirm our stated target to exit 2026 delivering 35% Ichor branded content within the systems we build. As a reminder, we exited 2025 delivering systems with 25% Ichor branded content, up from 15% in 2024. Our next step function increase in Ichor branded content is in flow control, which is progressing to plan. We see 2026 as a qualification year, with first meaningful flow control revenues in 2027.

Phil Barros: This level of gross margin expansion continues to support our expectation that gross profit dollars will grow around twice the rate of revenues as we move through the second half. On today's call, I will reaffirm our stated target to exit 2026 delivering 35% Ichor branded content within the systems we build. As a reminder, we exited 2025 delivering systems with 25% Ichor branded content, up from 15% in 2024. Our next step function increase in Ichor branded content is in flow control, which is progressing to plan. We see 2026 as a qualification year, with first meaningful flow control revenues in 2027.

Speaker #2: On today's call, I will reaffirm our stated target to exit 2026 delivering 35% ICOR-branded content within the systems we build. As a reminder, we exit 2025 delivering systems with 25% ICOR-branded content, up from 15% in 2024.

Speaker #2: Our next step-function increase in ICOR-branded content is in flow control, which is progressing the plan. We see 2026 as a qualification year, with first meaningful flow control revenues in 2027.

Speaker #2: We expect that bringing the capacity online in both Mexico and Malaysia, along with flow control qualifications, will enable us to reach our goal to be capable of providing up to 75% of ICOR-branded content within the systems we build by year-end.

Philip Barros: We expect that bringing the capacity online in both Mexico and Malaysia, along with flow control qualifications, will enable us to reach our goal to be capable of providing up to 75% of Ichor branded content within the systems we build by year-end. Finally, I will take the opportunity to reiterate our strategic priority to leverage our machining capabilities into high growth markets outside of semiconductor. This business represents less than 10% of our revenues today, but we anticipate this will grow at a rate faster than our WFE this year, driven by a number of key positions in commercial space and defense markets. To close, we have made significant progress on our strategic initiatives and all within a backdrop of rapidly growing demand. We remain confident that Ichor is well-positioned to capitalize on the ramp and deliver strong earnings leverage through this cycle.

Phil Barros: We expect that bringing the capacity online in both Mexico and Malaysia, along with flow control qualifications, will enable us to reach our goal to be capable of providing up to 75% of Ichor branded content within the systems we build by year-end. Finally, I will take the opportunity to reiterate our strategic priority to leverage our machining capabilities into high growth markets outside of semiconductor. This business represents less than 10% of our revenues today, but we anticipate this will grow at a rate faster than our WFE this year, driven by a number of key positions in commercial space and defense markets. To close, we have made significant progress on our strategic initiatives and all within a backdrop of rapidly growing demand. We remain confident that Ichor is well-positioned to capitalize on the ramp and deliver strong earnings leverage through this cycle.

Speaker #2: Finally, I will take the opportunity to reiterate our strategic priority to leverage our machining capabilities into high-growth markets outside of semiconductor. This business represents less than 10% of our revenues today, but we anticipate this will grow at a rate faster than our WFE.

Speaker #2: This year. Driven by number of key positions in commercial space and defense markets. To close, we have made significant progress on our strategic initiatives and all within a backdrop of rapidly growing demand.

Speaker #2: We remain confident that Ichor is well-positioned to capitalize on the ramp and deliver strong earnings leverage through this cycle. With that, I will now hand it off to Greg.

Philip Barros: With that, I will now hand it off to Greg.

Phil Barros: With that, I will now hand it off to Greg.

Speaker #1: Thanks, Phil. Before I 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.

Greg Swyt: Thanks, Phil. Before I 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. Q1 revenues of $256.1 million came in at the upper end of our guidance range, up 15% sequentially, reflecting continued demand momentum and strong execution as volumes ramped through the quarter.

Speaker #1: 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.

Speaker #1: First quarter revenues of $256.1 million came in at the upper end of our guidance range up 15% sequentially reflecting continued demand momentum and strong execution as volumes ramped through the quarter.

Speaker #1: Gross margin increased to 12.8%, up 110 basis points sequentially and 30 basis points above the midpoint of guidance, driven primarily by incremental factory leverage on the higher revenue levels in our Integration business.

Greg Swyt: Gross margin increased to 12.8%, up 110 basis points sequentially, 30 basis points above the midpoint of guidance, driven primarily by incremental factory leverage on the higher revenue levels in our integration business. Operating expenses in the quarter were aligned with our forecast of $24.1 million. As a result, operating income for Q1 more than tripled compared to Q4 to $8.7 million or 3.4% of revenue, demonstrating meaningful operating leverage as volumes ramped. With both interest and tax aligned with expectations, earnings for the quarter were near the high end of guidance at $0.15 per diluted share based on 35.3 million diluted shares outstanding. Positive cash flow generation from the P&L increased significantly in the quarter, with EBITDA of nearly $14 million.

Speaker #1: Operating expenses in the quarter were aligned with our forecast at 24.1 million. As a result, operating income for Q1 more than tripled compared to Q4 to 8.7 million or 3.4% of revenue demonstrating meaningful operating leverage as volumes ramped.

Speaker #1: With both interest and tax aligned with expectations, earnings for the quarter were near the high end of guidance at $0.15 per diluted share, based on 35.3 million diluted shares outstanding.

Speaker #1: Positive cash flow generation from the P&L increased significantly in the quarter, with EBITDA of nearly $14 million. In the early stages of what we expect will be a sustained, multi-year ramp, we are making incremental investments in inventory in support of our customers.

Greg Swyt: In the early stages of what we expect will be a sustained multi-year ramp, we are making incremental investments in inventory in support of our customers. As a result, cash from operations was a use of $2.9 million. Capital expenditures for the quarter were $7.1 million. We are managing our CapEx investments towards approximately 3% of revenue, we expect this CapEx level to trend up modestly as we move into the H2 of the year. Which brings us to the balance sheet. Given our current levels of investments in inventory and CapEx, cash and equivalents totaled $89.1 million at the end of the quarter, a decrease of $9.2 million from Q4. DSOs increased modestly to 33 days, and inventory turns improved to 3.7, reflecting improved throughput as volumes increased.

Speaker #1: As a result, cash from operations was a use of $2.9 million. Capital expenditures for the quarter were $7.1 million. We are managing our CapEx investments toward approximately 3% of revenue, so we expect this CapEx level to trend up modestly as we move into the second half of the year.

Speaker #1: Which brings us to the balance sheet. Given our current levels of investments in inventory and CapEx, cash and equivalents totaled 89.1 million at the end of the quarter a decrease of 9.2 million from Q4.

Speaker #1: DSOs increased modestly to 33 days, and inventory turns improved to 3.7, reflecting improved throughput as volumes increased. Total debt at quarter-end was $122 million, and our net debt coverage ratio stands at 1.6.

Greg Swyt: Total debt at quarter end was $122 million, and our net debt coverage ratio stands at 1.6. Now turning to our guidance for Q2 2026. As Phil mentioned, we are anticipating a steeper revenue ramp for Q2 compared to our expectations a quarter ago. We anticipate revenues in the range of $290 to 310 million, which at the midpoint represents sequential growth of 17% and a year-over-year increase in revenue volumes of 25%. Our gross margin guidance for Q2 is a range of 13% to 14%, and as Phil noted earlier, we continue to expect gross margin improvement of 100 basis points per quarter through H2 2026. Our guidance for operating expenses this year is largely unchanged from last quarter.

Speaker #1: Now turning to our guidance for the second quarter of 2026. As Phil mentioned, we are anticipating a steeper revenue ramp for Q2 compared to our expectations a quarter ago.

Speaker #1: We anticipate revenues in the range of $290 million to $310 million, which at the midpoint represents sequential growth of 17% and a year-over-year increase in revenue volumes of 25%.

Speaker #1: Our gross margin guidance for Q2 is a range of 13 to 14%, and as Phil noted earlier, we continue to expect gross margin improvement of 100 basis points per quarter through the second half of 2026.

Speaker #1: Our guidance for operating expenses this year is largely unchanged from last quarter. We continue to drive disciplined cost management across the organization in support of higher revenue volumes and we are managing to a target of only 5 to 6 percent OPEX growth for the full year.

Greg Swyt: We continue to drive disciplined cost management across the organization in support of higher revenue volumes. We are managing to a target of only 5% to 6% OpEx growth for the full year. This reflects a relatively consistent run rate of approximately $25 million beginning in Q2, slightly up from Q1's level as a result of higher variable compensation forecasts on the improved outlook for the year. The midpoint of our guidance for revenues, gross margin, and operating expenses in the current quarter indicate the highest level of operating income reported since fiscal 2022, an increase of nearly 80% from Q1, reinforcing the strong earnings leverage expected as we continue to ramp revenues. Expectations for interest and tax this year are unchanged since last quarter.

Speaker #1: This reflects a relatively consistent run rate of approximately $25 million beginning in Q2, slightly up from Q1's level, as a result of higher variable compensation forecasts on the improved outlook for the year.

Speaker #1: The midpoint of our guidance for revenues gross margin and operating expenses in the current quarter indicate the highest level of operating income reported since fiscal 2022 and an increase of nearly 80% from Q1 reinforcing the strong earnings leverage expected as we continue to ramp revenues.

Speaker #1: As expectations for interest and tax this year are unchanged since last quarter. We anticipate approximately $2 million per quarter in total interest and other income and expense and are assumed effective tax rate continues to be in the range of 20 to 25 percent.

Greg Swyt: We anticipate approximately $2 million per quarter in total interest and other income and expense. Our assumed effective tax rate continues to be in the range of 20% to 25%. Finally, our EPS range for Q2 of $0.25 to $0.35 reflects our expectation for a diluted share count of 35.5 million shares. In summary, Q1 reflects improving profitability, strong operating leverage, and disciplined cost control as volumes accelerate. We believe we are well-positioned for continued progress through the remainder of 2026. Operator, we are now ready for questions. Please open the line.

Speaker #1: Finally, our EPS range for Q2 of $0.25 to $0.35 reflects our expectation for a diluted share count of 35.5 million shares. In summary, Q1 reflects improving profitability, strong operating leverage, and disciplined cost control as volumes accelerate.

Speaker #1: And we believe we are well positioned for continued progress through the remainder of 2026. Operator, we are now ready for questions. Please open the line.

Speaker #2: 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.

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 your line is in the question queue. 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 keys. One moment please while we pull for questions. The first question is from Brian Chin from Stifel. Please go ahead.

Speaker #2: A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue.

Speaker #2: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions.

Speaker #2: The first question is from Brian Chin from Stifel. Please go ahead.

Speaker #3: Hi there. Good afternoon. Thanks for letting us ask a couple of questions. This first question impressive job in terms of the sequential growth Q1 and then the outlook maintaining sort of a mid-to-high teens sequential ramp at this point.

Brian Chin: Hi there. Good afternoon. Thanks for letting us ask a couple questions. This first question, impressive job in terms of the sequential growth Q1 and then the outlook, maintaining sort of a mid-to-high teens sequential ramp at this point. Maybe can you walk us through some of the puts and takes in H2 of the year in terms of ramping Malaysia, in terms of product mix, and kind of how that distills down to what level you can sort of sustain sequential growth into H2 of the year?

Speaker #3: Phil, maybe can you walk us through sort of some of the puts and takes in the second half of the year in terms of ramping Malaysia in terms of product mix and kind of how that distills down to what level you can sort of sustain sequential growth into the back half of the year?

Speaker #1: Yeah. Yeah. If you follow our customers, they're forecasting, say, a 25% growth year on year. We're going to project that at this point in terms of how much we think we're going to grow for 2026 over 2025.

Philip Barros: Yeah. Yeah. If you follow our customers, they're forecasting, say, a 25% growth year on year. We're gonna project that at this point, in terms of how much we think we're gonna grow for 2026 over 2025. What I would say is, at this point last quarter, I would have guided 26 to 27 or $265 to 270 million for Q2. Now we're guiding $290 to 310. As you can imagine, we're seeing a lot of growth, a lot of movement and a lot of, you know, puts and takes, if you will. We are seeing a lot of movement in our forecast.

Phil Barros: Yeah. Yeah. If you follow our customers, they're forecasting, say, a 25% growth year on year. We're gonna project that at this point, in terms of how much we think we're gonna grow for 2026 over 2025. What I would say is, at this point last quarter, I would have guided 26 to 27 or $265 to 270 million for Q2. Now we're guiding $290 to 310. As you can imagine, we're seeing a lot of growth, a lot of movement and a lot of, you know, puts and takes, if you will. We are seeing a lot of movement in our forecast.

Speaker #1: What I would say is, at this point last quarter, I would have guided $265 to $270 million for Q2. And now we're guiding $290 to $310 million.

Speaker #1: So, as you can imagine, we're seeing a lot of growth, a lot of movement, and a lot of puts and takes, if you will.

Speaker #1: So we are seeing a lot of movement in our forecast. And I would say my visibility today is stronger today than it was a quarter ago.

Philip Barros: I would say my visibility today is stronger today than it was a quarter ago. It'll be stronger, I believe, a quarter from now than it is today.

Phil Barros: I would say my visibility today is stronger today than it was a quarter ago. It'll be stronger, I believe, a quarter from now than it is today.

Speaker #1: And it'll be stronger, I believe, a quarter from now than it is today.

Speaker #3: Great. That's helpful. Then thinking about the margin gross margin progression in the back half of the year, when you think about the 100 basis points Q3, 100 basis points Q4, do you maybe sort of walk through how much of that is volume-related, how much is mix, inclusive of increased vertical content?

Brian Chin: Great. That's helpful then. Thinking about the margin, gross margin progression in the back half of the year, when you think about the 100 basis points Q3, 100 basis points Q4, can you maybe sort of walk through how much of that is volume related, how much is mix inclusive of increased vertical content?

Speaker #1: Yeah. In terms of percentages, what I would say is in general, think of our gross margin growth as coming from it's as much event-driven as it is volume-driven.

Philip Barros: Yeah. In terms of percentages, what I would say is, in general, think of our gross margin growth as coming from, you know, it's as much event driven as it is volume driven. I talked about the global footprint realignment. That's a big driver of our cost savings as well as our margin accretion as we move through the year. I would say they're pretty closely equally weighted in terms of gross margin impact. I would say that volume leverage is about 50% of it and our cost reductions are about 50% of it.

Phil Barros: Yeah. In terms of percentages, what I would say is, in general, think of our gross margin growth as coming from, you know, it's as much event driven as it is volume driven. I talked about the global footprint realignment. That's a big driver of our cost savings as well as our margin accretion as we move through the year. I would say they're pretty closely equally weighted in terms of gross margin impact. I would say that volume leverage is about 50% of it and our cost reductions are about 50% of it.

Speaker #1: And I talk about the global footprint realignment. That's a big driver of our cost savings, as well as our margin accretion, as we move through the year.

Speaker #1: So I would say they're pretty close to equally weighted in terms of gross margin impact. So I would say that volume leverage is about 50% of it.

Speaker #1: And our cost reductions are about 50% of it.

Speaker #3: Great. Great. Thank you.

Brian Chin: Great. Great. Thank you.

Speaker #1: Thank you.

Philip Barros: Thank you.

Phil Barros: Thank you.

Speaker #2: The next question is from Craig Ellis from B Reilly Securities. Please go ahead.

Operator: The next question is from Craig Ellis from B. Riley Securities. Please go ahead.

Speaker #4: Yeah, thanks for taking the questions, and congratulations on the good results and guidance. Phil, I wanted to start with more of a qualitative question on where Brian left off.

Craig Ellis: Yeah, thanks for taking the questions, and congratulations on the good result and guidance. Philip Barros, I wanted to start with more of a qualitative question on where Brian Chin left off. It was the beginning of the year when you outlined a four-point plan to really drive much better gross margins to 15%, and it sure seems like the business is solidly on track for that. Can you talk about how happy you are with where you see the business executing in the different company controllable areas that you're focused on? Where are you happier? Where do you need to get better performance to be real confident in that 100% per quarter in the back half of the year?

Speaker #4: So it was the beginning of the year when you outlined a four-point plan to really drive much better gross margins to 15%. And it sure seems like the business is solidly on track for that.

Speaker #4: But can you talk about how happy you are with where you see the business executing in the different company-controllable areas that you're focused on?

Speaker #4: Where are you happier? Where do you need to get better performance to be real confident in that 100% per quarter in the back half of the year?

Speaker #1: Yeah, what I would—well, 100% would be great. I think you said 100 basis points is what you meant. But yeah, I would say that, in general, I am very happy with the progress the team's making.

Philip Barros: Yeah. Well, 100% would be great. I think you said 100 basis what you meant. Yeah, I would say that in general, I am very happy with the progress the team's making. I would say, we're on track, if not ahead of schedule in most of the initiatives. That's tough to do in this type of environment, obviously, as we're ramping up revenues at the same time as doing a strategic transformation. It's very impressive for me to see the team really execute at this level. I would say in general, I'm very confident and very happy with where the team's at.

Phil Barros: Yeah. Well, 100% would be great. I think you said 100 basis what you meant. Yeah, I would say that in general, I am very happy with the progress the team's making. I would say, we're on track, if not ahead of schedule in most of the initiatives. That's tough to do in this type of environment, obviously, as we're ramping up revenues at the same time as doing a strategic transformation. It's very impressive for me to see the team really execute at this level. I would say in general, I'm very confident and very happy with where the team's at.

Speaker #1: I would say we're on track, if not ahead of schedule in most of the initiatives. And that's tough to do in this type of environment, obviously, as we're ramping up revenues at the same time as doing a strategic transformation.

Speaker #1: It's very impressive for me to see the team really execute at this level. So I would say in general, I'm very confident and very happy with where the team's at.

Philip Barros: If you looked at where I had risk in terms of the transformation in the Q1 timeframe, it was getting customer qualifications in Mexico, and it was getting E-beam welding up and running in Mexico. Both of those are behind us. I'm at a much stronger, much more confident position than I would have said about a quarter ago.

Speaker #1: If you looked at where I had risk in terms of the transformation in the Q1 timeframe, it was getting customer qualifications in Mexico, and it was getting e-beam welding up and running in Mexico.

Phil Barros: If you looked at where I had risk in terms of the transformation in the Q1 timeframe, it was getting customer qualifications in Mexico, and it was getting E-beam welding up and running in Mexico. Both of those are behind us. I'm at a much stronger, much more confident position than I would have said about a quarter ago.

Speaker #1: Both of those are behind us. So I'm at a much stronger, much more confident position than I would have said about a quarter ago.

Speaker #4: That's really helpful. And then just looking ahead, to what sounds like a really strong view for the second half of the year, and I think most everybody's really constructive for a robust calendar '27.

Craig Ellis: That's really helpful. Just looking ahead to what sounds like a really strong view for the H2 of the year, and I think most everybody's really constructive for robust calendar 2027 year-on-year growth. Can you just talk about your comfort with capacity upside beyond the level that you're guiding to in Q2? We can get comfortable that as demand continues to improve, Ichor's gonna be able to meet that demand. Thank you, Phil.

Speaker #4: You're on your growth. Can you just talk about your comfort with capacity upside beyond the level that you're guiding to in the second quarter?

Speaker #4: So we can get comfortable that, as demand continues to improve, Ichor is going to be able to meet that demand. Thank you, Phil.

Speaker #1: Yeah. I would say that the two major drivers or pacers for our outputs right now would be supply chain, number one. And labor headcount, number two.

Philip Barros: Yeah. I would say that the two major drivers or pacers for our output right now would be supply chain, number 1, and labor headcount, number 2. I would say we are well-positioned brick-and-mortar wise and clean room wise and infrastructure wise, which to me are the, you know, kind of the long lead items, if you will. I would say from a supply chain standpoint, we have boots on the ground that are, you know, there's always multiple suppliers that pop up in these types of ramp periods. We have boots on the ground as well as increased inventory levels in certain areas where we saw risk. I feel pretty good about that. In terms of ramping up headcount, I would say we are well along the path there.

Phil Barros: Yeah. I would say that the two major drivers or pacers for our output right now would be supply chain, number 1, and labor headcount, number 2. I would say we are well-positioned brick-and-mortar wise and clean room wise and infrastructure wise, which to me are the, you know, kind of the long lead items, if you will. I would say from a supply chain standpoint, we have boots on the ground that are, you know, there's always multiple suppliers that pop up in these types of ramp periods. We have boots on the ground as well as increased inventory levels in certain areas where we saw risk. I feel pretty good about that. In terms of ramping up headcount, I would say we are well along the path there.

Speaker #1: I would say we are well-positioned brick and mortar-wise and cleanroom-wise and infrastructure-wise. Which to me are the kind of the long lead items, if you will.

Speaker #1: I would say, from a supply chain standpoint, we have boots on the ground. There's always multiple suppliers that pop up in these types of ramp periods.

Speaker #1: We have boots on the ground as well as increased inventory levels in certain areas where we saw risk. So I feel pretty good about that.

Speaker #1: In terms of ramping up headcount, I would say we are well along the path there. I feel very good about where we are in terms of headcount as well.

Philip Barros: I feel very good about where we are in terms of headcount as well. I would say in general, we have the ability to ramp. What I would say is, in terms of brick-and-mortar, in terms of headroom and room for us to grow, we could more than double what we did last year, in terms of brick-and-mortar, so I'm not worried there. Like once again, it's gonna be headcount and supply chain that's gonna pace us going forward.

Phil Barros: I feel very good about where we are in terms of headcount as well. I would say in general, we have the ability to ramp. What I would say is, in terms of brick-and-mortar, in terms of headroom and room for us to grow, we could more than double what we did last year, in terms of brick-and-mortar, so I'm not worried there. Like once again, it's gonna be headcount and supply chain that's gonna pace us going forward.

Speaker #1: So I would say, in general, we have the ability to ramp. What I would say is, in terms of brick and mortar, in terms of headroom and room for us to grow, we could more than double what we did last year.

Speaker #1: In terms of brick and mortar, so I'm not worried there. Once again, it's going to be headcount and supply chain that's going to pace us going forward.

Speaker #4: Thank you.

Craig Ellis: Thank you.

Speaker #1: Thank you.

Speaker #2: The next question is from Christian Schwab from Craig Hallam Capital Group. Please go ahead.

Philip Barros: Thank you.

Phil Barros: Thank you.

Operator: The next question is from Christian Schwab from Craig-Hallum Capital Group. Please go ahead.

Christian Schwab: Great. Thanks for taking my question. Just to follow up on that last statement, you know, more than double revenue as far as, you know, given your global, you know, realignment in manufacturing. In aggregate, do you believe that you have the potential, if the end market demand, you know, remains robust, as expected on a multi-year basis that you would, you know, have, you know, $1.8 to roughly 2 billion in revenue capacity on a yearly basis? Did I hear that kind of correctly?

Speaker #1: Oh, great. Thanks for taking my question. Just a follow-up on that last statement—more than double revenue, as far as given your global realignment in manufacturing.

Speaker #1: So, in aggregate, do you believe that you have the potential, if the end-market demand remains robust as expected on a multi-year basis, that you would have $1.8 billion to roughly $2 billion in revenue capacity on a yearly basis?

Speaker #1: Did I hear that kind of correctly? Yeah. I would say, from a brick-and-mortar and kind of fixtures and equipment standpoint, I would say we have some areas where we need to make investment.

Philip Barros: Yeah. I would say from a brick-and-mortar and kind of fixtures and equipment standpoint, I would say we have some areas where we need to make investment. There's some equipment in the second half of the year that we're gonna be positioning to grow to those types of levels. What I would say is the long lead items like clean room, overhead, you know, building space, brick-and-mortar, we're in a very good position there, especially with our new facility put in place in Malaysia that we turned on last quarter.

Phil Barros: Yeah. I would say from a brick-and-mortar and kind of fixtures and equipment standpoint, I would say we have some areas where we need to make investment. There's some equipment in the second half of the year that we're gonna be positioning to grow to those types of levels. What I would say is the long lead items like clean room, overhead, you know, building space, brick-and-mortar, we're in a very good position there, especially with our new facility put in place in Malaysia that we turned on last quarter.

Speaker #1: There's some equipment in the second half of the year that we're going to be positioning to grow to those types of levels. But what I would say is the long lead items, like cleanroom, overhead, building space, brick and mortar, we're in a very good position there especially with our new facility put in place in Malaysia.

Speaker #1: And that we turned on last quarter.

Speaker #4: Great. And then, congrats on the gross margin progression expected throughout the course of the year. As you increase your branded products, or your vertically integrated products—however you want to refer to them—into your end boxes, do you have yet an aspirational goal of where you'd like to end gross margins at the end of 2027?

Christian Schwab: Great. Congrats on the gross margin progression expected throughout the course of the year. You know, as you increase, you know, your branded products or your vertically integrated products, however you want to refer to them, into your gas boxes, do you have a yet an aspirational goal of where you'd like to end gross margins at the end of 2027?

Philip Barros: We haven't drawn out the model to at the end of 2027 at this point. I would. It's a little bit early to do that, as you would know. As, as we enter, you know, 1 quarter into 2026, it's a little early to guide 2027 'cause a lot of that's gonna be volume driven as well, as you know. I do expect 2027 to be a growth year, but even with that, I'm gonna be a little bit shy on guiding 2027 at this point.

Speaker #1: We haven't drawn out the model at the end of 2027 at this point. I would it's a little bit early to do that, as you would know, as we enter 20 or one quarter into 2026, it's a little early to guide 2027 because a lot of that's going to be volume-driven as well, as you know.

Phil Barros: We haven't drawn out the model to at the end of 2027 at this point. I would. It's a little bit early to do that, as you would know. As, as we enter, you know, 1 quarter into 2026, it's a little early to guide 2027 'cause a lot of that's gonna be volume driven as well, as you know. I do expect 2027 to be a growth year, but even with that, I'm gonna be a little bit shy on guiding 2027 at this point.

Speaker #1: I do expect 2027 to be a growth year. But even with that, I'm going to be a little bit shy on guiding 2027 at this point.

Speaker #4: And then my last question just on the sequential progression. I know the mix of business of you and your largest public competitor are different.

Christian Schwab: My last question, just on the sequential progression, I know the mix of business of you and your largest public competitor are different. Do you anticipate, you know, after such a very strong start in H1 of the year and 17% sequential bid, you know, guidance at the midpoint from March to June, would you expect double-digit sequential growth as we go forward, or would you assume that that would potentially be more high single-digit?

Speaker #4: But do you anticipate, after such a very strong start in the first half of the year and 17% sequential bid guidance at the midpoint from March to June, would you expect double-digit sequential growth as we go forward, or would you assume that that would potentially be more high single-digit?

Philip Barros: I would say we could see double-digit growth in H2, in total. I would say at this point, it's gonna be our supply chain that's really gonna gate us in terms of revenue growth. I'm a little bit cautious on H2 at this point until we have good visibility there. What I would say is, we're executing really well. The reason I wanna say that is I think that's why we're seeing a very big pickup in Q2, is we're not leaving a lot of revenue behind, if you know what I mean. We're not rolling a lot of revenue from quarter over to quarter.

Speaker #1: I would say we could see double-digit growth in the second half in total. I would say, at this point, it's going to be our supply chain that's really going to gait us.

Phil Barros: I would say we could see double-digit growth in H2, in total. I would say at this point, it's gonna be our supply chain that's really gonna gate us in terms of revenue growth. I'm a little bit cautious on H2 at this point until we have good visibility there. What I would say is, we're executing really well. The reason I wanna say that is I think that's why we're seeing a very big pickup in Q2, is we're not leaving a lot of revenue behind, if you know what I mean. We're not rolling a lot of revenue from quarter over to quarter.

Speaker #1: In terms of revenue growth, I'm a little bit cautious on the second half at this point until we have good visibility there. But what I would say is we're executing really well.

Speaker #1: And the reason I want to say that is I think that's why we're seeing a very big pickup in Q2 is we're not leaving a lot of revenue behind, if you know what I mean.

Speaker #1: We're not rolling a lot of revenue from quarter over to quarter. And that's going to show a growth profile that kind of leads our customers and goes ahead of our customers because we deliver before our customers receive.

Philip Barros: That's gonna show a growth profile that kind of leads our customers and goes ahead of our customers because we deliver before our customers receive.

Phil Barros: That's gonna show a growth profile that kind of leads our customers and goes ahead of our customers because we deliver before our customers receive.

Speaker #4: Great. Thank you. No other questions.

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

Speaker #2: The next question is from Charles Xi from Needham & Company. Please go ahead.

Operator: The next question is from Charles Shi from Needham & Company. Please go ahead.

Speaker #5: Hi, thanks for taking my question. Phil and Greg, I want to first congratulate you on the very strong Q2 guide. But, obviously, a lot of people in my seat are going to ask you: what's your capacity—max capacity—right now?

Charles Shi: Hi. Thanks for taking my question, Phil and Greg. First, congrats on the very strong Q2 guide, but obviously, you know, a lot of people in my seats are gonna ask you what's your capacity, max capacity right now. I think you previously mentioned about potentially getting to that 20% gross margin at $400 million per quarter. To me, that's a read of, you're implying maybe $1.6 billion capacity. I don't know if you need incremental CapEx to get to that. What's the thought on getting beyond $1.6 billion capacity? What would be the next milestone, and how much CapEx do you think are you gonna need? That's the first question. Thank you.

Speaker #5: And I think you previously mentioned about potentially getting to that 20% gross margin at $400 million per quarter. To me, that's a read of you’re implying maybe $1.6 billion capacity.

Speaker #5: I don't know if you need incremental CapEx to get to that. But what's the thought on getting beyond $1.6 billion capacity? What would be the next milestone, and how much CapEx do you think you're going to need?

Speaker #5: That's the first question. Thank you.

Speaker #1: Yeah. Let me just be clear that we believe we have enough brick-and-mortar capacity today to go well above $2 billion. So just to be clear, it's not just the $1.6.

Philip Barros: Let me just be clear that we believe we have enough brick-and-mortar capacity today to go well above $2 billion. Just to be clear, it's not just the $1.6. After that, it becomes very driven by kind of equipment. If you look at the Ichor branded products, obviously, there's a lot of equipment that's required to build those. That would be the one area where we'd need to invest CapEx. That's what we've kind of alluded to when we said it's gonna be a H2 CapEx heavy. That's coming in as we fill out the machining capability within Malaysia. That's really what's driving that.

Phil Barros: Let me just be clear that we believe we have enough brick-and-mortar capacity today to go well above $2 billion. Just to be clear, it's not just the $1.6. After that, it becomes very driven by kind of equipment. If you look at the Ichor branded products, obviously, there's a lot of equipment that's required to build those. That would be the one area where we'd need to invest CapEx. That's what we've kind of alluded to when we said it's gonna be a H2 CapEx heavy. That's coming in as we fill out the machining capability within Malaysia. That's really what's driving that.

Speaker #1: After that, it becomes very driven by kind of equipment. So if you look at the ICOR branded products, obviously, there's a lot of equipment that's required to build those.

Speaker #1: That would be the one area where we need to invest CapEx. That's what we've kind of alluded to when we said it's going to be second half CapEx heavy.

Speaker #1: That's coming in as we fill out the machining capability within Malaysia. So that's really what's driving that. But once we like Greg talked about during his prepared remarks, we're really driving towards that kind of 3% of revenue CapEx plan.

Philip Barros: Once we, like Greg Swyt talked about during his prepared remarks, we're really driving towards that kind of 3% of revenue CapEx play.

Phil Barros: Once we, like Greg Swyt talked about during his prepared remarks, we're really driving towards that kind of 3% of revenue CapEx play.

Speaker #1: For this year. For this year.

Charles Shi: For this year.

Greg Swyt: For this year.

Philip Barros: For this year.

Phil Barros: For this year.

Speaker #4: Got it. Is it fair to say that to get to maybe $1.6 billion, it's not that the capacity is already in place? It's more about above $2 billion that you're going to need more equipment, etc.

Charles Shi: Got it. Is it fair to say that to get to like, maybe $1.6 billion, the capacity is already in place? Like it's more about above $2 billion that we're, you know, you're going to need more equipment, et cetera. Maybe I misunderstood some of the commentary. Thanks.

Speaker #4: Or maybe I misunderstood some of the commentary. Thanks.

Speaker #1: Yeah. What I would say is in order to get to keep the 35 to 75 percent ICOR branded content within a 1.6 billion, we need a little more equipment.

Philip Barros: Yeah. What I would say is that in order to get, you know, to keep the 35% to 75% Ichor brand of content within a $1.6 billion, we need a little more equipment. From a brick-and-mortar, from an overhead, from a clean room perspective, I would say we're well positioned for that, to be around $2 billion.

Phil Barros: Yeah. What I would say is that in order to get, you know, to keep the 35% to 75% Ichor brand of content within a $1.6 billion, we need a little more equipment. From a brick-and-mortar, from an overhead, from a clean room perspective, I would say we're well positioned for that, to be around $2 billion.

Speaker #1: From a brick and mortar, from an overhead, from a cleanroom perspective, I would say we're well positioned for that. To be around $2 billion.

Speaker #4: Got it. Got it. May I ask you about the demand signal? Because one thing I noticed when you talk about Q2, you're talking about demand, unconstrained demand is already about 300 million.

Charles Shi: Got it. Got it. May I ask you about the demand signal? One thing I noticed when you talk about Q2, you're talking about demand. Unconstrained demand is already above $300 million. What kind of visibility you have right now? How much are the like PO back, let's say, hard commits already from your customers? Like how many quarters you can see that and, you know, the forecast, where do you see the end of your visibility as we speak right now? Thank you.

Speaker #4: What kind of visibility do you have right now? How much are the PO back, let's say, hot commits already from your customers? How many quarters you can see that?

Speaker #4: And the staff, the forecast, where do you see the end of your visibility as we speak right now? Thank you.

Speaker #1: Yeah. I always say that we have good visibility for about six months. I'd say we have hard PO coverage for about a full quarter.

Philip Barros: Yeah. I always say that we have good visibility for about 6 months. I'd say we have hard PO coverage for about a full quarter, and about 6 months of great visibility. What I can tell you is that our customers do give us kind of soft guidance or, you know, kind of soft visibility in past that. I would say that right now, as they've signaled to you, they're signaling growth into 2027. We're preparing ourselves to capitalize on that growth into 2027.

Phil Barros: Yeah. I always say that we have good visibility for about 6 months. I'd say we have hard PO coverage for about a full quarter, and about 6 months of great visibility. What I can tell you is that our customers do give us kind of soft guidance or, you know, kind of soft visibility in past that. I would say that right now, as they've signaled to you, they're signaling growth into 2027. We're preparing ourselves to capitalize on that growth into 2027.

Speaker #1: In about six months of great visibility, what I can tell you is that our customers do give us kind of soft guidance or kind of soft visibility and pass that.

Speaker #1: I would say that right now, as they've signaled to you, they're signaling growth into 2027. So we're preparing ourselves to capitalize on that growth into 2027.

Speaker #4: Got it. Maybe last question from me. I noticed from the financial supplement, the revenue from Europe was a little bit light. In the quarter, I want to, with that data point, we'd like to ask you, what's the latest you see on the lithography side of the business?

Charles Shi: Got it. Maybe last question from me. I noticed from the supplemental financial information, the revenue from Europe was a little bit light in the quarter. I want to, with that data point, would like to ask you, what's the latest you see on the Lithography side of the business? What's the expectation this year in terms of growth? Understandably, you talked a lot more about dep and Etch, but I want to get the thoughts on the Litho side of the business. Thanks.

Speaker #4: And what's the expectation this year in terms of growth? Understandably, you talked a lot more about definite edge, but I want to get that thoughts on the litho side of the business.

Speaker #4: Thanks.

Speaker #1: Yeah. Yeah. I would definitely say edge and depth are growing faster. They're kind of leading the league right now. So I'd say that they're ahead of the litho business.

Philip Barros: Yeah. Yeah. I would definitely say Etch and Dep are growing faster. They're kind of leading the league right now, so I'd say that they're ahead of the Litho business. We talked about last quarter how our customer has some level of inventory they need to burn through. We do see them burning through that inventory in Q3, and we start to see a pickup in the Q4. I would say it's a little bit of a headwind in Q3, kind of a tailwind in Q4, is the way I would think about it. Once again, that's more on the level of inventory that they're holding versus anything to do with their business in particular.

Phil Barros: Yeah. Yeah. I would definitely say Etch and Dep are growing faster. They're kind of leading the league right now, so I'd say that they're ahead of the Litho business. We talked about last quarter how our customer has some level of inventory they need to burn through. We do see them burning through that inventory in Q3, and we start to see a pickup in the Q4. I would say it's a little bit of a headwind in Q3, kind of a tailwind in Q4, is the way I would think about it. Once again, that's more on the level of inventory that they're holding versus anything to do with their business in particular.

Speaker #1: We talked about last quarter how our customer has some level of inventory they need to burn through. We do see them burning through that inventory in Q3.

Speaker #1: And we start to see a pickup in the fourth quarter. So I would say it's a little bit of a headwind in Q3, kind of a tailwind in Q4, is the way I would think about it.

Speaker #1: But once again, that's more on the level of inventory that they're holding versus anything to do with their business in particular.

Speaker #4: Thank you, Phil. I appreciate it.

Charles Shi: Thank you, Phil. Appreciate.

Speaker #1: No problem. Thank you.

Philip Barros: No problem. Thank you.

Phil Barros: No problem. Thank you.

Speaker #2: The next question is from Krish Sankar from TD Cowan. Please go ahead.

Operator: The next question is from Krish Sankar from TD Cowen. Please go ahead.

Speaker #6: Hi. This is Rob Martins online. For Krish, thanks for taking my questions and congrats on the strong quartering guidance. Maybe first off, I'll just piggyback on Charles's question and ask if there's any changes in your view in terms of silicon carbide demand or from aerospace and defense customers compared to a quarter ago.

Robert Mertens: Hi, this is Robert Mertens on line for Krish. Thanks for taking my questions, and congrats on the strong quarter and guidance. Maybe first off, I'll just piggyback on Charles' question and ask if there's any changes in your view in terms of silicon carbide demand or from aerospace and defense customers compared to a quarter ago.

Rob Mertens: Hi, this is Robert Mertens on line for Krish. Thanks for taking my questions, and congrats on the strong quarter and guidance. Maybe first off, I'll just piggyback on Charles' question and ask if there's any changes in your view in terms of silicon carbide demand or from aerospace and defense customers compared to a quarter ago.

Speaker #1: Yeah. I would say aerospace and defense, are growing. Very well. If you can imagine conflicts in things of that sort, unfortunately, do drive increase in need for defense spending.

Philip Barros: Yeah. I would say aerospace and defense, are growing, very well. If you can imagine, conflicts and things of that sort, unfortunately do drive increase in need for defense spending. We're seeing some impacts of that. Obviously our other, commercial space business is also growing. What I would say is a lot of the R&D work that we were doing, for that commercial space business is now converting into hard PO, so we're seeing some strong growth, through this quarter. Looking pretty good there. I would say Silicon carbide is pretty light. I would say we're not seeing a major return in that. As we speak today, I would say that that's been pretty steadily down, since it was, last year.

Phil Barros: Yeah. I would say aerospace and defense, are growing, very well. If you can imagine, conflicts and things of that sort, unfortunately do drive increase in need for defense spending. We're seeing some impacts of that. Obviously our other, commercial space business is also growing. What I would say is a lot of the R&D work that we were doing, for that commercial space business is now converting into hard PO, so we're seeing some strong growth, through this quarter. Looking pretty good there. I would say Silicon carbide is pretty light. I would say we're not seeing a major return in that. As we speak today, I would say that that's been pretty steadily down, since it was, last year.

Speaker #1: So, we're seeing some impacts of that. And obviously, our other commercial space business is also growing. What I would say is, a lot of the R&D work that we were doing for that commercial space business is now converting into hard POs.

Speaker #1: So, we're seeing some strong growth through this quarter, so looking pretty good there. I would say silicon carbide is pretty light. I would say we're not seeing a major return in that as we speak today.

Speaker #1: I would say that that's been pretty steadily down since it was last year.

Speaker #6: Okay. Thank you. That's helpful. And then I know some of this had been asked before, but I just wanted to dig into the strength you're seeing from your largest customers.

Robert Mertens: Okay. Thank you. That's helpful. I know some of this had been asked before, but I just wanted to dig into the strength you're seeing from your largest customers. I mean, you mentioned visibility has improved, and that sales should grow sequentially through the back half of the year. Would you expect the mix shift to shift towards more of your high-margin components and in-source products through the back half? Or could there be some near-term impact due to the high growth of the gas panels this year?

Rob Mertens: Okay. Thank you. That's helpful. I know some of this had been asked before, but I just wanted to dig into the strength you're seeing from your largest customers. I mean, you mentioned visibility has improved, and that sales should grow sequentially through the back half of the year. Would you expect the mix shift to shift towards more of your high-margin components and in-source products through the back half? Or could there be some near-term impact due to the high growth of the gas panels this year?

Speaker #6: I mean, you mentioned visibility has improved. And that sales should grow sequentially through the back half of the year. Would you expect the makeshift to shift towards more of your high-margin components and in-source products through the back half?

Speaker #6: Or could there be some near-term impact due to the high growth of the gas panels this year?

Speaker #1: Yeah. I would say that the reason that we will see growth in gross margin sequentially from quarter to quarter is we're going to be able to ramp up in fulfill some of our own internal source parts in a higher percentage of those.

Philip Barros: I would say that the reason that we will see growth in gross margin sequentially from quarter to quarter is we're gonna be able to ramp up and fulfill some of our own internal source parts and a higher percentage of those. Right? As we move into H2, I expect us to fulfill more of our Ichor branded products within our gas boxes that we build. That will be a good tailwind as we get into H2. That's, you know, all predicated on ramping up our global footprint realignment and what we're doing in Mexico and Malaysia. We do expect that to come online in H2 and be fully running in H2.

Phil Barros: I would say that the reason that we will see growth in gross margin sequentially from quarter to quarter is we're gonna be able to ramp up and fulfill some of our own internal source parts and a higher percentage of those. Right? As we move into H2, I expect us to fulfill more of our Ichor branded products within our gas boxes that we build. That will be a good tailwind as we get into H2. That's, you know, all predicated on ramping up our global footprint realignment and what we're doing in Mexico and Malaysia. We do expect that to come online in H2 and be fully running in H2.

Speaker #1: Right? So as we move into the second half of the year, I expect us to fulfill more of our ICOR branded products within our gas boxes that we build.

Speaker #1: So that will be a good tailwind as we get into the second half of the year. That's all predicated on ramping up our global footprint realignment and what we're doing in Mexico and Malaysia.

Speaker #1: So we do expect that to come online in the second half and be fully running in the second half of the year.

Speaker #6: Got it. Thank you.

Robert Mertens: Got it. Thank you.

Rob Mertens: Got it. Thank you.

Speaker #1: No problem.

Philip Barros: No problem.

Phil Barros: No problem.

Speaker #2: The next question is from Edward Yang from Oppenheimer. Please go ahead.

Operator: The next question is from Edward Yang from Oppenheimer. Please go ahead.

Speaker #6: Hey, Phil. Thanks for the time. The first question's more of a clarification question. Did you say that you expect 2026 year-over-year revenue growth of 25%?

Edward Yang: Hey, Phil. Thanks for the time. The first question's more of a clarification question. Did you say that you expect 2026 year-over-year revenue growth of 25%? If that's the case, you know, that would imply a bit less than double digit sequential growth in H2, but just wanted to clarify that.

Speaker #6: And if that's the case, that would imply a bit less than double-digit sequential growth in the second half. But just wanted to clarify that.

Speaker #1: So we're definitely looking at double-digit sequential growth in the second half of the year, for sure.

Philip Barros: No, we're definitely looking at double-digit sequential growth in H2 of the year for sure.

Phil Barros: No, we're definitely looking at double-digit sequential growth in H2 of the year for sure.

Speaker #6: Okay. That's helpful. Thanks. And given that the industry's supply-constrained, are you pretty much set in terms of your 2026 growth outlook? Or are there still bottlenecking opportunities that could provide you revenue upside?

Edward Yang: Okay. That's helpful. Thanks. You know, given that the industry's supply constrained, are you pretty much, you know, set in terms of your 2026 growth outlook, or are there still bottlenecking opportunities that could provide you revenue upside?

Philip Barros: What I would say is that there is definitely bottlenecking opportunities that can give us revenue upside, where we are seeing some constraints, some noise in the supply chain as we move through from Q1 into Q2. With that said, I would say that we've got a good handle on it. I think we're well positioned in terms of inventory in order for us to execute, and I think we've been executing at a high level for our customers.

Speaker #1: What I would say is that there is definitely bottlenecking opportunities that can give us revenue upside. We are seeing some constraints. Some noise in the supply chain as we move through from Q1 into Q2.

Phil Barros: What I would say is that there is definitely bottlenecking opportunities that can give us revenue upside, where we are seeing some constraints, some noise in the supply chain as we move through from Q1 into Q2. With that said, I would say that we've got a good handle on it. I think we're well positioned in terms of inventory in order for us to execute, and I think we've been executing at a high level for our customers.

Speaker #1: But with that said, I would say that we've got a good handle on it. I think we're well-positioned in terms of inventory in order for us to execute.

Speaker #1: And I think we've been executing at a high level for our customers.

Speaker #6: Okay. And just a final one on your innovation pipeline—could you speak to any new product or module wins beyond off-cycle opportunities?

Edward Yang: Okay. Just final one on your innovation pipeline. You know, could you speak to any new product or module wins, you know, beyond, you know, up cycle opportunities?

Speaker #1: Yeah. What I would say is that we're making great progress on the flow control. And one of the things I want to just highlight here is that I think there could be questions of whether or not we can get flow control qualified during a ramp like this.

Philip Barros: Yeah. What I would say is that we're making great progress in the Flow control, and one of the things I wanna just highlight here is I think there could be questions of whether or not we can get Flow control qualified during a ramp like this. What I do wanna say is a ramp like this is the perfect opportunity to get qualified. 'Cause if you look at some of the constraints we're running into, it happens to be in the Flow control space. I think there's an open window for us to capture share. We need to be ready, and we need to be available for that window of opportunity that I'm talking about.

Phil Barros: Yeah. What I would say is that we're making great progress in the Flow control, and one of the things I wanna just highlight here is I think there could be questions of whether or not we can get Flow control qualified during a ramp like this. What I do wanna say is a ramp like this is the perfect opportunity to get qualified. 'Cause if you look at some of the constraints we're running into, it happens to be in the Flow control space. I think there's an open window for us to capture share. We need to be ready, and we need to be available for that window of opportunity that I'm talking about.

Speaker #1: And what I do want to say is, a ramp like this is the perfect opportunity to get qualified. Because if you look at some of the constraints we're running into, it happens to be in the flow control space.

Speaker #1: So, I think there's an open window for us to capture share. And I think we need to be ready, and we need to be available for that window of opportunity that I'm talking about.

Speaker #6: Thank you.

Edward Yang: Thank you.

Philip Barros: Thanks.

Phil Barros: Thanks.

Speaker #2: There are no further questions at this time. I would like to turn the floor back over to Phil Barros for closing comments.

Operator: There are no further questions at this time. I would like to turn the floor back over to Philip Barros for closing comments.

Speaker #1: Yeah. Thank you, Operator. And thank you, everyone, for joining our call today. I want to once again thank our employees who are taking on this ramp and our strategic transformation all at the same time.

Philip Barros: Thank you, operator, and thank you everyone for joining our call today. I wanna once again thank our employees who are taking on this ramp and our strategic transformation all at the same time and executing at a very high level. I have complete faith in the team's ability to execute, and could not be more proud to be leading this team along this journey. You can feel the momentum and the energy within Ichor. I look forward to our next update on our Q2 call in August. In the meantime, please reach out to Claire to arrange any follow-up requests for meetings. Operator, you may conclude the call.

Phil Barros: Thank you, operator, and thank you everyone for joining our call today. I wanna once again thank our employees who are taking on this ramp and our strategic transformation all at the same time and executing at a very high level. I have complete faith in the team's ability to execute, and could not be more proud to be leading this team along this journey. You can feel the momentum and the energy within Ichor. I look forward to our next update on our Q2 call in August. In the meantime, please reach out to Claire to arrange any follow-up requests for meetings. Operator, you may conclude the call.

Speaker #1: And executing at a very high level. I have complete faith in the team's ability to execute and cannot be more proud to be leading this team along this journey.

Speaker #1: You can feel the momentum and the energy within Ichor. I look forward to our next update at our Q2 call in August. In the meantime, please reach out to Claire to arrange any follow-up requests for meetings.

Speaker #1: Operator, you may conclude the call.

Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.