Ichor Holdings

key benchmarks to look for from us over the next few quarters. The first is building momentum in our top line. Year-to-date, further expansion of our revenue scale beyond the current $240 million run rate has been stalled by a slowing EUV build, reduced investments by a major U.S. semiconductor manufacturer, and the continued lack of demand for additional capacity in some of our non-traditional markets, such as silicon carbides. In order to see our structural improvements to gross margin materialize, we need the additional tailwind of revenue momentum above the $250 million run rate, which is what we had planned for in the second half of 2025 as we entered the year. The next sign of progress will be continued qualifications of our new products by the end device manufacturers. And finally, progress will continue as we provide updates that we have scaled our internal supply to sufficient levels and that our output is aligned with our customer needs and cost targets. Turning to our momentum qualifying additional proprietary components with our key customers, in Q2, we made meaningful progress across multiple fronts, qualification, commercialization, and market expansion. Most notably, we achieved a major milestone with the successful qualification of our flow control product at a key end user. This marks our first end user qualification for this product line, which serves as a strong validation of its performance in high demand production environments. We believe this success lays the foundation for broader adoption and additional end customer qualifications. We also reached an important inflection point with our valve product line. During the quarter, we secured a third customer qualification and we're actively working toward a fourth. That said, we are intentionally pacing the fourth qualification to align with our internal capacity ramp. This ensures that we can support volume demands without compromising quality or delivery commitments. Importantly, we began shipping valves in production volumes this quarter, a key milestone in scaling commercial success and realizing the margin benefits of internal sourcing. In parallel, we are making steady technical and operational progress on two new proprietary component products, which are designed to expand our addressable markets for both flow control and valves. These next generation offerings will allow us to serve a broader range of applications and customer needs, further increasing our value across the semiconductor supply chain. As we move into the second half of the year, we remain focused on expanding manufacturing capacity and aligning production to meet our targeted product margins. For Q3 specifically, with our current visibility, Our revenue guidance remains in the same range as we provided for Q2 a quarter ago. The customer demand environment has remained relatively steady since May, and our full-year outlook is largely unchanged. The key differences between how we are looking at 2025 now compared to a quarter ago are, The Q2 revenue pull-in now indicates 2025 is likely to be a slightly front-half weighted year. While the second-half customer demand environment hasn't changed materially, I would also add that the accelerations of demand leading to a stronger second quarter have now slowed a bit in advance of an expected slower quarter in December for etch and deposition. We are marginally less confident about a few areas of potential upside materializing within this calendar year. Next and more meaningful to our outlook, we are taking a more conservative view to our expected hiring ramp and guiding gross margin. And for the third quarter, we are providing a similar range of expectations as we did for Q2. While we remain wholly confident that our strategy will materialize in steady progress towards our longer-term gross margin targets, we need to have improved visibility toward a more meaningful and sustainable top-line sequential growth in addition to achieving our product cost targets before we will significantly raise the bar on our expectations for gross margin expansion. While we currently expect to deliver sequential improvements to our gross margin, for the fourth quarter, even on similar revenue levels. At this time, we will refrain from guiding significantly stronger gross margins until we deliver the expected gross margin performance for Q3. With that, I'll turn it over to Greg to recap our Q2 results and provide further details around our financial outlook. Greg?

Thanks, Jeff. To begin, I would like to emphasize that the P&L metrics discussed today are non-GAAP measures. These measures exclude the impact of share-based compensation, amortization of acquired intangible assets, non-recurring charges, and discrete tax items and adjustments. There is a useful financial supplement available on the investor section of our website that summarizes our GAAP and non-GAAP financial results, as well as a summary of the balance sheet and cash flow information for the last several quarters. Second quarter revenues were $240.3 million at the upper end of guidance, up 18% year over year and 2% lower than Q1. The gross margin for the quarter was 12.5%, an increase of 10 basis points from Q1 but at the low end of expectations, largely due to hiring challenges, limiting our ability to achieve the expected ramp of our machines components. With operating expenses roughly flat to Q1 at $23.8 million, operating income for Q2 was $6.1 million. Our net interest expense was aligned with our expectations at $1.6 million. However, our non-GAAP net income tax expense of $3.2 million came in well above forecast due primarily to the acceleration of the Pillar 2 tax into Q2. For the full year, our estimated income tax is currently $5.6 million compared to the $6 million estimates as of May. Therefore, while the full year tax estimate is largely unchanged, the acceleration into Q2 impacted EPS by $0.07. The resulting EPS for the quarter was $0.03 per share. In our gap results, you may note that year to date in 2025, we have been executing towards various strategies to consolidate and align our global operations capacity with our customers' largest global production and supply chain centers. Between Q1 and Q2, we recorded charges of $5.7 million for exit costs related to personnel, fixed assets, and facility-related costs. We anticipate there may be additional charges in Q3 and Q4 as we complete the analysis. Turning to the balance sheet, our cash and equivalents totaled $92 million at the end of the quarter, down $17 million from Q1. reflecting working capital investments as well as $7 million in capital expenditures. Our planned CapEx investments for 2025 are still expected to total about 4% of revenue. Our total debt at quarter end was $126 million, and our net debt coverage ratio was 1.5 times, well below any potential threshold for covenants. Now I will discuss our guidance for the third quarter of 2025. With anticipated revenues in the range of $225 to $245 million, we expect our Q3 gross margins to be between 12.5 and 13.5%. We expect Q3 operating expenses to be approximately $23.7 million, and we expect Q4 OpEx to be at a similar level. Net interest expense for Q3 and Q4 are expected to be approximately $1.6 million per quarter. We expect to record a tax expense in both Q3 and Q4 of approximately $900,000, reflecting our current forecast for a non-GAAP tax expense of $5.6 million for the full year. Finally, our EPS guidance range for Q3 of 6 cents to 18 cents reflects a share count of 34.4 million shares. I will now turn the call back over to Jeff.

Thanks, Greg. Before turning the call over to Q&A, I'd like to say a few words about the CEO succession plan we announced today. I joined the company in late 2017 as CFO. And after first becoming the company's president, I took over as CEO just as the COVID shutdowns were beginning to roll out in early 2020. There's no question that the operational challenges of the past five years have been greater than at any period in recent memory. And I am immensely proud of our successes winning multiple new product qualifications after embarking on I-Corps first ever branded product development strategy. During the same period, We have integrated five acquisitions and successfully completed the recapitalization of our balance sheet. I love this company, and I strongly believe that we have many opportunities to transform the company's profit generation as we continue to bring our branded products to market. I also believe that the time has come to begin the search for a new leader. It can drive I-Corps to new levels of success. I-Corps is a strong leader in the industry, enjoying tremendous customer partnerships and an amazing team of employees around the globe. This strong foundation will be attractive to the next leader of I-Corps. And in order to ensure a seamless transition, the board and I have entered into a transition agreement where I will remain CEO until my successor is identified and then continue as a strategic advisor to the company and our new CEO to assist in the leadership succession process. We have an excellent board of directors, and I have full confidence that they will find an outstanding new leader for the company. Operator, we are now ready for questions. Please open the line.