Ichor Q2 2026 Earnings Report

Ichor EPS Results

• Actual EPS: $0.34
• Consensus EPS: $0.31
• Beat/Miss: Beat by +$0.03
• One Year Ago EPS: $0.03

Ichor Revenue Results

• Actual Revenue: $294.78 million
• Expected Revenue: $300.17 million
• Beat/Miss: Missed by -$5.38 million
• YoY Revenue Growth: +22.70%

Ichor Announcement Details

• Quarter: Q2 2026
• Date: 8/3/2026
• Time: After Market Closes
• Conference Call Date: Monday, August 3, 2026
• Conference Call Time: 4:15PM ET

Ichor (NASDAQ:ICHR) Holdings Ltd. is a global supplier of critical subsystems used in the fabrication of semiconductor devices. The company specializes in the design, engineering and manufacturing of gas delivery systems, vacuum pumps and abatement solutions that manage process gases and by-products in wafer-processing tools. Its modular subsystems are designed to integrate with lithography, etch, deposition and cleaning equipment, helping to ensure precise control of gas flow, pressure and purity throughout the chip-manufacturing cycle.

Founded in the mid-1980s and headquartered in Fremont, California, Ichor has expanded its footprint across Asia, Europe and North America. The company operates engineering and manufacturing centers in key semiconductor hubs, including Taiwan, Singapore and the United States. This global network enables Ichor to support both leading foundries and equipment builders with rapid prototyping, qualification and volume production of customized gas delivery and vacuum solutions.

Ichor’s product portfolio includes gas cabinets, pressure control modules, mass flow controllers, vacuum pumps and abatement systems for removing hazardous by-products. Its subsystems are used by major semiconductor equipment manufacturers and integrated device manufacturers to support both mature and cutting-edge process nodes. By focusing exclusively on these critical tool subsystems, Ichor seeks to deliver high reliability and repeatable performance in the complex environments of advanced chip fabs.

Ichor Q2 2026 Earnings Call Transcript

Key Takeaways

• Accelerating demand outlook: Management expects sequential revenue growth of more than 10% in both Q3 and Q4, with second-half revenue at least 25% above the first half and full-year 2026 growth of at least 30% versus 2025.
• Margin expansion is progressing: Q2 gross margin reached 14.1%, exceeding guidance, while management expects approximately 100 basis points of additional improvement in each of the next two quarters. The company also expressed increased confidence in a longer-term path toward 20% gross margins.
• Q3 guidance points to continued momentum: Revenue is forecast at $315 million to $345 million, representing 12% sequential growth at the midpoint, with non-GAAP EPS guided to $0.40-$0.50.
• Capacity and internal manufacturing are being expanded: Ichor said current capacity supports approximately $500 million in quarterly revenue and that targeted investments could raise annual capacity to roughly $3 billion. Proprietary content is expected to increase from about 25% currently to approximately 35% by the end of Q4, supporting margins and supply-chain flexibility.
• Growth is consuming cash and equity issuance diluted shareholders: Inventory investments contributed to operating cash flow of negative $15.9 million in Q2, with improvement not expected until the first half of 2027. The completed $200 million ATM offering also issued 2.48 million shares, increasing liquidity but adding dilution.

Presentation

[Phil Barros, CEO at Ichor]

Thank you, Claire, and welcome everyone to our Q2 earnings call. Three quarters ago, we laid out our strategy to strengthen Ichor's operating model, expand margins, and position the company to outperform in the next semiconductor growth cycle. Our results today demonstrate that we are delivering against that plan. Revenue of $295 million increased 15% sequentially, and with gross margins up 130 basis points, we more than doubled EPS compared to Q1. The additional revenue growth we had guided for Q2 was instead recognized one week later due to isolated part shortages that we have since resolved, and we are now driving significantly more growth in the second half compared to our expectations a quarter ago.

[Phil Barros, CEO at Ichor]

Gross margin of 14.1% exceeded the high end of guidance, with improved product mixes continuing to grow our component revenues and non-semi business, as well as improved product margins as we execute our strategic footprint realignment during this historic ramp. The gross margin upside in the quarter translated to $0.34 in earnings at the upper end of our guidance range and our highest quarterly earnings in three years, demonstrating that the strategic actions that we are taking are translating into meaningful financial results. We also completed the entire ATM equity offering during the quarter, providing significant flexibility for us to make strategic investments that will enhance our results going forward. This brings me to the underlying demand environment, which continues to strengthen since our last earnings call. Ichor's revenue growth in 2026 now expected to be even stronger than we communicated just three months ago.

[Phil Barros, CEO at Ichor]

We have now reported 15% sequential revenue growth in each of the first two quarters of the year. Looking ahead, the steepening ramp in customer demand provides us with strengthening visibility, indicating sequential revenue growth exceeding 10% in each of the next two quarters. Our current demand forecast, along with our assessment of supply chain readiness, altogether supports our expectations for second half revenue volumes of at least 25% higher than the first half. Our confidence in both the magnitude and the duration of this growth cycle is higher today than at any point during this year. The technology transitions driving the demand remain unchanged. Investments in advanced etch and deposition applications supporting AI infrastructure, gate-all-around architectures, advanced memory, and leading-edge process technologies continue to favor Ichor's portfolio of highly. We believe Ichor is well positioned to capitalize on these technology transitions.

[Phil Barros, CEO at Ichor]

For 2026 in particular, we expect revenue growth in alignment with the high end of WFE expectations, which would be an increase of at least 30% from full year 2025. Turning now to our strategic initiative. Last quarter, we discussed our global footprint realignment and the actions we are taking to structurally improve our business. Today, we are demonstrating that these actions are translating into measurable financial results. Over the past two quarters, we have expanded gross margin to over 14%, exceeding our 100 basis points per quarter target while driving earnings to a three-year record. This is exactly the type of operating leverage our business model can deliver as we execute our strategy. Further, because our footprint realignment and operating model improvements are structural, we continue to drive another 100 basis points in further gross margin improvement in each of the remaining two quarters of the year.

[Phil Barros, CEO at Ichor]

Even after coming in above the high end of expectations for Q2. We are making meaningful operational improvements within our machining and component businesses, with product margin expanding significantly from the first quarter. These improvements are resulting from operational efficiencies and the success of our product transitions, and not merely by the increased factor utilization at these higher revenue volumes. We also saw product mix shift to a more favorable profile, which strengthened our proprietary products, higher value manufacturing service, and commercial space businesses. These improvements demonstrate exactly what we expect our operating model will deliver. Higher proprietary content, higher internal manufacturing, greater operational efficiency, and stronger earnings leverage as revenue continues to grow. Our manufacturing transitions remain on schedule, and we continue to increase the amount of proprietary Ichor content within the systems we build.

[Phil Barros, CEO at Ichor]

We secured additional key qualifications during Q2, including for our high-volume manufacturing site in Malaysia. This represents another important milestone in our product strategy. Every successful qualification expands our ability to manufacture internally, strengthens our competitive advantage, and improves our returns over the long term. We are on track to our plans to qualify additional key components in Malaysia that will provide additional flexibility for us to optimize the supply chain and further ramp internal supply. This strategy is aimed at enabling even stronger execution for our customers and is a key element of our gross margin expansion plans. Importantly, we have now reached an inflection point. Demand is not our growth constraint. Manufacturing capacity is not our growth constraint. With continued success in our high-volume manufacturing site, our ability to reduce Ichor's reliance on external supply will become a competitive advantage.

[Phil Barros, CEO at Ichor]

Over the past year, we have invested aggressively in people, inventory, manufacturing capacity, and our global footprint to prepare for this significant ramp in demand. Those investments are now paying dividends. We have the capacity today to support $500 million in quarterly revenue. With targeted investments, we believe we can expand capacity within our existing footprint upwards of $3 billion annually, more than double our current run rate. Our incremental investment needs will be focused primarily on expanding production of our high-value proprietary components in order to eliminate pain points in our supply base. These same investments will enable us to achieve our targeted product mix and gross margin objectives. As we look ahead, our priorities remain clear. Execute for our customers, complete our manufacturing transition, continue ramping proprietary Ichor content, expand margins, and convert this exceptional demand environment into sustained earnings growth.

[Phil Barros, CEO at Ichor]

The investments we have made over the past several years are positioning Ichor differently than any point in our history. We are becoming a structurally stronger company with more efficient manufacturing network, higher proprietary content, stronger earnings leverage, and the operational capacity to support our customers through what is likely to be the strongest growth cycle our industry has ever experienced. I've never been more confident in our strategy, our execution, or the opportunities that lie ahead. With that, I will now turn the call over to Greg to review the financial results in more detail.

[Greg Swyt, CFO at Ichor]

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. Second quarter revenues of $294.8 million increased 15% sequentially. Isolated supply chain constraints that surfaced late in the quarter kept us from recognizing our full revenue forecast in time for the June 26th quarter end, and instead, we surpassed $300 million in revenue for the 13 weeks ending July 3rd. We have worked through these parts shortages as we drive for another significant growth quarter in Q3.

[Greg Swyt, CFO at Ichor]

Gross margin increased to 14.1%, up 130 basis points sequentially and 60 basis points above the midpoint of guidance, driven by continued progress executing our machining strategy and improved product mix. Stronger gross margin drove the majority of upside in profitability, with Q2 operating expenses coming in at $25.3 million. Operating margin improved to over 5.5%, demonstrating significant operating leverage as volumes ramped. The resulting EPS for the quarter was $0.34, based on an average of 36.3 million diluted shares outstanding during the quarter. Positive cash flow generation from the P&L increased significantly in the quarter, with EBITDA increasing more than 50% sequentially to over $21 million. As we prepare for continued growth ahead, we are making incremental investments in inventory, cash from operations was therefore a use of $15.9 million.

[Greg Swyt, CFO at Ichor]

Capital expenditures totaled $7.8 million for the quarter. Given that the stronger outlook for 2026 is expected to continue into 2027, we are accelerating investments in our factory clean rooms and machining capacity. As a result, we expect our CapEx level to trend higher in the second half while remaining within our target range of approximately 3% of revenue. Which brings us to the balance sheet. Cash and equivalents totaled $256 million at the end of the quarter, an increase of $167 million from Q1. During Q2, we completed the entirety of our $200 million ATM equity offering, issuing a total of 2,480,000 shares at an average price of $80.70 per share and generating net proceeds of approximately $195 million. The transaction significantly increased our available liquidity, providing additional flexibility to support growth initiatives, working capital needs, and strategic opportunities.

[Greg Swyt, CFO at Ichor]

Both DSOs and inventory turns remained similar to Q1 at 32 days and 3.7 times, respectively. Total debt at quarter end was $120.6 million, our net debt coverage ratio stands at 1.1. Turning to guidance. As Phil mentioned, we are now anticipating a steeper revenue ramp for Q3 and the second half of 2026 compared to our expectations a year ago. We anticipate Q3 revenues in the range of $315 million-$345 million, which at the midpoint represents sequential growth of 12% and year-over-year increase in revenue volumes of 38%. Our gross margin guidance for Q3 is a range of 14.5%-15.5%, as we continue to drive gross margin improvements of 100 basis points per quarter through the remainder of 2026. Our guidance for total operating expenses this year has remained relatively constant year to date, even with the steeper ramp in demand.

[Greg Swyt, CFO at Ichor]

We continue to drive disciplined cost management across the organization in support of higher revenue volumes. We currently expect total operating expenses in 2026 will be up about 6% from 2025, with nearly all of the increase in the R&D line. This expectation reflects a relatively consistent run rate of $25.5 million of OpEx for both Q3 and Q4. Finally, our EPS range of $0.40-$0.50 for the third quarter reflects our expectation for total interest and other expenses of $1.5 million and assumed effective tax rates in the range of 20%-25%. 38.5 million diluted shares outstanding. In summary, our second quarter results demonstrate clear progress against the financial priorities we laid out earlier in the year. Stronger profitability, continued execution of our internal product strategy, disciplined cost management, and improved operating leverage as volumes accelerate.

[Greg Swyt, CFO at Ichor]

With demand strengthening, margins expanding, and our balance sheet providing greater flexibility, we are entering the second half with momentum and a stronger earnings outlook than we have delivered in any period since 2022. We believe the combination of accelerating demand, improving margins, disciplined investment, and enhanced liquidity positions us to support our customers through the ramp while continuing to convert higher revenue into stronger performance. Operator, we are now ready for questions. Please open the line.

[Operator]

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. Please limit yourself to one question and one follow-up. 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. Our first question will come from Krish Sankar with TD Cowen.

[Analyst at TD Cowen]

Hi. Thanks for taking my questions. This is Steven calling on behalf of Krish. I guess, Phil, first question for you on the commentary around full year growth. You mentioned 30%+ potential for this year versus last year. I guess when we look at some of the WFE numbers that some of your customers have been talking about, and also sort of the full year growth rates that one of your key customers is talking about, can you help us bridge some of the gap between customer commentary versus what you're saying today? Again, totally get that the sentiment and demand signals are very strong, but just from a quantitative standpoint, anything can help in terms of bridging the numbers, whether it's supply or just ramping up the timeframe for capacity would be helpful.

[Phil Barros, CEO at Ichor]

Yeah. Great question. What I would say is, what we're trending to today is kind of a mix of all of our customers. If you look at how every one of our customers are guiding, I would say that we're a good blend of what they're saying based on what our percentage of shipments are to each of those customers. In general, I'd say we're trending towards the higher end of WFE. When we said 30%+, that's kind of what we mean by that. That's where we're seeing the WFE kind of coalesce at this point in the cycle. What I would say is that we will continue to monitor that, and I would say that we're continuing to grow with our customers in a good blend of what they're seeing.

[Analyst at TD Cowen]

Okay. Understood. For my follow-up, I was wondering for your lithography customer, I think prior quarters you kind of mentioned that inventory levels might be a factor in how much you can grow that customer this year. Just kind of curious, how has the inventory situation changed, if at all, at the customer over the last quarter? Thanks so much.

[Phil Barros, CEO at Ichor]

I'd say the inventory position's been very consistent. We believe we're burning through the inventory this quarter. I'd say we're through that as we exit this quarter in Q3. Q4, we start to see a return, in Q1 in particular. We have really good visibility with that customer. They give us a long-range forecast that gives us good visibility for what they need. I would say we see significant growth in 2027 with that particular customer.

[Analyst at TD Cowen]

Perfect. Thank you so much.

[Phil Barros, CEO at Ichor]

Sure.

[Operator]

Our next question will come from Edward Yang with Oppenheimer.

[Edward Yang, Analyst at Oppenheimer]

Hey, Phil. Thanks for the time. Could you provide a little bit more detail on that piece of the revenue in the second quarter that was pushed out from the parts shortage, and was that related to flow controllers by any chance? As a result of that, did you miss any delivery timetables with customers? Just curious around some color around that.

[Phil Barros, CEO at Ichor]

Yeah, all good questions. First of all, your nose is very good because I would say that if I talk about the suppliers that keep me up at night, I would say flow control is definitely one of those. The way I would think about it, in terms of how we're executing for our customers, I think we're executing very well for our customers. I think we're keeping very good pace with them. I think we are not a drag on their output, and so I would say we're pacing very well. Everything that we're outputting is going through their system and shipping. What I would say is, that particular supplier, what happened at the end of the quarter, I would say is more of an isolated incident. In particular, we chase parts every quarter. This is not a surprise.

[Phil Barros, CEO at Ichor]

This is not a kind of thing that we don't do as a daily part of our business. Quite frankly, this typically happens kind of earlier in the quarter, if you will. Unfortunately, it happened at the very end of the quarter, which kind of crossed quarter boundaries. I would say, if you looked at when that revenue shipped, it shipped literally days after the quarter, but just not in time for us to recognize revenue.

[Edward Yang, Analyst at Oppenheimer]

Got it. For my follow-up, maybe a question for Greg. One of the impacts from the tremendous revenue growth you're seeing is you're building up inventory and your operating cash flow has turned negative and you're burning cash on the operating cash flow side. When do you think that will start to revert back to positive?

[Greg Swyt, CFO at Ichor]

Hi. Near term, as we said, we still have some investments to make in our inventory to make sure that we're meeting the customer demands. We do expect to see that we'll start to see the benefit of the inventory turns start to improve into the first half of 2027 as we work through this demand cycle.

[Edward Yang, Analyst at Oppenheimer]

Thank you.

[Operator]

Moving next to Christian Schwab with Craig-Hallum.

[Christian Schwab, Analyst at Craig-Hallum]

Great. Thanks for taking my question. I just have a clarity about something I thought I heard in the prepared comments. I think you guys outlined last quarter that you had yearly manufacturing capacity of up to $2 billion of revenue, which is a little bit higher than what was reflected two or three quarters before that. Did I hear you correctly that you think you have the capability to produce up to $3 billion in annual revenue?

[Phil Barros, CEO at Ichor]

Christian, great question. What I would say is we've gone through our long-range planning over the past quarter. As you can imagine, in this type of ramp environment, you spend a lot of time planning and making sure you're ready for the coming demand. As part of that exercise, we went through and said, "Okay, what would it take to get to $3 billion? What would it take to get to above and beyond that?" What I would say is $2 billion in our current footprint, not a problem at all. To get to $3 billion, we have the brick and mortar, which is obviously the longest lead time item. I would say we would have to add a little bit of clean room space.

[Phil Barros, CEO at Ichor]

Not a whole lot, but a little bit of clean room space, which actually we're executing in the second half of this year, which will put us in a good position. Then I would say above and beyond that, what we will do is invest in machining capacity, because as we see the ramp continue, we're going to see a need for additional machining capacity to meet our internal needs as revenues continue to grow. For the most part, what I would say is within our four walls, we can do $3 billion in revenue. It just takes a little bit of investment for us to get between now and then.

[Christian Schwab, Analyst at Craig-Hallum]

That investment, it sounds like you're doing it in the second half of this year. Typically, that may take six, nine months to get the clean room space up and going. Is it safe to say that at some point in calendar 2027, that's the direction we're marching to? Did I hear that correctly?

[Phil Barros, CEO at Ichor]

Yeah. I'm not going to guide $3 billion right now. If we get closer to that, maybe I will. What I'll say is we are gearing ourselves up for a significant 2027.

[Christian Schwab, Analyst at Craig-Hallum]

Fantastic. Great. No other questions. Thank you.

[Phil Barros, CEO at Ichor]

Thank you.

[Operator]

Our next question will come from Brian Chin with Stifel.

[Brian Chin, Analyst at Stifel]

Hi there. Good afternoon. Thanks for letting us ask a few questions. Maybe first, back on the supply, maybe can you unpack a little bit more about how you're executing on that Malaysia manufacturing ramp? Also maybe related to this or maybe it's beyond this, but are you getting mandates from some of your direct OEM customers at this stage to accelerate maybe insourcing and design of certain passive, maybe even active components based on any part shortages that are existing or maybe at risk of emerging across the supply chain?

[Phil Barros, CEO at Ichor]

Yeah, Brian, I think those are great questions. What I would say is a couple of things. First and foremost, our Malaysia ramp is going exceptionally well. What I would say for that is there's a couple of areas where I was concerned of the ramp up for Malaysia. That would be in machining and our welding, both of which have been qualified by both of our major customers. That's a big win in the quarter. Great progress there. What I would say is we talked about it before with Malaysia being a headwind until we fully absorb that factory. That's one of the major reasons we see the second half of the year. We continue to march to that one point per quarter gross margin increase. A portion of that is Malaysia ramp up, as well as internal supply.

[Phil Barros, CEO at Ichor]

In terms of our customers and what they're asking from us from an internal supply, I would say the answer is yes. Our customers really want us to bring on additional supply because that's going to give them the amount of flexibility they need, and that's exactly what our customers are asking us for. I would say that in general, the qualifications with our customers in terms of products are going faster than normal, and that's an indication of there's risks in the supply chain that they need to de-risk, and we're offering kind of relief valves for that with our internal supply.

[Brian Chin, Analyst at Stifel]

Great. Appreciate that color. Maybe on the demand side, again, sounds like you're targeting at least $350 million revenue in the fourth quarter and that 25% at least second half for first half growth. Given your commentary on visibility stretching out, how would you calibrate or describe growth momentum in first half next year relative to second half?

[Phil Barros, CEO at Ichor]

Yeah. We've got a couple of things that are interesting in the first half of 2027 that are going to be additive that we did not see or we're not going to see in the second half of this year. In particular litho, for example. We see that picking up significantly in the first half. I think it's a little early to call the first half of next year. I normally wouldn't want to guide out six months ahead of time, but what I can tell you is our customers are placing POs out six months ahead, which is abnormal for our customers, as you know. I feel very good about the trajectory of 2027 at this point. I think our customers are given that same level of confidence. I just continue to echo that as well.

[Brian Chin, Analyst at Stifel]

Great. Appreciate the color.

[Operator]

Moving on to Linda Umwali with D.A. Davidson.

[Linda Umwali, Analyst at D.A. Davidson]

Hi, guys. Thank you for letting us ask questions. My first question was to double-click on demand capacity. I think you said that demand isn't a constraint anymore and manufacturing is. As we get Malaysia up and running and bring more production in-house, I want to understand how much more room do you have to support customers if demand stays this strong? I don't know if you mentioned it before, I missed it. Color on that would be great.

[Phil Barros, CEO at Ichor]

Yeah. One point of clarification. Our manufacturing capacity is not a constraint today. I want to be ultra clear when I say that our manufacturing capacity is at the point or is above where our customers need it to be today, and I would say that I feel comfortable with that. With that said, what we talked about in the prepared remarks was that we are growing. We have the capacity today to do $2 billion within our installed capacity. As we enter into next year, we're looking at growing capacity up to about $3 billion. That increased capacity, once again, is preparing for growth, and growth beyond what we need today. What I would say is that $3 billion kind of run rate is more than what we have, or more than double what we're going to need essentially in this year.

[Phil Barros, CEO at Ichor]

We have the ability to more than double our size from this year.

[Linda Umwali, Analyst at D.A. Davidson]

Got it. Thank you for that. Now I want to switch gears to the non-semi business. Could you talk about what's driving the non-semi business today? Is the growth still mostly commercial space and defense? How should we think about that business in the second half and over the next year?

[Phil Barros, CEO at Ichor]

Yeah, I would say actually the commercial space business this quarter grew significantly, and that it's continuing to grow into the second half of this year. We did receive an official qualification for a particular part family that's going to be growing in the second half of the year. We feel really, really good about that trajectory. We are also unfortunately seeing a little bit of growth in our defense business because of certain activities that are driving that. With that said, I would say that we're seeing growth in both the commercial space business as well as the aerospace and defense. I would say the commercial space business is pacing by far, or is growing or driving it by far.

[Linda Umwali, Analyst at D.A. Davidson]

Got it. Thank you for your time.

[Phil Barros, CEO at Ichor]

Absolutely. Thank you.

[Operator]

Our next question will come from Denis Pyatchanin with Needham & Company.

[Denis Pyatchanin, Analyst at Needham & Company]

Great. Thank you for the opportunity. I think I have only one question here today, maybe you could provide an update on the internal content roadmap. Maybe provide an update on where you are today and where you expect to be over the next 12 months, if that's changed from kind of the last time we spoke, along with perhaps what kind of gross margin improvements we could see as a result. Thank you.

[Phil Barros, CEO at Ichor]

Yeah. That's a fantastic question again. What I would say there is, we exited Q2 at around just below our 25% run rate that we exited last year with. As we bring capacity down from Minnesota and into Mexico with our realignment, obviously we purposely took down some capacity. We brought that back up. That's now up and running. We're about 25% as we exited the quarter. As we bring up Malaysia and additional capacity within Mexico, we expect to be at a run rate around 30% as we exit this quarter, and around 35% as we exit next quarter. That's very well in line with what we expected. I would tell you that that's a large driver for our gross margin increases over the next couple of quarters.

[Phil Barros, CEO at Ichor]

The exciting part to me, more than just the percentage of product that we're getting in there is the product margin we're seeing with those. As we've moved these parts, we're seeing significant increases in product margin. While that was expected, I'm really happy with what we're seeing in terms of kind of realizing those gains as we speak.

[Denis Pyatchanin, Analyst at Needham & Company]

Yeah, perfect. That's all that I needed. Thank you very much.

[Phil Barros, CEO at Ichor]

Thank you.

[Operator]

We'll go next to Craig Ellis with B. Riley Securities.

[Craig Ellis, Analyst at B. Riley Securities]

Yeah, thanks for taking the questions. I'll stick with the gross margin theme. Phil, at the beginning of the year, you laid out four factors that could lift gross margins to 15% and were essentially at that level, and you outlined four that could take the business to 20%. Can you just talk about your confidence in getting from 15%-20% gross margins, the visibility you have, and what specifically you're focused on executing for this next 500 basis points in expansion?

[Phil Barros, CEO at Ichor]

Yeah. I would say my confidence today is I would say higher than at any given point. Obviously, when you're planning out these things, everything's a plan on paper. To see it actually come out in execution is when you start to realize that it's going to happen. That's me where I get comfort at this point, because we're starting to see that in the actual results, right? As you saw from the last couple of quarters, we outperformed compared to where we thought we were going to be from 100 basis points per quarter execution. We outperformed that. That to me is just a testament to everything that's going on and all the changes that we're making, and they're turning into meaningful results. As you pointed out, we're at the 15% now, what have you done for me lately?

[Phil Barros, CEO at Ichor]

How are you going to get to 20%? Getting to 20%, it's going to be a lift. We talked a bit about 100 basis points over the next two quarters. A lot of that's going to come from parts that we already have qualified that we need to ramp up. A lot of that's going to come from Malaysia. Once again, that's going to come from the gross margin improvement that we have in those particular products. One thing I do want to highlight that I maybe haven't said publicly before, we have put out a roadmap that had flow control as a requirement to get to 20%. I would say that I can see a path today, without that.

[Phil Barros, CEO at Ichor]

There's more than one path to get us to the 20%. I think that as revenue continues to grow and our execution of our product strategy continues to continue, I would say that that's opening up additional paths for us to be successful.

[Craig Ellis, Analyst at B. Riley Securities]

That's really helpful. Thanks for that. Then, there hasn't been a lot of conversation this call about just the relative strength of different products and how you feel about fulfillment at a product level. Can you talk a little bit more about gas panels, chemical delivery, weldments, et cetera, and where you think the business is in terms of meeting customer demands and your ability to hit higher calls from customers as you go through this year and into next year? Thanks.

[Phil Barros, CEO at Ichor]

Yeah, I would say that we're performing, at least in my view, very well for our customers. Our customers, as you know, are a demanding group. With that said, I would say that we are executing to what they need, and I think that's on all aspects, whether it be chemical delivery, gas delivery, or our weldment business. We are seeing a significant growth in our weldment business, which is part of our business that has been kind of brought down for a period of time. We're starting to see that pick back up and recover. That feels really good. We have increased our capacity with weldments. One of the areas we got it first was in our weldment business. That's one area where we're going to have additional capacity come online as we get to the second half, which I think with a product mix.

[Craig Ellis, Analyst at B. Riley Securities]

Thank you.

[Operator]

This now concludes our question and answer session. I would like to turn the floor back over to Phil Barros for closing comments.

[Phil Barros, CEO at Ichor]

Thank you, operator, thank you everyone for joining our call today. I want to once again thank our employees who are taking on this ramp of strategic transformation all at the same time. I have complete faith in this team's ability to execute. I'm more proud to be leading along this journey. You can feel the momentum, the energy at our core. I look forward to our next update, our Q3 call in November. In the meantime, please reach out to Claire to arrange any follow-up requests for meetings. Operator, you may conclude the call.

[Operator]

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.

Participants

Executives

• Phil Barros, CEO
• Greg Swyt, CFO

Analysts

• Analyst at TD Cowen
• Edward Yang, Analyst at Oppenheimer
• Christian Schwab, Analyst at Craig-Hallum
• Brian Chin, Analyst at Stifel
• Linda Umwali, Analyst at D.A. Davidson
• Denis Pyatchanin, Analyst at Needham & Company
• Craig Ellis, Analyst at B. Riley Securities