[Management View]
Ichor Holdings announced the appointment of Phil Barrows as CEO, emphasizing continuity in product strategy and operations. The company reported third-quarter revenues of $239 million, exceeding expectations, driven by customer pull-ins for gas panel deliveries. However, non-semi market declines impacted overall performance.

[Outlook]
Management anticipates Q4 to be the trough, with expected revenues between $210 million and $230 million. Strategic initiatives include capacity ramp and cost reduction in internal component manufacturing, with new product evaluations planned for early 2026. Long-term gross margin aspirations remain at 20%.

[Financial Performance]
Revenue increased 13% YoY, remaining flat sequentially. Gross margin was 12.1%, impacted by reduced IMG segment volumes. Operating expenses matched forecasts, supporting operating income of $5.1 million. EPS was $0.07 per share, aligning with targets.

[Q&A Highlights]
Question 1: Can you quantify the revenue shortfall from IMG in Q3? How much is IMG sales expected to decline in Q4? What's driving the decline? (Line breaks here)
Answer: IMG experienced a $2.5 million revenue shortfall in Q3, with a similar decline expected in Q4. The decline is driven by funding delays in new programs, which are expected to stabilize and recover by Q1 next year.

Question 2: What optimism do you have for business levels improving in the first half of next year? (Line breaks here)
Answer: Management sees recovery into Q1, with core DEPA and etch markets starting to bounce back. The elimination of the 50% ownership threshold may impact positively, although Q4 is expected to be the trough.

Question 3: How can the company sustainably improve execution around internal supply and product yield? (Line breaks here)
Answer: Initiatives are in place to increase gross margin, particularly in valve product lines. The company aims to achieve cost targets and expand products across more customers, with improvements expected early next year.

Question 4: Are Q3 revenue benefits from pull-ins related to Q4 revenue decline from number three and four customers? (Line breaks here)
Answer: The pull-ins were unrelated to the decline from smaller customers. The largest customer offset IMG softness.

Question 5: What are the expectations for WFE trends next year? (Line breaks here)
Answer: Management anticipates a back-half weighted year with growth starting midyear, driven by China reduction impacts and stronger demand in 2027.

Question 6: How will gross margin expand from 12% to 15% at $250 million in revenues? (Line breaks here)
Answer: Expansion will be driven by proprietary product improvements, global operations rationalization, and increased revenue from machining business.

Question 7: What are the elements of transition targeted for 2026? (Line breaks here)
Answer: Transition involves getting products into volume, optimizing global operations, and expanding machining business for quick turn revenue growth.

Question 8: Update on hiring process for machining business? (Line breaks here)
Answer: Hiring targets at the Minnesota factory have been met, with plans to increase capacity in Malaysia and Mexico.

Question 9: Update on customer qualification for internal valve system? (Line breaks here)
Answer: The fourth customer is expected to come online in the first half of next year.

Question 10: How does prior CTO experience help in alleviating execution issues? (Line breaks here)
Answer: Phil Barrows' experience as CTO aids in smooth product transitions and aligning operations with product growth.

Question 11: Expectation for year-over-year growth in 2026? (Line breaks here)
Answer: Management anticipates growth, with Q1 better than Q2, and a strong back half of the year.

Question 12: Aspirational goal of vertical integration driving gross margin of 20%? (Line breaks here)
Answer: Long-term goal remains at 20%, with flow control as the enabler for achieving mid-teens to 20% gross margin.

[Sentiment Analysis]
Analysts expressed cautious optimism, acknowledging challenges but recognizing strategic initiatives. Management maintained a confident tone, emphasizing growth potential and strategic transitions.

[Quarterly Comparison]
| Metric | Q3 2025 | Q2 2025 | YoY Change |
|-----------------------|---------|---------|------------|
| Revenue | $239M | $239M | +13% |
| Gross Margin | 12.1% | 13.1% | -1% |
| Operating Income | $5.1M | $5.1M | Flat |
| EPS | $0.07 | $0.07 | Flat |

[Risks and Concerns]
Risks include reduced gross margin guidance due to lower IMG revenues and declining revenue from key semi customers. Restructuring costs and potential additional charges pose financial concerns.

[Final Takeaway]
Ichor Holdings is navigating a transitional phase with strategic initiatives aimed at improving product margins and expanding market reach. Despite current challenges in non-semi markets and secondary customer relationships, management remains focused on long-term growth and profitability. The appointment of Phil Barrows as CEO marks a pivotal moment for the company, with a renewed focus on operational efficiency and product innovation. Investors should monitor the company's progress in executing its strategic priorities and adapting to evolving market conditions.