Business Context and Reporting Period
Company: Ichor Holdings, Ltd. (ICHR)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 26, 2025 (52 weeks)
Business Overview: Ichor is a leader in the design, engineering, and manufacturing of critical fluid delivery subsystems and components, primarily for semiconductor capital equipment. The company serves top-tier OEMs including Lam Research, Applied Materials, and ASML. It also operates in defense/aerospace and medical sectors.
Key Financial Metrics
| Metric | 2025 (Actual) | 2024 (Actual) | Change |
|---|---|---|---|
| Net Sales | $947.7 million | $849.0 million | +11.6% |
| Gross Margin (GAAP) | 9.3% | 12.2% | -290 bps |
| Gross Margin (Non-GAAP) | 12.2% | 12.7% | -50 bps |
| Operating Loss (GAAP) | $(39.3) million | $(7.6) million | Widened |
| Operating Income (Non-GAAP) | $20.5 million | $18.9 million | +8.5% |
| Net Loss (GAAP) | $(52.8) million | $(20.8) million | Widened |
| Net Income (Non-GAAP) | $7.9 million | $5.9 million | +34.4% |
| Diluted EPS (GAAP) | $(1.54) | $(0.64) | Widened |
| Diluted EPS (Non-GAAP) | $0.23 | $0.18 | +27.8% |
| Cash from Operations | $29.9 million | $27.9 million | +7.2% |
| Capital Expenditures | $36.2 million | $17.6 million | +105.7% |
| Ending Cash Balance | $98.3 million | $108.7 million | -9.6% |
| Total Debt (Principal) | $125.0 million | $129.4 million | -3.4% |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 11.6% driven by sustained demand from primary customers (Lam Research and Applied Materials) in the semiconductor capital equipment industry, specifically in etch and deposition markets.
- Margin Compression: GAAP gross margin declined from 12.2% to 9.3%. This was primarily due to approximately $35 million in restructuring, exit, and reduction-in-force costs, increased supplies/tooling/occupancy costs, and unfavorable sales mix. Non-GAAP gross margin remained relatively stable at 12.2%.
- Restructuring Plan: In Q3 2025, the company initiated a "Consolidation Restructuring Plan" to align its footprint with demand. This included closing facilities in Scotland and Korea, resulting in inventory impairment charges of $19.8 million and fixed asset charges of $3.1 million.
- Operating Expenses: Selling, general, and administrative (SG&A) expenses rose 20.5% to $95.7 million, largely due to $9.4 million in non-recurring restructuring and exit costs.
- Interest Expense: Net interest expense decreased 28.6% to $6.6 million due to lower weighted average borrowings and a decrease in the weighted average borrowing rate (6.16% in 2025 vs. 7.31% in 2024).
Guidance, Outlook, and Risks
Management Commentary: Management expects long-term demand for semiconductors and capital equipment to grow. However, they note that results remain subject to significant risks in the global trade and regulatory landscape. The company is confident in its ability to fund operations for at least the next 12 months.
Key Risks and Contingencies:
- Customer Concentration: Two customers (Lam Research and Applied Materials) accounted for 76% of total sales in 2025. The loss of or reduction in orders from these customers would materially impact the business.
- Geopolitical and Trade Risks: Ongoing uncertainties regarding U.S. trade policies, tariffs, and export controls (specifically regarding China) could disrupt supply chains and reduce demand. The company notes that while tariffs have not yet had a material adverse impact, future changes could be significant.
- Cyclicality: The semiconductor capital equipment industry is highly cyclical. Downturns in the industry could lead to reduced sales and pricing pressure.
- Inventory Valuation: The company recorded a $19.8 million inventory impairment charge in 2025. Future write-downs could occur if demand forecasts are not met.
- Debt Covenants: The company has $125 million in term loan debt with restrictive covenants, including a minimum fixed charge coverage ratio of 1.25:1 and a maximum leverage ratio of 3.50:1.
Investor Verification Checklist
- Restructuring Execution: Verify the completion status of the Consolidation Restructuring Plan and the realization of expected cost savings versus the $35 million in incurred charges.
- Customer Order Trends: Monitor order intake from Lam Research and Applied Materials to assess the sustainability of the 11.6% revenue growth given the 76% concentration risk.
- Inventory Levels: Review subsequent quarter inventory balances and write-downs to ensure the $19.8 million impairment was sufficient and that no further obsolescence risks exist.
- Trade Policy Impact: Assess the impact of potential new tariffs or export control restrictions on the company's supply chain and ability to sell to customers in restricted jurisdictions.
- Non-GAAP Reconciliation: Scrutinize the recurring nature of "restructuring" and "facility shutdown" costs to ensure they are not becoming a regular part of the cost structure.