Ultra Clean Holdings, Inc. Stock price
Compare with Peer Group
📊 Peer Group
📈 What is it?
The peer group consists of the companies with the most similar business model. They serve as a benchmark for putting a stock into context.
🧮 How is it selected?
Based on similarity of business model, meaning companies from the same industry with comparable products and a similar customer base. That's the only way to compare apples to apples.
🏛️ Why does it matter?
Whether a stock is cheap or expensive is best judged by comparison. A P/E of 18 or an EV/FCF of 20 can look cheap or expensive depending on the yardstick. The peer group gives you the most accurate one: companies with a similar business model that operate under the same conditions.
🎯 What does it mean for investors?
When a metric sits below the peer average, the stock is valued more cheaply relative to its competitors, and above the average more expensively. A discount to the peer group can be an opportunity, but it can also have a reason (for example lower growth). The comparison is a starting point, not a verdict.
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Key metrics
📘 Market Capitalization
📈 What is it?
Market capitalization shows how much a company is currently worth on the stock market.
🧮 How is it calculated?
🏛️ Why is it important?
It helps classify companies by size (Large, Mid, Small Cap) and indicates their market presence and relative stability.
🧮 Calculation
🎯 What does this mean for investors?
- Large-cap companies tend to be more stable, often pay dividends, but may grow more slowly.
- Smaller firms may offer higher growth potential but come with more volatility.
- Market capitalization is a useful indicator of company size — but not a measure of whether a stock is undervalued or overvalued.
📘 Enterprise Value (EV)
📈 What is it?
Enterprise Value represents the total cost to acquire a company — including its debt and excluding its cash reserves.
🧮 How is it calculated?
(= Market Cap + Net Debt)
🏛️ Why is it important?
EV gives a more complete picture of a company's value than market cap alone and is used in key valuation ratios like EV/FCF or EV/Sales.
🧮 Calculation
🎯 What does this mean for investors?
- Enterprise Value shows the true cost of buying a company, including all financial obligations.
- It is more accurate than just looking at market cap, especially when comparing companies with different levels of debt or cash.
- Professional investors prefer EV-based multiples because they better reflect the company’s full financial footprint.
📘 Net Debt
📈 What is it?
Net Debt shows how much debt remains after subtracting a company’s available cash reserves.
🧮 How is it calculated?
🏛️ Why is it important?
It indicates how dependent a company is on borrowed money and how easily it can service its debt in the short term.
🧮 Calculation
🎯 What does this mean for investors?
- Low or negative net debt signals financial strength and flexibility.
- Companies with strong cash positions are better positioned in crises.
- High net debt increases financial risk — especially in environments with rising interest rates or economic downturns.
📘 Cash
📈 What is it?
Cash represents all liquid assets a company can access immediately — including cash, bank deposits, and short-term investments.
🧮 How is it calculated?
🏛️ Why is it important?
It reflects a company’s financial flexibility and resilience — enabling investments, buybacks, or buffer in downturns.
🧮 Calculation
🎯 What does this mean for investors?
- A strong cash position means greater room for maneuver and crisis resistance.
- Cash-rich companies can invest, pay down debt, or repurchase shares.
- But excess idle cash might indicate a lack of growth opportunities.
📘 Shares Outstanding
📈 What is it?
Shares outstanding represent the total number of a company’s shares currently held by investors — excluding treasury stock.
🧮 How is it calculated?
🏛️ Why is it important?
It’s the basis for key metrics like Earnings Per Share (EPS), Market Capitalization, or the Price/Earnings ratio (P/E).
🧮 Calculation
🎯 What does this mean for investors?
- Fewer shares in circulation typically increase earnings per share — making each share more valuable.
- Share buybacks reduce the number of shares and boost per-share metrics.
- Issuing new shares does the opposite — diluting shareholder value and lowering per-share figures.
📘 Price-to-Earnings Ratio (P/E)
📈 What is it?
The P/E ratio shows how many times a company's earnings per share are reflected in its current share price — in other words, how "expensive" the stock appears relative to its profits.
🧮 How is it calculated?
🏛️ Why is it important?
The P/E ratio is one of the most widely used valuation metrics. It helps investors assess whether a stock appears cheap or expensive compared to its earnings power.
🧮 Calculation
📊 P/E (TTM) = Based on earnings from the last 12 months (Trailing Twelve Months):🎯 What does this mean for investors?
- A low P/E may indicate undervaluation — or signal underlying issues.
- A high P/E may reflect strong growth expectations — or an overvalued stock.
📘 Price-to-Sales Ratio (P/S)
📈 What is it?
The P/S ratio shows how much investors are paying for $1 of the company’s revenue – regardless of profitability.
🧮 How is it calculated?
🏛️ Why is it important?
P/S is especially useful for evaluating growth companies or businesses not yet profitable. It reflects how the market values the company’s sales.
🧮 Calculation
Market Cap = $3.01b | Revenue (TTM) = $2.20b
Market Cap = $3.01b | Estimated Revenue = $2.78b
🎯 What does this mean for investors?
- A low P/S may indicate undervaluation — or low profitability.
- A high P/S can reflect strong growth expectations — or excessive optimism.
- Especially helpful when evaluating companies where profits are low, volatile, or negative.
📘 Enterprise Value to Sales (EV/Sales)
📈 What is it?
EV/Sales shows how much investors are paying for $1 of revenue — considering not just equity, but also debt and cash. It’s the capital structure–adjusted version of the P/S ratio.
🧮 How is it calculated?
🏛️ Why is it important?
It’s ideal for comparing companies with different levels of debt. It reflects a company's true cost relative to its revenue.
🧮 Calculation
Enterprise Value = $3.36b | Revenue (TTM) = $2.20b
Enterprise Value = $3.36b | Forward Revenue = $2.78b
🎯 What does this mean for investors?
- EV/Sales allows for capital structure–neutral company comparisons.
- A lower ratio may indicate undervaluation; a higher one may signal strong growth expectations or overvaluation.
- Especially helpful when evaluating high-growth companies with low or negative earnings.
📘 Enterprise Value to Free Cash Flow (EV/FCF)
📈 What is it?
EV/FCF shows how many years it would take for a company to "pay back" its enterprise value using its free cash flow.
🧮 How is it calculated?
🏛️ Why is it important?
It focuses on real cash generation, ignoring accounting noise — ideal for assessing profitability and value based on liquidity, not earnings.
🧮 Calculation
🎯 What does this mean for investors?
- A low EV/FCF may signal undervaluation and strong cash generation.
- A high EV/FCF might reflect weak recent cash flow or aggressive growth expectations.
- Best suited for stable, mature businesses with predictable free cash flows.
📘 Price-to-Book Ratio (P/B)
📈 What is it?
The P/B ratio compares a company’s market value to its book value — showing how much investors are paying for each dollar of net assets.
🧮 How is it calculated?
🏛️ Why is it important?
P/B is commonly used for asset-heavy industries like banks or industrials. It helps assess whether a stock is trading above or below its net asset value.
🧮 Calculation
🎯 What does this mean for investors?
- A P/B below 1 may signal undervaluation — or weak profitability.
- A P/B above 1 implies the market expects future value creation (e.g., brand, IP, growth).
- Best used for companies with tangible assets and strong balance sheets.
📘 Equity Ratio
📈 What is it?
The equity ratio indicates what portion of a company’s total assets is financed by shareholders’ equity – in other words, how much it relies on its own capital.
🧮 How is it calculated?
🏛️ Why is it important?
A high equity ratio reflects financial strength and stability, especially during downturns. It’s a key indicator of a company’s solvency and long-term risk profile.
🧮 Calculation
🎯 What does this mean for investors?
- Companies with high equity ratios are generally more resilient and less dependent on external debt.
- Low equity ratios can signal higher risk or aggressive financial strategies.
- Important: Always assess the equity ratio in combination with the return on equity (ROE). This shows not just how stable the company is – but also how efficiently it uses shareholder capital.
📘 Return on Equity (ROE)
📈 What is it?
Return on equity (ROE) shows how efficiently a company uses its shareholders’ equity to generate profit. In other words: how much net income is earned per dollar of equity.
🧮 How is it calculated?
🏛️ Why is it important?
ROE is a core profitability metric. It helps investors understand whether a company delivers attractive returns on the capital provided by its shareholders.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROE indicates that the company is using its capital efficiently and profitably.
- It’s especially meaningful for capital-intensive businesses or firms with high equity bases.
- Important: A very high ROE can also result from high debt levels – always interpret it alongside the equity ratio to assess financial health.
📘 Return on Capital Employed (ROCE)
📈 What is it?
ROCE measures how efficiently a company generates profits from its total capital – including both equity and interest-bearing debt.
🧮 How is it calculated?
It evaluates the return on all capital employed, regardless of how it’s financed.
🏛️ Why is it important?
ROCE is ideal for comparing companies with different financing structures. It shows how well management uses capital to create value for both shareholders and creditors.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROCE means the company uses its capital efficiently – regardless of whether it's funded by debt or equity.
- The higher the ROCE compared to peers, the more value the company creates with its invested capital.
- Especially relevant for capital-intensive sectors like industrials, energy, or infrastructure.
📘 Return on Invested Capital (ROIC)
📈 What is it?
ROIC measures how efficiently a company generates returns from the capital invested in its core operations – regardless of whether the capital comes from equity or debt.
🧮 How is it calculated?
- NOPAT = Net Operating Profit After Taxes
- Invested Capital = Operating assets minus non-interest-bearing liabilities
🏛️ Why is it important?
ROIC is one of the most accurate indicators of capital efficiency. Unlike return on equity, it is not distorted by leverage and shows how much value is created for all capital providers.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROIC shows how effectively a company uses the capital that is truly invested in its core operations.
- Unlike ROCE, ROIC focuses only on the capital that is actively used to run the business – and that requires a return (i.e. interest-bearing).
- Especially useful when comparing companies with large amounts of excess cash or non-interest-bearing liabilities – giving a more realistic picture of capital efficiency.
📘 Leverage Ratio (Debt-to-Equity)
📈 What is it?
The leverage ratio indicates how much a company relies on interest-bearing debt (such as loans and bonds) relative to its shareholders’ equity.
🧮 How is it calculated?
🏛️ Why is it important?
This ratio helps assess a company’s financial structure and risk profile. High leverage can enhance returns – but also increases exposure to interest rate changes and financial stress.
🧮 Calculation
🎯 What does this mean for investors?
- A low leverage ratio signals financial strength and independence.
- A higher ratio can improve returns in good times but increases risk during downturns or rising interest rate periods.
- 👉 Always interpret in the context of industry, capital intensity, and interest rate environment.
📘 Revenue
📈 What is it?
Revenue shows how much a company earns in total from selling its products and services – the gross income before any costs are deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Revenue is one of the key figures to assess a company’s size, market position, and growth potential.
🧮 Calculation
🎯 What does this mean for investors?
- Growing revenue indicates rising demand and can be an early signal of future earnings growth.
- Comparing actual and expected revenue reveals trends in the market environment and analyst sentiment.
- Note: Strong revenue alone isn’t enough – margins and profitability matter just as much.
📘 EBITDA
📈 What is it?
EBITDA stands for “Earnings Before Interest, Taxes, Depreciation, and Amortization.” It reflects a company’s operating profit before the effects of financing, taxes, and accounting depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
EBITDA is widely used to evaluate a company’s operating performance – especially across capital-intensive sectors or international comparisons.
🧮 Calculation
🎯 What does this mean for investors?
- A high or growing EBITDA indicates strong operational profitability – independent of taxes, interest, or accounting methods.
- It’s especially useful for comparing companies across sectors or geographies.
- Important: EBITDA is not a net income figure – it excludes key costs like depreciation and interest.
📘 EBIT
📈 What is it?
EBIT stands for “Earnings Before Interest and Taxes.” It reflects a company’s operating profit after depreciation, but before interest and tax expenses.
🧮 How is it calculated?
🏛️ Why is it important?
EBIT is a core profitability metric that shows how well the company performs in its main business operations – independent of capital structure and tax environment.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBIT indicates strong profitability from the company’s core business – before financial and tax effects.
- It allows better comparison between companies with different debt levels or tax structures.
- Compared to EBITDA, EBIT already accounts for depreciation and reflects capital intensity more clearly.
📘 Net Income
📈 What is it?
Net income is the company’s total profit – the amount left after all expenses, taxes, interest, and depreciation have been deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Net income is the most comprehensive measure of a company’s profitability – showing how much actual profit remains after all business and financing costs.
🧮 Calculation
🎯 What does this mean for investors?
- Growing net income indicates that the company is managing all of its costs efficiently.
- It directly influences valuation metrics like P/E ratio and the company’s dividend capacity.
- Over time, net income trends reveal how resilient and profitable the business model really is.
📘 Free Cash Flow (FCF)
📈 What is it?
Free Cash Flow shows how much actual cash remains after a company covers its operating expenses and capital expenditures.
🧮 How is it calculated?
🏛️ Why is it important?
FCF reflects a company’s real financial strength – regardless of accounting profits. It shows how much flexibility a company has for dividends, share buybacks, or debt reduction.
🧮 Calculation
🎯 What does this mean for investors?
- High free cash flow means the company generates real, usable cash – independent of reported net income.
- It’s often the most reliable base for sustainable dividends and buybacks.
- Declining FCF can be an early warning sign – even when profits appear stable.
📘 Revenue Growth
📈 What is it?
Revenue growth shows how much a company’s sales have changed compared to the previous year – both on a trailing basis (TTM) and based on forward projections.
🧮 How is it calculated?
Forward = (Expected revenue ÷ Revenue in prior year − 1) × 100
Forward growth is based on analyst estimates for the current fiscal year.
🏛️ Why is it important?
Rising revenue signals growing demand, business expansion, and market share gains – especially important for growth-oriented companies.
🧮 Calculation
🎯 What does this mean for investors?
- Growth is the engine of long-term value creation – especially in tech and growth sectors.
- What matters is not just current growth, but its sustainability.
- Forward projections reflect whether analysts expect continued momentum – or a slowdown.
📘 EBITDA Growth
📈 What is it?
EBITDA growth shows how much a company’s operating profit (before interest, taxes, depreciation, and amortization) has increased or decreased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBITDA ÷ EBITDA from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
Growing EBITDA indicates improving operational profitability – regardless of financing or accounting effects.
🧮 Calculation
🎯 What does this mean for investors?
- Strong EBITDA growth signals operational efficiency and scalability – especially during growth phases.
- EBITDA growth can be an early indicator of margin and earnings expansion – but should be assessed alongside revenue and EBIT.
📘 EBIT Growth
📈 What is it?
EBIT growth shows how much a company’s operating profit (after depreciation, but before interest and taxes) has increased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBIT ÷ EBIT from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
EBIT growth is a direct indicator of a company’s business performance – taking into account capital intensity through depreciation.
🧮 Calculation
🎯 What does this mean for investors?
- Rising EBIT signals improving operating profitability – even after accounting for depreciation.
- It’s especially important for evaluating companies with significant capital expenditures.
- Combined with revenue and EBITDA growth, EBIT growth provides a well-rounded view of operational progress.
📘 Net Income Growth
📈 What is it?
Net income growth shows how much a company’s bottom-line profit has increased or decreased compared to the previous year – both on a trailing basis (TTM) and based on analyst projections.
🧮 How is it calculated?
Forward = (Expected net income ÷ Net income from prior year − 1) × 100
The forward estimate reflects analysts’ expectations for the current fiscal year.
🏛️ Why is it important?
Net income is the ultimate measure of profitability. Growing net income signals stronger efficiency, cost control, and sustainable earnings power.
🧮 Calculation
🎯 What does this mean for investors?
- Stronger net income boosts valuation, dividend potential, and investor confidence.
- If profits stall while revenue grows, it may signal margin pressure.
📘 Free Cash Flow Growth
📈 What is it?
Free cash flow (FCF) growth shows how a company’s available cash – after covering operating expenses and capital expenditures – has changed compared to the previous year.
🧮 How is it calculated?
🏛️ Why is it important?
Free cash flow reflects real financial strength. Growing FCF indicates more flexibility for dividends, share buybacks, and reinvestment.
🧮 Calculation
🎯 What does this mean for investors?
- Declining FCF may point to rising investments, increasing costs, or weaker operating performance.
- Especially for dividend investors, FCF growth is critical – since dividends are paid from actual available cash.
- A negative trend isn't always bad, but it deserves closer attention.
📘 Gross Margin
📈 What is it?
Gross margin shows how much of a company’s revenue remains after deducting the direct costs of goods sold (like materials and production). It represents the company’s “raw profit” before fixed costs, taxes, and interest.
🧮 How is it calculated?
Or simply: Gross Margin = Gross Profit ÷ Revenue × 100
🏛️ Why is it important?
Gross margin indicates how efficiently a company can produce or procure what it sells. It is a key measure of product-level profitability and pricing power.
🧮 Calculation
🎯 What does this mean for investors?
- A high gross margin suggests strong pricing power and efficient production.
- Falling margins may signal rising input costs or competitive pressure.
- Compared to peers, gross margin offers insights into the quality of a business model.
📘 EBITDA Margin
📈 What is it?
The EBITDA margin shows how much of a company’s revenue remains as operating profit before interest, taxes, depreciation, and amortization.It reflects operating efficiency without being distorted by financing or accounting factors.
🧮 How is it calculated?
🏛️ Why is it important?
The EBITDA margin reveals how much operating income a company generates per dollar of revenue – independent of capital structure and tax effects.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBITDA margin reflects strong core profitability – before accounting distortions.
- It allows for effective comparisons across companies and sectors.
- A stable or growing margin signals efficient cost control and business scalability.
📘 EBIT Margin
📈 What is it?
The EBIT margin shows what percentage of revenue remains as operating profit after depreciation but before interest and taxes.
🧮 How is it calculated?
🏛️ Why is it important?
The EBIT margin reflects a company’s core profitability while accounting for capital intensity (e.g. machinery, infrastructure). It’s especially useful for comparing businesses with different levels of depreciation.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBIT margin shows that the company remains efficient even after factoring in depreciation.
- It’s especially relevant for capital-intensive industries.
- Stable or rising EBIT margins over time are a strong indicator of pricing power and business quality.
📘 Net margin
📈 What is it?
Net margin shows how much of a company’s revenue remains as bottom-line profit after deducting all costs, interest, taxes, and depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
Net margin reflects a company’s overall efficiency – across operations, financing, and taxation. It shows how much actual profit is generated from each dollar of revenue.
🧮 Calculation
🎯 What does this mean for investors?
- A high net margin means the company is not only strong operationally but also manages financing and taxes efficiently.
- Peer comparisons reveal business quality and competitiveness.
- Declining margins despite revenue growth can be a red flag for rising costs or inefficiencies.
📘 Free cash flow margin
📈 What is it?
The free cash flow (FCF) margin shows how much of a company’s revenue remains as actual free cash after covering all operating expenses and capital expenditures.
🧮 How is it calculated?
🏛️ Why is it important?
This margin reflects the true liquidity generated by the business – independent of accounting rules or depreciation. It’s especially relevant for dividends, buybacks, and reinvestment decisions.
🧮 Calculation
🎯 What does this mean for investors?
- A high FCF margin means a company consistently generates strong cash flow.
- It’s a positive signal for financial stability and shareholder returns.
- The long-term trend is key – a declining margin may indicate rising investments or weakening operating efficiency.
📘 Earnings per share (EPS)
📈 What is it?
Earnings per Share (EPS) shows how much profit is attributable to a single share – and is one of the most important metrics for evaluating a company's performance.
🧮 How is it calculated?
The diluted share count reflects potential new shares that could be issued through options, convertible bonds, or other rights.
🏛️ Why is it important?
EPS is the basis for many key valuation metrics like P/E ratio, PEG ratio, or payout ratio. It enables comparisons of profitability across companies, regardless of their size.
🧮 Calculation
🎯 What does this mean for investors?
- EPS captures per-share profitability and is especially useful for comparisons over time or with analyst estimates.
- Rising EPS may signal consistent growth or share buybacks.
- Important: Always use diluted EPS for more realistic valuations – especially in companies with stock-based compensation.
📘 Free cash flow per share (FCF per share)
📈 What is it?
Free Cash Flow per Share shows how much free cash flow a company generates per outstanding share – after investments, but before dividends or debt repayments.
🧮 How is it calculated?
Free cash flow is calculated as operating cash flow minus capital expenditures (CapEx).
🏛️ Why is it important?
FCF per Share reveals how much real cash is available per share – useful for dividends, buybacks, or reducing debt. Unlike net income, free cash flow is harder to manipulate and often seen as a more reliable metric.
🧮 Calculation
🎯 What does this mean for investors?
- High FCF per share signals strong financial flexibility.
- It shows how much capital the company can effectively reinvest or return to shareholders.
- Particularly relevant for dividend payers and capital-efficient businesses.
📘 Short interest
📈 What is it?
Short interest indicates how many shares of a company are currently sold short – that is, borrowed and sold by investors who expect the price to decline.
🧮 How is it calculated?
It reflects the percentage of a company’s shares that are being shorted relative to the total shares available.
🏛️ Why is it important?
Short interest serves as a sentiment indicator: A high value may signal skepticism or bearish expectations – but also increases the potential for a short squeeze if prices rise unexpectedly.
🧮 Calculation
🎯 What does this mean for investors?
- Low short interest usually indicates market confidence in the company.
- High short interest can be a warning sign – or an opportunity if sentiment shifts.
- Especially relevant in volatile markets or ahead of key earnings releases.
📘 Employees
📈 What is it?
The employee count shows how many people a company employs worldwide – offering insights into its size, structure, and business model.
🧮 How is it calculated?
🏛️ Why is it important?
It helps assess operational scale, labor intensity, and cost structure. Combined with revenue and profit, it enables key metrics like revenue per employee or productivity.
🧮 Calculation
🎯 What does this mean for investors?
- A high headcount can signal operational complexity – but also significant growth capacity.
- Revenue per employee is a key indicator of efficiency.
- Especially useful for comparing tech, industrial, or service-heavy companies.
📘 Turnover per employee
📈 What is it?
Revenue per employee indicates how much revenue a company generates on average per employee – a key measure of efficiency and productivity.
🧮 How is it calculated?
The employee count is typically taken from the most recent annual report.
🏛️ Why is it important?
This metric helps compare business models – especially between labor-intensive and technology-driven companies. A high value suggests automation, operational efficiency, or strong value creation per head.
🧮 Calculation
🎯 What does this mean for investors?
- A high revenue per employee indicates a scalable and margin-strong business model.
- A low figure may reflect labor-intensive operations or lower value-add.
- Especially helpful when comparing tech companies to industrial or service sectors.
Ultra Clean Holdings, Inc. Stock Analysis
Analyst Opinions
11 Analysts have issued a Ultra Clean Holdings, Inc. forecast:
Analyst Opinions
11 Analysts have issued a Ultra Clean Holdings, Inc. forecast:
Ultra Clean Holdings, Inc. Events
Past Events
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AUG
3
Q2 2026 Earnings Call
about one month ago
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APR
28
Q1 2026 Earnings Call
5 months ago
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FEB
23
Q4 2025 Earnings Call
7 months ago
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OCT
28
Q3 2025 Earnings Call
11 months ago
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StocksGuide Free
Ultra Clean Holdings, Inc. — Q2 2026 Earnings Call
1. Management Discussion
Good afternoon, ladies and gentlemen, and welcome to the Ultra Clean Q2 2026 Earnings Call. [Operator Instructions] This call is being recorded on Monday, August 3, 2026.
I would now like to turn the conference over to Rhonda Bennetto of Investor Relations.
Thank you, operator. Good afternoon, everyone, and thank you for joining us. With me today are James Xiao, CEO; Sheri Savage, CFO; and Mike Keogh, CFO beginning August 5. James will begin with some prepared remarks about the industry and highlight some of the opportunities ahead for UCT. Sheri will follow with the financial review, and then we'll open up the call for questions.
Today's call contains forward-looking statements that are subject to risks and uncertainties. For more information, please refer to the Risk Factors section in our SEC filings. All forward-looking statements are based on estimates, projections and assumptions as of today, and we assume no obligation to update them after this call. Discussion of our financial results will be presented on a non-GAAP basis. A reconciliation of GAAP to non-GAAP can be found in today's press release posted on our website.
And with that, I'd like to turn the call over to James. James, please go ahead.
Thank you, Rhonda, and good afternoon, everyone. We appreciate you joining us for our Q2 '26 earnings call. This afternoon, I will discuss industry environment and the trend is shaping our customer investment, provide an update on our execution against UCT 3.0 strategy and highlight how we are positioning UCT to deliver sustainable growth and long-term value. Following that, Sheri will provide a financial update and then we will open up the call for questions.
Throughout the second quarter, we saw increased demand across both our products and service businesses. Reflecting healthy activity across all our end markets. Momentum is building as AI-driven investment reshaped the semiconductor capital equipment landscape, driving increased volume and complexity in the systems and components our customers require.
As agentic AI become more mainstream, the incremental demand extends well beyond today's GPU-intensive training clusters, we influenced workloads utilizing higher volumes of CPU compute. For companies like UCT, the implications are particularly meaningful because every layer of semiconductor manufacturing must scale to support this next wave of infrastructure investment and AI chip demand expansion beyond GPU and HBM.
As volume and complexity increases, customers are engaging more strategically with trusted partners like UCT earlier in the development cycle to help ensure manufacturing readiness and accelerated execution. As technologies advance, we're confident that we will play an even more important role in our customers' long-term technology road maps and capacity expansion. That confidence is reinforced by the unprecedented visibility our customers are sharing with us now. They are extending their forecast and giving us longer planning horizons so we can make strategic decisions regarding capacity, supply chain readiness, engineering resources and talent investments that support their product pipeline.
As AI infrastructure scales, execution speed and innovation velocity at scale will send UCT apart from the complication. Our customers with partners that can accelerate product development, qualify new technology faster, execute flawless production ramp and support increasingly complex global manufacturing operations.
UCT is becoming more deeply embedded in their success because these are the capabilities that consistently set us apart. The UCT 3.0 is transforming the way we execute. Being ramp ready is the foundational to our customer-first mindset and long-term growth strategy. It is ensuring we're prepared to support our customers whenever the whatever they need us.
Over the past couple of months, we have built out an additional 26,000 square feet of clean room space in our Malaysia facility and will be increasing our capacity within the current footprint in Singapore and the Czech Republic over the coming quarters.
With those expansions we should be able to support a $4 billion annualized revenue run rate of $200 billion WFE by the middle of 2027. We have begun the process of evaluating future capacity requirements, strategic geographic locations and greenfield opportunities to support a $5 billion revenue run rate of $250 billion WFE. We will continue to align our investments with our customers' long-term demand outlook and commitment.
Our NPX initiative, which integrates new product development, introduction and transfers reached a significant milestone recently. We have launched our first MPX Center of Excellence in Hillsboro, Oregon, designed to engage earlier and more closely with our customers. This will accelerate product qualification, improve the transition from development to high-volume manufacturing and strengthen our position as the preferred co-innovation partner. By demonstrating our value from design to production, we're increasing our opportunities to win customers new products that support a favorable long-term margin profile.
Digital transformation, the third pillar of our UCT 3.0 strategy is enabling a more efficient data-driven enterprise. We have begun modernizing our systems, processes and data infrastructure, starting with the ones that best support our ramp readiness efforts. These initiatives have already improved operational visibility, accelerated decision-making and enable faster execution across our global operations. Combined with automation, advanced analytics and AI-enabled capabilities we're increasing productivity and scaling the business more efficiently as customer demand accelerates.
We believe our global manufacturing footprint, engineering expertise operational discipline and ability to execute with speed and agility position us to capture a greater share in the years ahead. Our objective is straightforward to deepen our strategic co-innovation partnerships, outgrow the market we serve and create sustainable long-term value for our shareholders.
Before I turn to the financial review, I'd like to announce that this is going to be Sheri's last earnings call as CFO of UCT. I'd like to take a moment to recognize and thanks Sheri for her 17 years of dedicated service to UCT. Sheri has been a trusted leader and an exceptional steward of our business, helping guide the company through the period of significant growth and transformation while strengthening our financial foundation. On behalf of our Board of Directors and the entire UCT family. Thank you, Sheri, for your many contributions unwavering commitment to the company. We wish you all the best in your well-earned retirement.
Over to you for the financial review. Thank you.
Thanks, James, and good afternoon, everyone. Thanks for joining us. In today's discussion, I will be referring to non-GAAP numbers only. As James mentioned, this will be my final earnings call with UCT. It has been a privilege to be a part of UCT's growth and transformation over the past 17 years, and I want to sincerely thank our employees, customers, investors and partners for your support.
Before I begin, I'd like to welcome Mike Keogh, our new Chief Financial Officer. Mike brings extensive financial, operational and public company leadership experience and I am confident he will be a tremendous asset to the team as they continue to advance the UCT 3.0 growth plan.
For the second quarter, demand remained healthy across both products and services businesses. Those market dynamics supported another quarter of solid execution and financial performance.
For the second quarter, we saw record total revenue of $644.9 million compared to $533.7 million in the prior quarter. Revenue from products was $572.7 million compared to $465.7 million last quarter. Services revenue was $72.2 million in Q2 compared to $68 million in Q1. We continue to invest in capacity to support our customers' long-term growth. We recently added 26,000 square feet of clean room space in Malaysia with additional expansion planned in Singapore and Czech Republic soon. These investments position us to support an annualized revenue run rate of approximately $4 billion by mid-2027, while planning is underway for the next phase of capacity expansion to support $5 billion run rate over time. As production increases, we expect to benefit from improved operating leverage and corresponding margin expansion.
Total gross margin for the second quarter was 16.7% compared to 16.5% last quarter. Products gross margin was 15.1% compared to 14.6% in Q1 and services was 28.9% compared to 30% last quarter. Gross margin improved primarily due to higher volumes driving factory efficiencies. Margins continue to be influenced by fluctuations in volume, mix and manufacturing region as well as material and transportation costs. So there will be variances quarter-to-quarter.
Operating expense for the quarter was $62.5 million compared to $51.1 million in Q1. As a percentage of revenue, operating expenses were 9.7% versus 11.4% last quarter. Total operating margin for the quarter came in at 7% compared to 5.1% last quarter. Margin from our Products division was 6.5% compared to 4.2% and services margin was 11.2% compared to 11.5% in the prior quarter.
Second quarter tax rate came in at 20%, consistent with our expectations. Our mix of earnings between higher and lower tax jurisdictions can cause our rate to fluctuate throughout the year. For 2026, we expect our tax rate to stay in the low 20% range. Based on 46 million shares outstanding, earnings per share for the quarter were $0.70 on net income of $32.3 million compared to $0.31 on net income of $14.5 million in the prior quarter.
Turning to the balance sheet. Cash and cash equivalents were $255.9 million compared to $323.5 million at the end of last quarter. Operating cash flow was negative $41.1 million compared to negative $33.3 million last quarter. The year-to-date cash outflow continues to reflect strategic investments in working capital, particularly in inventory to support anticipated demand and position the business for future growth.
Turning to the guidance for the third quarter. We project total revenue to be between $700 million and $750 million and EPS in the range of $0.83 to $1.03.
And with that, I'd like to turn the call over to the operator for questions.
[Operator Instructions] Your first question comes from the line of Timothy Arcuri from UBS.
2. Question Answer
Just on the guidance, it was quite good, but it could have -- it was right where I thought it would be. But it could have been even better when you consider that your biggest customer guided its systems up. It's implying that systems are going to grow like 30% Q-on-Q in calendar Q3. I realize your product revenue outgrew their systems in June. So is it really just a timing thing? Or do they have some inventory or maybe you're just being maybe arguably a little bit conservative in your guidance?
Yes, it's a little bit of both, Tim. This is James. I think that definitely, you realize that we have a timing gap with certain customers, where we need to really -- they need to integrate our subsystem into their systems, and there's a timing lag. So the revenue recognition time is different because of that. And for some other customer, they also -- their quarter end are a little bit different from ours. So that created a little bit of a timing gap on the revenue growth. But if you aggregate a 2-quarter revenue growth, you will see that our revenue is on par with their growth or higher.
And then we've heard some examples. So all your customers are so full on capacity there. I mean they're basically booking into the back half of '27, if not even some of them out into '28 some of the slots. So is there an opportunity for them to use you as more overflow.
So they come to you to maybe do some things that they had originally planned to do themselves. So then maybe that can hear your revenue to the upside just given how full their internal manufacturing is.
Yes. Definitely, we see that upside opportunity, especially when the customer are, to some extent, constrained by their internal capacity. They -- in this upturn, as you know, they intend to focus more on their final test and the final integration capacity and overflow their subsystem capacity to partners like UCT. So heavily historically, we see that our growth opportunity when the customer gave a higher percentage of their subsystem built to UCT in the uptime. So this is why we always see an outgrow attended on the product side in upturn.
Your next question comes from the line of Charles Shi from Needham.
Congrats on the next results and I have a question on the capacity plan. I think I heard you talk about maybe get the $4 billion run rate ready by the mid 2027, looking at $5 billion run rate over time. But on the $4 billion, what's the current judgment on the timing, maybe you may have to do a little bit earlier the mid-'27? Or what's the range of possibilities of what's the buyers? And on the $5 billion, what do you have to see to pull the trigger to really start that expansion to the $5 billion run rate?
Thank you, Charles. I think that we said that we're taking the phased approach to -- from $3 billion to $4 billion and then from $4 billion to $5 billion, we're executing on that plan. So at the end of the year, you will see a $3.5 billion, we'll see $3.5 billion capacity ready and not really match the run rate we see today. And then in the first half of 2027, we will hit that $4 billion run rate in capacity, and we're going full speed on that.
As you see in my statement earlier, we're actually adding 26,000 square feet in Malaysia site, and we're doing similar things in our Singapore and Czech Republic site. So we will get the $4 billion in the first half of '27.
For the $5 billion run rate or to address a $250 billion WFE we're actually evaluating the new expansion plan in Southeast Asia, and we'll make that decision pretty quickly and start execution. So the time line still as we communicated before in the first half of 2028, will reach beyond the $4 billion, and those capacity will add and you will see the run rate of $5 billion in the second half of '28 million.
So that's pretty clear. Sheri, congrats again on the well-deserved retirement, glad working with you for quite a few years. Maybe as Mike is also here, I want to get some thoughts, maybe early thoughts from Mike, how to think about the margin model going forward. I know the team has laid out a goal of 20% gross margin, 10% operating margin at $4 billion revenue run rate, but since the $4 billion is kind of inside right now. Any thoughts on long-term if you will, aspirational margin targets going forward? Any early thoughts at the moment, I think we definitely appreciate that.
It's Sheri. Thank you for the nice comment. I'll be answering calls on this call at this point, but you just talk to Mike later. For the incremental margins, we do see them continuing to move up as we utilize more of our factories. Obviously, we do see us moving towards that 17% range as we move through the rest of the year and hopefully moving beyond that. The $4 billion and 20% gross margin is still the goal that we are marching forward, especially during 2027.
So beyond that, we'll put out a model at some point, but that's the goals that we're still marching to with the utilization of our factories and where we're at right now.
Your next question comes from the line of Krish Sankar from TD Cowen.
This is Eddy for Chris. A question on the customers beyond the biggest 2 customers. It seems that customer base has been growing year-over-year. Can you give us some color like what's the driver and think about it going forward? And I have a follow-up.
Yes, Chris. And certainly, as you can see that if you look at our quarter-by-quarter customer distribution, you can see that the top 2 customers, as presented with revenue actually reduced from the 64 down to the high 50s. So I think that, that just to show that we're diversifying our customer mix, so that less volatile regardless of the segment move within WFE.
So we're growing our business with our litho customers. And as the EUV getting the momentum and more adoption in the leading-edge foundry logic and in memory now, we'll see that we also grow our business in terms of total revenue and -- but because the 2026 and '27, we still see the WFE actually has more depth and etch intensity. So we do not see that the percentage of the non-GAAP and etch will grow significantly, but we'll definitely grow in that segment as well.
Got it. Got it. And just a clarification about the previous question. You mentioned when you get to full utilization, your gross margins would be 20%. And a full utilization, would you remind us what level of revenue run rate that would be? And would it be 20%? Because I think the September guide implies around 19% gross margin.
Yes. I mean, again, as we've mentioned many times, it depends on multiple things, whether that be mixed and revenue and where things are shipped from jurisdiction, et cetera. So our goal is to be at $4 billion and 20% gross margin. The question is, obviously, there's many factors that go into that. So it just depends on where we're at, at that moment. But we anticipate that we will be at a run rate of $4 billion at some point during 2027.
Your next question comes from the line of Ed Yang from Oppenheimer.
One of your competitors reported some issues with component shortages the second quarter. Just curious, did you run into any similar problems? And were there any delivery pushouts in the quarter?
Yes. So Ed, the answer is no. I think we talked about that a couple of earnings ago that we really initiated the ramp readiness campaign internally way ahead. So with that, we were able to secure most of the critical components and really kind of mitigate through at this point, But what I see is also, if you look forward, the industry is implying a double-digit growth quarter-by-quarter. That will constantly put the pressure on the entire supply chains. And you will see excursions in WFE supply chain, and we just need to actively and proactively manage that.
Okay. And your comments around WFE, it sounds like, again, by mid-2027, you said you expect to see a $200 billion run rate WFE. And for UCT, $4 billion revenue run rate. And it sounded like you also hinted at 2028, you expect to see good growth there because you implied that you're going to add capacity beyond that $4 billion run rate for CAF '28. Just wondering what informs that outlook? Is it just -- is it the order book, the outlook? Would love some color there.
Yes, I think that we definitely see a good chance to -- for the whole industry to exceed $200 billion WFE sometime in '27, right? So I think that you see the range between $190 billion, up to $220 billion. And so we just prepare ourselves on the bull case, right? Because I do believe that sufficient shifted stock additional capacity will become a competitive advantage in this kind of up cycle.
Your next question comes from the line of Christian Schwab from Craig-Hallum.
Congratulations. Sheri, on a well-deserved retirement. It has been a pleasure working with you for many, many, many years. My only question has to do with as wafer starts accelerate from the capacity that's put on -- is it safe to assume that services will grow at the same pace as products or even potentially higher as we exit 2027?
Christian, I definitely see that the service will grow as we communicated before in the double-digit -- but as you know that the OEMs always have their extended service. So there's a timing lag, right? So I think that we still see the double-digit growth in the '26 and '27, but the acceleration will be after we see the ramp of the advanced factories in U.S., the improvement of the utilization of one of our major customers in U.S. and also the -- really the kind of the leading-edge ramp as they planned in factories in Korea and Taiwan.
There are no further questions at this time. I will now turn the call over to James Xiao for closing remarks.
Thank you, operator. We appreciate you joining us today, and we look forward to talk to some of you at the call back and update you all after Q3.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Ultra Clean Holdings, Inc. — Q1 2026 Earnings Call
1. Management Discussion
Good afternoon, ladies and gentlemen, and welcome to the UCT Reports First Quarter 2026 Financial Results Conference Call. [Operator Instructions] This call is being recorded on Tuesday, April 28, 2026. I would now like to turn the conference over to Rhonda Bennetto, Investor Relations. Please go ahead.
Thank you, operator. Good afternoon, everyone, and thank you for joining us. With me today are James Xiao, CEO; Sheri Savage, CFO; and Cheryl Knepfler, VP Marketing. James will begin with some prepared remarks about the industry and highlight some of the opportunities ahead for UCT.
Sheri will follow with the financial review, and then we'll open up the call for questions. Today's call contains forward-looking statements that are subject to risks and uncertainties. For more information, please refer to the Risk Factors section in our SEC filings. All forward-looking statements are based on estimates, projections and assumptions as of today, and we assume no obligation to update them after this call.
Discussion of our financial results will be presented on a non-GAAP basis. A reconciliation of GAAP to non-GAAP can be found in today's press release posted on our website. Also, beginning this quarter, our non-GAAP results now exclude the impact of unrealized gains and losses on foreign exchange and our revised reference to prior periods was included in our fourth quarter earnings press release back in February.
And with that, I'd like to turn the call over to James. James, please go ahead.
Thank you, Rhonda, and good afternoon, everyone. We appreciate you joining us for the Q1 2026 earnings call. In my prepared remarks, I will provide my thoughts on the near and longer-term market drivers and highlight where UCT has a clear competitive advantage to capitalize on a variety of opportunities during this multiyear up cycle.
Following that, Sheri will provide a financial update, and then we will open up the call for questions. We started the year out strong and delivered revenue and earnings above the midpoint of our guided range for the first quarter, driven by solid execution across a broad set of products, services and customers.
As you can see in our Q2 guidance, we're seeing momentum build across the semiconductor landscape, supported by growing industry-wide investments in AI-driven computing. I'd like to acknowledge our global teams for the sense of urgency, focus and operational excellence they continue to demonstrate every day. Their commitment to our customers and to driving the continuous improvement is elevating our performance today and positioning UCT to compete and win in the next phase of AI-driven growth.
The rapid expansion of AI infrastructure is fueling increased investments across the semiconductor ecosystem, with hyperscalers and cloud providers expect to deploy significant data center capacity by spending around $600 billion in 2026, driving demand sharply higher. Investment by memory companies to address the bottleneck will remove a major constraint to the overall server supply chain, increasing foundry unit demand to support this growth.
AI data center growth is being fueled by the rapid adoption of generative and agentic AI, and we're now seeing the early impact of physical AI as well. This new wave is driving increased demand for AI memory and leading-edge foundry logic, further accelerating fab capacity investments. These investments are driving the surge in WFE spending, with notably strong demand in leading-edge foundry logic, high-bandwidth memory and advanced packaging, all critical enablers of AI workloads.
Increasing device complexity is driving higher process and equipment intensity, especially in deposition and removal, sustaining the WFE cycle and expanding UCT's opportunity. Demand continued to build week by week, and we expect this momentum to increase as customers gain clarity on fab time lines, delivery schedules and ramp readiness. Long-term customer forecast and capacity requests reinforce our confidence in continued WFE demand growth with our services business directly tied to wafer starts. We are also seeing increasing wafer volumes across IDMs and foundries, driven by AI demand and ongoing fab expansions with higher tool utilization, creating a durable multiyear growth tailwind for our service business.
We're aligned with our customers and industry sentiment that we're in the early stage of a multiyear cycle that should accelerate into the second half of this year and beyond. Strong demand is occurring alongside emerging supply side constraints, including clean room capacity and the time required to bring new fabs online. As a result, today's environment is driven not only by demand, but also by the industry's ability to scale efficiently.
By executing on our UCT 3.0 growth strategy, we are strategically positioning to win in this environment. Ramp readiness remains a top priority under UCT 3.0. We are executing with urgency and a customer-first mindset. We align our teams, systems and supply chain to deliver with speed, quality and consistency. We see the AI-driven ramp as a meaningful opportunity to drive growth and expand margins through improved utilization and more efficient operations and infrastructure.
In parallel, we're advancing our MPX strategy, new product introduction, development and transition to accelerate time to market through our global centers of excellence. By co-innovating earlier with customers, compressing NPI cycles and strengthening responsiveness and the supply chain resilience, we are enabling faster ramps to high-volume production near our customers. This positions us to execute at speed and scale, supporting incremental share gains as customers prioritize development velocity and ramp speed, while driving UCT's operating leverage and margin expansion through higher volumes, improved mix and greater efficiency.
Supporting ramp readiness and MPX, we're making strong progress on our third UCT 3.0 initiative, digital transformation. We are upgrading our systems, processes and data infrastructure with AI compatible solutions to improve visibility, reduce cycle times and increase productivity, while enabling faster customer response. These efforts are strengthening our foundation for AI-enabled operations, increasing agility, driving productivity gains and transforming UCT into a more scalable enterprise aligned to capture growth in this multiyear AI-driven industry upturn.
Our global footprint supports around $3 billion in revenue today and can scale up to $4 billion with modest incremental capital investment. Assuming continued progress in workforce development, strategic supply chain and operational scaling, we do not expect infrastructure capacity to be our constraint. As volumes ramp, this should allow UCT to drive stronger operating leverage, improve profitability and create sustainable value.
In closing, while the long-term outlook remains strong, the near-term environment remains dynamic with variability across customer spending, potential supply chain constraints and geopolitics. In this environment, disciplined execution will define the winners. With our trusted partnership with key customers, strong ramp readiness and a global footprint that enables speed, agility and scale, we believe we are well positioned to capture an outsized portion of the opportunities ahead of us.
I will now turn the call over to Sheri, who will summarize our first quarter results and update you with our second quarter guidance. I look forward to your questions following the financial summary. Thank you.
Thanks, James, and good afternoon, everyone. Thanks for joining us. In today's discussion, I will be referring to non-GAAP numbers only. As James mentioned, we are seeing increased momentum from the early stages of a multiyear AI-driven expansion, and we're executing with urgency to support customer ramps while maintaining a strong focus on operational efficiency, cost discipline and margin improvement.
For the first quarter of 2026, total revenue came in at $533.7 million compared to $506.6 million in the prior quarter. Revenue from products was $465.7 million compared to $442.4 million last quarter. Services revenue was $68 million in Q1 compared to $64.2 million in Q4. Our global footprint supports about $3 billion in revenue today and can scale to approximately $4 billion with modest incremental capital investment.
With ongoing progress in workforce and operational scaling, we do not expect capacity constraints. As production increases over time, we would expect to benefit from improved operating leverage and corresponding margin expansion. Total gross margin for the first quarter was 16.5% compared to 16.1% last quarter. Product gross margin was 14.6% compared to 14.1% in Q4 and services was 30% compared to 29.7% last quarter.
Gross margin improved primarily due to better product mix and higher volumes, driving factory efficiencies. Margins continue to be influenced by fluctuations in volume, mix and manufacturing region as well as material and transportation costs. So there will be variances quarter-to-quarter. Operating expense for the quarter was $61.1 million compared to $56.6 million in Q4. As a percentage of revenue, operating expenses were 11.4% versus 11.2% last quarter. Total operating margin for the quarter came in at 5.1% compared to 4.9% last quarter.
Margin from our products division was 4.2% compared to 3.9% and services margin was 11.5% compared to 12.4% in the prior quarter. The first quarter tax rate came in at 20%, consistent with our expectations. Our mix of earnings between higher and lower tax jurisdictions can cause our rate to fluctuate throughout the year. For 2026, we expect our tax rate to stay in the low 20% range.
Based on 46.3 million shares outstanding, earnings per share for the quarter were $0.31 on net income of $14.5 million compared to $0.24 on net income of $10.9 million in the prior quarter. During the quarter, we made the strategic decision to further strengthen our balance sheet and meaningfully reduce our ongoing cost of capital.
In February, we priced a $600 million offering of zero-coupon convertible senior notes. We used a portion of the proceeds to fully repay our Term Loan B, reducing our annual cash interest expense by approximately $30 million. Subsequent to quarter end, we refinanced and upsized our revolving credit facility from $150 million to $250 million, reduced the interest margin by 75 basis points and extended the maturity to 2031, further enhancing our liquidity and financial flexibility.
Together, these actions are expected to reduce our weighted average borrowing rate from around 6.2% to approximately 1.4%. Turning to the balance sheet. Cash and cash equivalents were $323.5 million compared to $311.8 million at the end of last quarter. Operating cash flow was negative $33.3 million this quarter compared to positive $8.1 million last quarter, driven primarily by higher working capital as we build inventory to meet near-term demand and support future growth.
We are seeing broad-based improvements across the semiconductor landscape heading into the second half of this year and beyond, underpinned by sustained industry investment in AI-driven computing. We remain focused on maintaining discipline around margin expansion and driving sustainable shareholder returns over time.
Turning to the guidance. For the second quarter, we project total revenue to be between $565 million and $605 million and EPS in the range of $0.44 to $0.60. And with that, I'd like to turn the call over to the operator for questions.
[Operator Instructions] Our first question comes from the line of Charles Shi from Needham.
2. Question Answer
Maybe the first question, James, what's the WFE outlook you are seeing as of today? And I think in your prepared remarks, there's a line you mentioned you talked about solving the memory bottleneck and the relation to how that increases foundry unit output.
And I'm not sure the context of that line. And are you kind of implying maybe the memory WFE growth is pretty high today, maybe some of that strength will transition more to the leading-edge foundry logic? I'm not sure what you meant by that line, but can you elaborate a little bit while you address the WFE outlook question.
Thanks, Charles. Yes, so the WFE outlook is really continue to grow bigger than we saw the previous quarter. We see really from our customers, they're quoting $140 billion to $145 billion in 2026. So that's dependent on where you see the '25 number end up with at 18% to 20% year-over-year growth. And we see the similar momentum. The customers are talking about 15% and above for the 2027.
So to your question about the memory growth, I think that we kind of see that the AI capacity is somehow gated by the memory capacity in the past 3, 4 quarters. And now we see that all the major memory customers are investing in their greenfield factories and also upgrading their existing fabs to maximize their current footprint. So that actually gave a whole industry an unlock of the constrained capacity. So we see more of the new leading-edge new factory launches in basically all 3 leading customers, TSMC, Intel and Samsung.
Got it. So maybe the second question, James, I understand that the outlook is getting stronger on a week-by-week basis. You gave a special shout out to etch deposition, and I think that's well understood. But is there any part of your end markets that may still be a little bit slow, maybe even on a relative basis? I didn't hear you talk about lithography. I didn't hear you talk about your domestic Chinese customers. So what's going on there in those areas?
Yes. I think that, first of all, very good question. If you see the -- really the fast-growing segment in WFE overall, it is really the leading-edge foundry logic and HBM on the memory side and advanced packaging. So those are more an etch and removal intensive in terms of capital intensity. So therefore, relatively, you hear our customers are saying that they see that the first half, the deposition and etch is at mid-30s of the WFE. And in the second half, they see that increase to the high 30s of WFE.
So naturally, because this high-growth area are etch and dep intensive, so we see a higher share of dep and etch in overall WFE. The flattish area we see is probably the non-dep and etch segment overall. And the surprising is the trailing node foundry logic are also not going down. They're more like flattish. China, as we discussed before, it was a kind of building inventory safety stock situation in '24 and '25. Therefore, they're really kind of become a bigger portion of worldwide WFE at 35 to 40. Now we're seeing they're back to normal in the low 20s as the portion of the worldwide WFE. So I don't think that's an outlier. It's more back to the normal business situation.
Got it. Maybe the last question from me, if I may. If I understand the typical behavior of your customers correctly, I think this is a year -- I mean this year is when they are competing for basically who can ship tools faster to their customers. How do you assess in this kind of situation, whether the requests are coming from your customers are reasonable, whether -- or if any chance some of the requests you would see unreasonable and potentially at the expense of the growth for your outer years? How do you handle the situation like that and in terms of how you allocate your capacity, grow your capacity, et cetera? Just maybe a little bit of high-level philosophical question from -- I want to understand how you operate in an environment like this.
Actually, this is a great question. I think that I really see a very healthy move as an industry. What I mean by that is that we see the customer actually giving us a long-term forecast, so we can do the planning better. And the long-term forecast is actually showing the growth momentum. They gave us a confidence to really kind of utilize our current capacity and also have the confidence to plan for the next step expansion.
As I mentioned in my previous earnings call and this one, we really have capacity to really run at $3 billion run rate per year. The current run rate is still $2 billion, $2.2 billion. So we have the runway to really kind of address additional demand. And our brick-and-mortar capacity can handle up to $4 billion. So by minimal capital investment, we can have 6 to 9 months to build that capacity so we can really reach the $4 billion run rate. So in that sense, we're well positioned to address the drop-in demand from our customers.
Our next question comes from the line of Krish Sankar from TD Cowen.
This is Robert Mertens on the line on behalf of Krish. I guess the first one is just around your domestic China business. Do you have a percentage of sales figure you could share for the March quarter? And just how you sort of expect that portion of your business to trend given that the current semi-cap customers in China have been doing pretty well.
Yes. As we previously discussed, the percentage of our China business, domestic China business is less than 5% of our overall revenue. We maintain that kind of range. And what we see is that gradually the domestic Chinese WFE customers will increase their share within the China WFE market. And we see also the growth opportunity as we grow the share with those Chinese customers.
Our next question is from Christian Schwab from Craig-Hallum Capital Group.
Great. Congrats on the great quarter and outlook. Given the demand is improving week by week, I guess it's kind of crystal clear. But do you -- as you look at the year, do you have an idea of what percentage of revenue will be second half weighted versus the first half?
Yes, great question. So we -- as you can see that in our forecast, we're seeing close to double-digit growth quarter-over-quarter from Q1 to Q2. We expect a similar range of growth going forward and for the second half.
Perfect. And then can you give us -- given $4 billion in revenue driven by increased WFE, but finally seeing a very material increase in wafer starts to drive your services business. When you talk about $4 billion in revenue potential and another $1 billion that could be added given a modest amount of capital and notice to put that online, what would you anticipate would be your mix of revenue at $4 billion that would be service?
Yes, I think it's a good question. So as we discussed, we see that the -- our service revenue is really a function of wafer starts and a small portion of that business is also directly correlated to the WFE growth. So in an aggregated base, we expect a double-digit growth for the year on the service side. And going forward, we still see a range of 10% to 12% as our overall revenue percentage.
Great. And then lastly, historically, if we go back to '20 and '21 as far as the last accelerated WFE spending cycle, you outgrew WFE growth materially. And should we assume the big not only market share gains and certainly your ability to potentially gain share with the ease of adding increased capacity. But as far as outgrowing WFE, there's a lag period between installing fab equipment and wafer starts being finished, which is the driver of the services business, I guess, in aggregate. Is that the way we should be thinking about the primary driver of your growth outperforming WFE? Or do you think this cycle, you're better positioned for market share gains?
Yes. So we definitely see that we will grow with the WFE growth and with really the upside potential on both product side and service side. And really, to me, the playbook is always to defend the core, which we are really in a leading position and grow the SAM. So we enter into new modules and new gas panel business as our customers expand their product portfolio. And then finally, win at inflection. So position ourselves with stronger NPI capabilities so we can align with customers' NPI road map and win in the next node inflection.
Our next question is from Edward Yang from Oppenheimer.
Just first question, related to that strong second quarter guide on the revenue side and for the remainder of the year, how should we think about gross margin progression?
Yes. Gross margin should start to continue to improve as we move through the year. Obviously, we'll see it being slightly up in Q2 and then continue to grow as we move through the year as the revenue potentially goes up. So obviously, mix and where it's shipping from does play a factor in that and things change as we move through the year, but we truly do see it moving up as we get closer to the Q4 time frame.
And Sheri, if I could dig a little deeper related to mix. I mean you've got a plethora of different products and services. Just focusing on the product side, what are the gross margin differentials between your lowest and highest? And what's your highest margin products and maybe talk some detail around that.
Yes. We probably don't publish as much on the specific product margins. But as I've mentioned before, we have a large bell curve of margins, so they can range anywhere between 10% to 50% to 60% depending upon whether it's a component part or it's a module or a gas panel.
So it just really depends on the sheer volume of each of those mixes of products that play into our overall gross margin, along with how fast the revenue comes in to us and how fast we can hire labor and other costs associated with that. So those are the key factors that play into our margin as we grow revenue. So again, a large bell curve of margins. There's quite a few different products and different margins within those products as well. So that's why it makes it complicated to detail all of those out.
Got it. And maybe a question for James. Beyond the general uplift in WFE, you mentioned your UCT 3.0 strategy. I know it's a long-term vision, but just interested in the progress around that, the co-innovator and the MPX framework. And just wondering how customer receptivity has been to that? And when can we expect to see specific market share gains or new module wins around that MPX framework?
We are -- great question. We are investing in our, I call it, regionalized center of excellence. So basically, we have NPI Center of Excellence in U.S. We further enhance that. And we're actually expanding our NPI capabilities in Asia and also in Europe. So the customer wants to have the engineers co-innovate, define the spec and really design the system and modules close to their core engineering team.
That's actually in Europe, in U.S. and expanding to Asia. So we follow customers' need on that. Then we will also transfer that locally by region to our HVM site, also distribute in all the regions, right, U.S. and Europe and Southeast Asia. And that's really well aligned with our customer strategy where they're also moving their global engineering footprint close to their high-value production sites. So well received by customer. We see some early momentum, and that's actually accelerating our NPI engagement with customers. We already have a pretty strong pipeline of NPI engagement with existing customers. This regionalized center of excellence just further enhance our capabilities.
Our next question is from Krish Sankar from TD Cowen.
I realize I put myself on mute after my first prior question. And my second question was going to be around the margin profile, but you just answered it. So I won't make you repeat yourself.
I'd like to turn the call back over to Sheri Savage for an announcement.
Thank you, operator. I have an announcement to make, and I wanted to share it on this call because I personally know many of you here today. After a lot of thought, I've decided to retire from UCT. Being part of UCT's journey over the past 17 years has been an incredible privilege. I'm incredibly proud of what we've built together, and I'm deeply grateful for the trust, partnership and support of our teams, our leadership and our Board.
I'm confident that UCT is ideally positioned for continued growth and success in the years ahead. I'll remain fully engaged until we find my successor, looking both internally and externally, and I'll continue behind the scenes to ensure a smooth transition. Thank you for making this journey meaningful and rewarding for me. I really appreciate the support many of you have given to me over the years. And with that, thank you for joining our call today, and we look forward to seeing you when we report our second quarter earnings. Thanks.
This concludes today's conference call. Thank you for your participation. You may now disconnect.
Ultra Clean Holdings, Inc. — Q1 2026 Earnings Call
Ultra Clean Holdings, Inc. — Q4 2025 Earnings Call
1. Management Discussion
Good afternoon, ladies and gentlemen, and welcome to the Ultra Clean Technologies Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] This call is being recorded in Monday, February 23, 2026.
I would now like to turn the conference over to Ronda Bennetto, Investor Relations. Please go ahead.
Thank you, operator. Good afternoon, everyone, and thank you for joining us. With me today are James Xiao, CEO, Sheri Savage, CFO; and Cheryl Knepfler, VP Marketing. James will begin with some prepared remarks about the industry and highlight some of the opportunities ahead for UCT. Sheri will follow with the financial review, and then we'll open up the call for questions. .
Today's call contains forward-looking statements that are subject to risks and uncertainties. For more information, please refer to the Risk Factors section in our SEC filings. All forward-looking statements are based on estimates, projections and assumptions as of today, and we assume no obligation to update them after this call. Discussion of our financial results will be presented on a non-GAAP basis. A reconciliation of GAAP to non-GAAP can be found in today's press release posted on our website.
And with that, I would like to turn the call over to James. James, please go ahead.
Thank you, Rhonda, and good afternoon, everyone, and thank you for joining us. This is my first sold earnings call as CEO. And as I approach nearly 6 months in a row, I remain very energized by the opportunity ahead of us. We will spend significant time across our global sites, meeting with employees, customers and partners, and have developed an even deeper connection in the strength of our team, our strategic position and have refined our long-term growth strategy and vision which I now call UCT 3.0.
I want to thank our employees worldwide for their focus, resilience and commitment to operational execution during this transition. Their dedication to our customers and to continuous innovation and improvement is fundamental to our performance. and it positions us well as we enter a new phase of AI technology-driven industrial growth, where speed, scale and execution will become designing advantages for long-term winners at UCP. As you have heard recently from our customers and their customers, we're no longer preparing for a semiconductor recovery. We're entering a structural expansion of wafer fab equipment driven by AI infrastructure and physical AI demand.
The long-term outlook for the semiconductor market remains very strong. industry projections now suggest the market could reach $1 trillion in annual revenue of semiconductors by 2027, possibly earlier, which is significantly ahead of prior expectations. What we are with anything is not a normal cyclical upturn. It is an AI technology inflection. The center of gravity has shift from consumer electronics to AI infrastructure, visit AI, autonomous driving and other AI applications. The evolving AI road map from generative AI to physical and genic AI and ultimately, artificial general intelligence, or AI is driving greater end customer confidence and accelerating investment in AI infrastructure stakeholders across the AI ecosystem are investing to support growing AI end market demand.
Rising device complexity is accelerating wafer fab equipment spending as the leading ad fabs deploy new materials like molder, and new structures such as gate our round and high-bandwidth memory. These technologies require tight integrated solutions across deposition and removal, with increased DAP edge CapEx intensity, which provide a tremendous growth opportunity for UCT. All these market drivers should lead to a multiyear WFE outturn once wafer fabs address their near-term cleanroom constraints. Our technology co-innovation is tightly aligned to our customers' road maps.
We expect to see strength around edge and deposition, especially ALD and high-precision patch to support gate our run and backside power distribution and logic transitions as well as high bandwidth memory, advanced packaging and greater than 300 layer NAND in memory. This environment demands innovation velocity and operational agility. This is how UCT is positioned today and will continue to evolve to win and create a sustainable, profitable growth. This strategic transformation is what we call UCT 3.0 ramp readiness is our top priority now. We have been preparing for this moment, and this is where UCT has a distinct competitive advantage.
Over the past several months, we have been focused on our business to operate with greater responsiveness and sensible urgency, efficiency and accuracy. Leveraging our global talent and the footprint, we're driving operational execution initiatives to ensure we grow as the partner of choice for engineering support development and also the manufacturing support. Through facility optimization over the last several years, we have the capacity in place now to support approximately $3 billion in revenue today, with global utilization currently averaging 65%. Among our worldwide capacity, approximately 50% is currently in Asia with plans to increase to 60%, which is strategically aligned to support our key customers' global manufacturing footprint.
As volumes ramp quarter-over-quarter, we will be focused on improving operating leverage and generating meaningful margin expansion. While we expect 2026 demand to be second half weighted and increase into 2027, customers are encouraging us to position capacity ahead of that inflection. Our largest customers are providing extended visibility, enabling us to align capacity and service infrastructure in advance of increased order activity. In parallel, we have identified and addressed product-specific supply chain and manufacturing constraints to ensure the readiness for a step function increase in orders. For UCT to support our long-term goal of a $4 billion annual run rate. Only modest incremental cleanroom investment will be required. We do not expect infrastructure-related capacity to be a limiting factor during this cycle, provided we continue to build and retain the scaled workforce required and leverage automation and the leading capabilities to scale capacity efficiently.
Having well-planned actual capacity entering a technology inflection of this magnitude, is a strategic competitive advantage. This allows us to support customer road maps while capturing in and dropping opportunities and responding rapidly to urgent need and frequent changes that others may struggle to support. In addition to our readiness initiatives, we're also accelerating the design to production cycle, expanding our participation in high-value new product introductions at the leading-age nodes and strengthening strategic technology integration with our customers. A key enabler of this is our expanded MPS strategy which is comprised of new product introduction, new product development and new product transition.
Together, they will position UCT to co-innovate earlier run faster and manufacturing closer to customers, driving speed, responsiveness and supply chain resilience at scale. Another important focus area is on digital transformation. By upgrading our systems, processes and data infrastructure with AI compatible solutions, we are further improving operational visibility, shorter cycle times, enhancing productivity and enabling a faster response time to our customers. These digital initiatives set a solid foundation for our multiyear digital transformation drive towards AI-enabled IT infrastructure and business processes to enhance operational agility and continuously improve productivity. In closing, we remain focused on reaching our long-term revenue target expanding margins over time and delivering durable shareholder value as a strategic co-innovator and manufacturing partner throughout the next cycle of technology inflection.
We will now turn the call over to Sheri who will summarize our first quarter results and update you with our first quarter guidance. I look forward to your questions following the financial summary. Thank you.
Thanks, James, and good afternoon, everyone. Thanks for joining us. In today's discussion, I will be referring to non-GAAP numbers only. As James mentioned, we are entering a structural expansion of wafer fab equipment spend. driven by AI infrastructure and physical AI demand.
I'll now review our fourth quarter and full year results as well as provide our first quarter guidance. For the fourth quarter, total revenue came in at $506.6 million compared to $510 million in the prior quarter. Revenue from products was $442.4 million compared to $445 million last quarter. Services revenue came in at $64.2 million in Q4 compared to $65 million in Q3. For the full year, total revenue was $2.1 billion, roughly flat with 2024 revenue. Due to facility optimization initiatives over the last several years, we have the capacity in place now to support approximately $3 billion in revenue and are currently averaging 65% utilization.
We believe that in order to -- for UCT to support a $4 billion annual run rate, only modest incremental clean room investment will be required. We remain focused on aligning workforce capacity with demand while leveraging automation and lean disciplines to drive efficient and scalable growth. Total gross margin for the fourth quarter was 16.1% compared to 17% last quarter. Products gross margin was 14.1% compared to 15.1% in Q3. We and services was 29.7% compared to 30% last quarter. Gross margin was impacted in Q4 due to a shift in product mix. Total gross margin for 2025 was 16.5% compared to 17.5% in the prior year.
Margins continue to be influenced by fluctuations in volume mix, manufacturing region and related tariffs as well as material and transportation costs, so there will be variances quarter-to-quarter. As production levels increased sequentially, we expect improved operating leverage and meaningful margin expansion. Operating expenses for the quarter was $56.6 million compared to $57.7 million in Q3. As a percentage of revenue, operating expenses were 11.2% and versus 11.3% last quarter.
For the year, operating expense as a percentage of revenue was 11.2% compared to 10.6% in the prior year. Total operating margin for the quarter came in at 4.9% compared to 5.7% last quarter. Margin from our Products division was 3.9% compared to 4.9% and and services margin was 12.4% compared to 11.1% in the prior quarter. For the full year, operating margin was 5.3% compared to 6.9% in the prior year. Fourth quarter tax rate came in at 21%, consistent with our expectations. Our mix of earnings between higher and lower tax jurisdictions can cause our rate to fluctuate throughout the year.
For 2026, we expect our tax rate to stay in the low 20% range. Based on 45.8 million shares outstanding, earnings per share for the quarter were $0.22 and on net income of $10 million compared to $0.28 on net income of $12.9 million in the prior quarter. For the full year, earnings per share was $1.05, and on net income of $47.7 million compared to $1.44 on net income of $65.2 million in 2024. Turning to the balance sheet. Our cash and cash equivalents were $311.8 million compared to $314.1 million at the end of last quarter. Cash flow from operations was $8.1 million this quarter compared to breakeven last quarter, primarily due to working capital management.
For the full year, cash flow from operations was $55.6 million compared to $65 million in the prior year. Looking ahead, we continue to see a strong structural backdrop for semiconductors with industry estimates now calling for annual revenue to approximately $1 trillion by 2027, possibly earlier. We continue to execute towards our longer-term $4 billion revenue goal with a focus on expanding margins and generating durable shareholder returns. For the first quarter of 2026, we project total revenue to be between $505 million and $545 million. We expect EPS in the range of $0.18 to $0.34. And with that, I'd like to turn the call over to operator for questions.
[Operator Instructions] Ladies and gentlemen, we will now begin the question-and-answer portion of the call. [Operator Instructions] Your first question comes from the line of Charles Shi from Needham
2. Question Answer
I want to start with your overall on WFE. Back in January, I believe you talked about probably low to mid-teens WFE growth I saw your presentation there's $125 billion to $135 billion projection in the deck, but not so sure about your base numbers. So can you give us a little bit better sense of what's your WFE forecast this year?
And on a related question, the Q1 guidance looks like at least on a year-on-year basis, it's at the midpoint of the guidance, it's only up a little bit. So it looks like you may be -- I mean implying a very, very strong second half pickup. I wonder how the shape of the year could be.
Charles, let me answer your questions, and we'll have Sheri came in. So for -- that's why I explained to you in the Medan conference, a month ago, we see the forecast increase week by week. So right now, our view on the overall is bigger than a month ago. So we're looking at 15% to 20% year-over-year growth. And in terms of your second question, yes, we do not see probably what you see the year-over-year quarter-over-quarter from our customers. But we have a big bump from Q3 to Q4.
So if you take the average, the increased rate actually is kind of in line with our customers' growth rate. Okay?
James, maybe a quick clarification. Just a big bump basically, you're saying maybe the run rate -- for your revenue run rate, you see like September will be a very strong pickup from June, maybe from a strong pickup again from September to December. Is that what you were speaking to? Yes.
Yes, I think that you're right. So look forward, we devise a step function increase in the second half of '26 and that's where we see the over year and we're very optimistic about the whole year growth.
Maybe I may I ask a question about the gross margin. So can you provide a little bit color March quarter, what's the implied gross margin expectation under your revenue and EPS assumptions.
Charles, this is Brian Harding, I'll cover the margin question for you. Just quickly, yes, we expect gross margins in Q1 to be roughly the same, maybe slightly up to Q4 and then sequentially up from there through the year.
Your next question comes from the line of Krish Sankar from TD Cowen.
GMs 2 of them. One is if WP is going to grow 15% to 20%, is it fair to assume you could outgrow that WFE this year and would your revenues grow sequentially every quarter? Or is it really more back operated that Q2 is going to be flattish. So just trying to figure out if you can outgrow WFE for Ultra Clean revenues.
Yes. I think that what we look at is this year, we see really kind of step function growth of the WFE. So we're very confident we will kind of in line with the WFE growth and we also see that because we have a well-planned extra capacity that really can address $3 billion. So we'll capture more opportunities, leverage that extra capacity.
So we're pretty confident we will be on par with WFE growth or even higher.
And would it be sequentially growing? Or is it more really like Q3, Q4 .
I think that we will see another growth in Q2 already but more step function in the second half.
Got it. Got it. And then a quick follow-up. How much is China as a percentage of revenues last quarter? And how do you expect that to grow, especially given that Chinese semi cap customer seems to be doing pretty well. It's a great question. I think that as you have already heard from our customers, the WFE in China is flattish in 2026. .
I think because of the worldwide WP is growing substantially. I think the percentage of the China WFE will be lower for our business for the China OEMs, we see also kind of flattish forecast for 2026. But overall, it's less than 7% of our overall revenue. I would not put too much of emphasis on this.
Your next question is from the line of Edward Young from Oppenheimer.
James, just wanted to follow up on the gross margin assumption for the upcoming first quarter '26. I think Brian mentioned that you're expecting same or slightly up from third quarter. So just wondering what's driving that? Why aren't you seeing more operating leverage from that? And can you maybe talk a little bit more in detail about the mix issue that you saw in the fourth quarter?
Yes, I think that I will answer that, and maybe Brian can chime in. So overall, I really see as I said, we're running at 65% of the utilization rate today and we'll see duly the demand is growing quarter-by-quarter. So by the end of 2026, we definitely see a much higher utilization rate that will naturally expand our margin profile. And also we're keeping very disciplined operation cadence. So we will not grow the OPEC and IDL as the revenue growth. So that will also -- that discipline will also give us margin expansion opportunities -- and Brian, maybe you want to talk more on the model standpoint. .
6 Yes, sure. Just looking at Q3 to Q4, first off, Ed, we -- in Q3, we did have a favorable product mix that didn't repeat again in Q4. And so -- and our margins do continue to fluctuate with volume and mix and manufacturing regions as well as tariffs. -- and material transportation costs, a number of things impact our margins quarter-to-quarter. And going forward into Q1, I did say that we expect Q4 and Q1 to be roughly in line, maybe slightly better in Q1 -- but then as volumes come in, as James mentioned, in Q2, 3 and 4, we expect sequential margin expansion in a meaningful way.
Okay. And I mean this is a tough question to answer, but obviously, a lot of excitement around what's happening in memory, and that's a business that in the prior peak was $900 million in revenue for you. It's down about $300 million from that peak. So I would imagine that would have some significant upside as well. So James, when you think about, I guess, this memory cycle, what are -- what's your feeling in terms of how much longer it could go in terms of the strength on the upside? And what are the sort of parameters we should be watching out for in terms of the slope of that up cycle and the duration of that up cycle. A, this is a great question. I think that you hear from our customers' customer, right? So some are mentioning that the shortage will last until 2028. And when we see that the -- all 3 of them Miron Samsung, SK, they are really investing on greenfield will they continue to convert existing fab to really kind of address immediate demand. So -- we really see this as a multiyear upturn for the memory segment. And also if you look at the end market demand, HBM will compromise the nameplate capacity in the DRAM factories.
So you almost need more WPE investment to compensate that focus on HVM capacity expansion, will we still try to address the unbalanced demand and supply in the regular DRAM market. And also, I think that if you look at the NAND, you still see that upgrade from the FXX to 3x and for X. So that will continue -- you heard Lam is talking about that $40 billion over multiple years of net upgrade capacity and investment and they also mentioned that they're going to modify that model. seeing the demand even for the SSD broadband, right?
So I think that overall, we really believe this is a multiyear growth for the NAND customers are talking about for the AI specific memory this year, 22% CAGR or 2 to 3x CAGR compared to the regular memory market.
Your last question comes from the line of Christian Far from Craig-Hallum.
So James, with the 65% utilization rate in your recent facility optimization over the last 1.5 years or 2 years, how should we be thinking about what utilization rate for what type of order visibility would be required to put in essence, the $1 billion worth of capacity that's available to you above and beyond the $3 billion you have today? How should we be thinking about that? .
Yes. I think that what we see today, Christian, is that week by week, we see a drop in forecast. So we're very optimistic from the run rate quarterly run rate standpoint will fill that capacity very quickly, especially we're actually shifting our focus to Asian manufacturing is kind of in line with our customers' global manufacturing strategy. So very soon, you will see our Asian factory will fill completely and that will eventually represent 60% of our global capacity, well matched the customers' manufacturing footprint. So with the increase in utilization with highly weighted Asian manufacturing, we'll see really the positive improvement on our margin profile.
Great. And then on the margin profile, understanding utilization rates having an impact. But as your customers then begin to especially in memory, materially increase wafer starts per month, naturally, your services business, which is heavily influenced by wafer starts similar to what we saw in '20 and '21 when that mix of revenue was larger in a 29% gross margin, plus or minus, naturally kind of drives gross margins there without any material increase in product gross margin. Are you thinking about that right?
Right. Great. So I think that -- yes, so I guess the question is what is the growth on the service business? So in that sense, we see double-digit growth in 2026. Again, it's also weighted in the second half on our leading a foundry logic customers ramp up their factories in U.S. The RSC, we're well positioned for that U.S. foundry logic ramp in addition to our current customer or serving in U.S.
Thank you. There are no further questions at this time. I would now like to turn the call back to James Shaw for closing comments. Sir, please go ahead. .
Thank you for joining us today. This concludes our earnings call. I will have a follow-up with you guys at a private session. Talk to you later.
Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.
Ultra Clean Holdings, Inc. — Q4 2025 Earnings Call
Ultra Clean Holdings, Inc. — Q3 2025 Earnings Call
1. Management Discussion
Ladies and gentlemen, and welcome to UCT Q3 2025 Financial Results Conference Call. [Operator Instructions] Please be advised that this call is being recorded on Tuesday, October 28, 2025. I will now turn the call over to our first speaker today, Rhonda Bennetto, Investor Relations. Please go ahead.
Thank you, operator. Good afternoon, everyone, and thank you for joining us. With me today are Clarence Granger, Chairman; James Xiao, CEO; Sheri Savage, CFO; and Cheryl Knepfler, VP Marketing. Clarence will begin with some prepared remarks about the quarter, and James will share his thoughts on the industry and the opportunities ahead for UCT. Sheri will follow with a financial review, and then we'll open up the call for questions.
Today's call contains forward-looking statements that are subject to risks and uncertainties. For more information, please refer to the Risk Factors section in our SEC filings. All forward-looking statements are based on estimates, projections and assumptions as of today, and we assume no obligation to update them after this call. Discussion of our financial results will be presented on a non-GAAP basis. A reconciliation of GAAP to non-GAAP can be found in today's press release posted on our website. And with that, I would like to turn the call over to Clarence. Clarence?
Thank you, Rhonda, and good afternoon, everyone. We appreciate you joining our third quarter 2025 conference call. I'll start with a brief review of our Q3 results, followed by an update on our 3 areas of focus, including new product introduction, flattening the organization and business structure and processes.
After that, I'll turn the call over to James Xiao, UCT's new CEO, for a few observations from his first 60 days and insight into UCT's next phase of growth. And then Sheri will provide a more detailed financial review. First of all, we are very pleased with our third quarter results, which reflect continued progress on the priorities we've set for the year.
This quarter, we realized a notable improvement in our gross margin, demonstrating some early benefits of the structural and operational improvements we've been implementing across UCT as well as some tariff-related cost recovery. These results speak to the resilience of our business model, the discipline of our global teams and our continued focus on execution in a complex and uncertain business environment.
Throughout the quarter, we remain focused on strengthening our operational foundation through the 3 key initiatives I highlighted last quarter. First, we continue to drive new product introductions and component qualifications with our customers, ensuring we are positioned early in their technology development cycle.
Second, we substantially completed the work to flatten our organizational structure. A key milestone that's improving our decision-making speed, increasing efficiency and better connecting our global teams. Part of this process includes driving factory-level efficiencies and consolidating select sites to further enhance productivity and optimize our cost structure.
A third major area of focus, streamlining our business systems and the optimization of our prior acquisitions, including Fluid Solutions, Services and HIS into UCT's core systems and processes is on track. We installed our company-wide SAP business system into our Fluid Solutions Group at the beginning of July, and we have completed the strategic alignment between our Products Group and Fluid Solutions on qualification priorities with our customers.
This alignment strengthens our position for new business opportunities and will support improved margins over time. These combined efforts represent a comprehensive transformation that positions UCT for greater agility, efficiency and long-term profitability. While it will take time for all the benefits to be fully realized, these actions are foundational to building a stronger and more competitive company for the years ahead.
We all recognize that the current macro landscape remains dynamic with near-term volatility and reduced visibility. Yet the underlying fundamentals of our industry remain exceptionally strong. AI-enabled high-performance computing continues to drive a powerful new wave of semiconductor innovation, fueling demand for advanced manufacturing technologies, new architectures and next-generation processes. These structural growth drivers play directly into UCT's strength, our deep technical expertise, our manufacturing expertise and the ability to respond with speed and precision as our customers' needs evolve.
With that, I'll turn the call over to James to share more about our operational progress, customer engagement and the opportunities we see ahead. James?
Thank you, Clarence. My first [ 60 ] days as CEO has been inspiring. The talent and their drive across UCT give me full confidence in our ability to take the company to the next level. Our industry is entering a new era fueled by AI and rapid technology change. That is what I call UCT 3.0, evolving from a trusted partner into a trusted strategic partner and co-innovator deeply integrated into our customers' technology road maps. By harnessing our operation agility and innovation velocity, we will unlock new levels of growth with our world-class facilities while supporting our global customers with speed, scale, automated infrastructure and innovation.
To build a little more on what Clarence already highlighted, my immediate focus remains on strengthening the profitability, optimizing our global footprint and positioning UCT for long-term growth. Operationally, we are driving measurable improvement in quality, cost efficiency and on-time delivery performance.
Through lean and quality initiatives, we are streamlining our process across sites and sharing best practices, including broadening our vertical integration and optimizing the organization and our accountability. Automation and digitalization, including the integration of AI-based inspection and robotics are also accelerating factory throughput and quality consistency.
With that, UCT will have more robust infrastructure and processes to better capture emerging growth opportunities during the next ramp. Our optimized footprint strategy ensures the capacity is aligned with regional wafer fab equipment demand growth. We are establishing a cluster-based manufacturing network to improve global innovation, speed and cost efficiency through regionalized centers of excellence with new product engineering and mass production transfer.
To build long-term value creation, we will accelerate the design to production cycle, capitalize on high-value new product introduction at a leading-edge node and further strengthening our strategic partnerships with semi-cap customers through technology integration and execution discipline. We are aligned with our peers, customers and industry sentiment that the long-term outlook for the semiconductor market is very much intact.
We see powerful sustained demand driven by AI, high-performance computing, data center expansion and advanced packaging technologies. We view these structural technology inflections as the foundation for a decade of growth across the semiconductor ecosystem. In the short term, while downstream fundamentals and sentiments are improving, it could take several quarters to see a meaningful acceleration in wafer fab equipment spending. This does not change the fact that I'm very excited about UCT's future and the opportunity to lead this company into the next AI era of semiconductor advancement. Back over to you, Clarence. Thank you.
Thanks, James. I know that with your leadership, UCT will be in good hands. Since this is my last conference call, I wanted to thank all our investors, our customers and especially our employees for the trust they placed in me during this transition period. It was my honor to step in and reconnect with everyone, and I am very confident that James will take us to the next level. With that, I'll turn the call over to Sheri for a review of our financial performance. Sheri?
Thanks, Clarence and James, and good afternoon, everyone. Thanks for joining us. In today's discussion, I will be referring to non-GAAP numbers only. As Clarence and James noted, our third quarter results highlight meaningful progress on our key initiatives for the year. These achievements demonstrate the effectiveness of our strategy and the resilience of our organization as we continue to position UCT for long-term profitable growth. For the third quarter, total revenue came in at $510 million compared to $518.8 million in the prior quarter.
Revenue from products was $445 million compared to $454.9 million last quarter. Services revenue came in at $65 million in Q3 compared to $63.9 million in Q2. Total gross margin for the third quarter was 17% compared to 16.3% last quarter. Products gross margin was 15.1% compared to 14.4% in Q2 and services was 30% compared to 29.9% last quarter. Gross margin gains were supported by improved site utilization, a higher value product mix, cost and efficiency initiatives and tariff recoveries.
Margins continue to be influenced by fluctuations in volume, mix, manufacturing region and related tariffs as well as material and transportation costs, so there will be variances quarter-to-quarter. Operating expense for the quarter was $57.7 million compared with $56.1 million in Q2. As a percentage of revenue, operating expenses were 11.3% versus 10.8% last quarter. As mentioned in the previous call, this increase in OpEx was mainly due to incremental SAP go-live costs.
Total operating margin for the quarter came in at 5.7% compared to 5.5% last quarter. Margin from our Products division was 4.9% compared to 4.8% and services margin was 11.1% compared to 10.5% in the prior quarter. Our third quarter tax rate came in at 22.7% as we have revised our full year estimated tax rate to approximately 21%. Our mix of earnings between higher and lower tax jurisdictions can cause our rate to fluctuate throughout the year.
For 2025, we continue to expect the tax rate to be in the low to mid-20s. Based on 45.6 million shares outstanding, earnings per share for the quarter were $0.28 on net income of $12.9 million compared to $0.27 on net income of $12.1 million in the prior quarter.
Turning to the balance sheet. Our cash and cash equivalents were $314.1 million compared to $327.4 million at the end of last quarter. Cash flow from operations was breakeven compared to $29.2 million last quarter, mainly due to timing of cash collections and payments. Reducing our overall interest expense remains a key priority.
During the quarter, we took advantage of favorable conditions in the credit markets to reprice our Term B loan, lowering our interest rate margin by 50 basis points. This proactive step further optimizes our capital structure and reduces our long-term borrowing costs. Another development includes the renewal of our share repurchase program for an additional 3-year term, authorizing up to $150 million of repurchases with a maximum of $50 million per year. Although we are not anticipating near-term repurchases, we view this program as a valuable component of our disciplined capital allocation framework.
The tariff environment for the semiconductor market remains dynamic, and we continue to see the effects across the supply chain. During the third quarter, we achieved some tariff recovery, and we will continue to closely monitor developments, leverage our global footprint and localized supply chain to help mitigate the impact, maximize efficiency and protect our profitability. As stated earlier, this quarter was very favorable for product mix and factory utilization.
We see Q4 returning to similar levels as the first half of the year. As a result, we project total revenue for the fourth quarter of 2025 to be between $480 million and $530 million. We expect EPS in the range of $0.11 to $0.31. And with that, I'd like to turn the call over to the operator for questions.
[Operator Instructions] Your first question comes from Charles Shi of Needham & Company.
2. Question Answer
Maybe the first question on the near-term industry demand outlook. It sounds -- it looks like you guys are seeing maybe we won't really see a pickup over the next several quarters before an actual pickup start to happen. And I wonder what your view right now on first half next year? Should we still kind of assume that the $500 million per quarter level? And what's the early view on the second half next year? That's the first question.
Yes. Okay. So Charles, thanks for the question. And I look forward to work with you and your firm as a long-term partner. I think that our view on this, as you already heard from some of our customers, right? They really see a kind of mid- to high range of year-over-year growth in next year's WFE in general.
I think that some customers see that a little bit of a flattish outlook in first half, and they see a kind of step function increase in the second half. Others see differently. So I think that I really do not want to give you a specific because the controversial outlook we have from different customers. So I would say that we will see a mid- to high range and year-over-year growth and the timing of that to be seen. Charles, you want [indiscernible].
Go ahead, Charles.
Yes. Maybe a second question on Q4. It looks like you're guiding Q4 slightly below the September level. I believe one quarter ago, you were expecting some pickup tied to some of the opportunities you saw in Europe. And I wonder why the guide is a little bit lighter than the expectation a quarter ago. Was that the timing of that program in Europe or something else has probably weakened a little bit?
Charles, this is Sheri. Yes, we did -- we have seen that demand and continuing to see that, but we are seeing some different forecast from other customers. So it's just causing a little bit difference in Q4 than what we initially said last quarter. But we are seeing strength in that specific revenue that we talked about in Q3.
As you know, we have a large bell curve of margins that we produce for our customers. And in Q3, just happened to be a little bit better mix than what we've seen previously. And Q4 is kind of going back to the mix that we've seen in the first half of '25. But that's generally why our Q4 is slightly down from the Q3 time frame.
But Charles, this is Clarence. So as we said, we were going to capture some new business in Europe in Q4. We did capture that business. It's just, as Sheri said, some other businesses slowing down and offsetting that. But overall, we are very confident in our position in capturing new business, and we feel we're well on our way to have a much stronger year in 2026, albeit maybe in the second half.
Got it. If I may, I have one last question. what's the -- is there anything changed -- anything that's different in terms of your view about your China for China business? We knew that at the beginning of the year, there was some technical challenges that your Chinese OEM customers saw and that kind of led to quite a bit of a decline in that part of the business. Is that on track to recover? And is it on track into the, let's say, into the fourth quarter, where do you see that China for China business in terms of maybe revenue run rate where it's going to be at?
Charles, yes, we knew this question was coming from you. We were kind of flipping a coin to see who got to answer it. I got the short straw. So I guess it's my turn. So just to make sure we clarify on our China situation. Literally, a little less than 7% of our total revenue is to our Chinese customers. So it's not a huge portion of our revenue.
But obviously, I understand why everybody is interested in China with all the talk going on. So -- but in terms of the revenue, our revenue this quarter and next quarter will be about the same percentage for China. So it's relatively flat right now. And frankly, because of all the political turmoil, we are migrating all of our non-Chinese customer manufacturing out of China.
So as you know, we've called that China for China, but we're probably going to quit using that terminology. But essentially, all of the products manufactured in China as of the end of the fourth quarter will be manufactured in China and all of the products for our non-Chinese customers will be manufactured outside of China. So that's an important strategic direction for us, and we've accomplished what we said we would.
So from a long time -- long-term perspective, we're very comfortable with our position in China. We think the Chinese market is going to be one of significant growth over the next few years, and we fully intend to participate in that market going forward, albeit on a slightly different footing where we have essentially 2 separate manufacturing organizations.
Your next question comes from Krish Sankar of TD.
This is Robert Mertens on the line on behalf of Krish. First, congrats, James, on the new role. We look forward to working closely with you in the future. Just my first question, could you walk us through some of the remaining synergies with these recent acquisitions you've done?
I believe last quarter, maybe you had mentioned integrating the Fluid Solutions Group systems into existing products. Are those targets still on track? And then I have one follow-up.
Sure. So yes. So obviously, we've talked about the acquisitions. We had Fluid Solutions, Services and HIS. And so the Fluid Solutions is the one where we've made the most significant progress right away. We have completed the inclusion or update to the SAP business system in our Fluid Solutions site. This will -- this will give us consistency between our traditional UCT manufacturing and our Fluid Solutions. We've also completed the strategic alignment between the Products group and the Fluid Solutions on qualification priorities with our customers. So we've made very good progress there.
What that means, though, is the reason we need strategic alignment is the Fluid Solutions products will be utilized in the subsystems that our product systems that our products groups build. So we won't actually see -- as Fluid Solutions gets more and more qualified, we won't actually see an increase in revenue. What we'll see is an increase in margins because the Fluid Solutions products will be replacing other products that we've had to buy from other suppliers.
And so that will result in improved margins for us. And so we're very pleased with the progress that we've made there. The other 2 sites are the services side, and we've made some good progress on the integration of the services side. We had previously had the business unit separated from the manufacturing arm of the services group, and we've now combined that to improve our overall efficiencies. That's been accomplished.
And the HIS group, we are considering various options relative to locations and possible levels of increased utilization for new product introduction and possible site consolidation. So we have not finalized all the activities that we're doing in those major areas, but we do think that we've made significant progress, and we expect significantly more progress in 2026.
Great. That's helpful. And then just for the tariff recovery benefit in the quarter, was that meaningful to the overall margin growth in the September quarter? And was this sort of a onetime benefit catch-up from suppliers? Or should we expect a bit of a tailwind in the December quarter as well?
Yes. Well -- this is Sheri, Robert. We will continue to collect surrounding our tariffs going forward. We did collect slightly more than what we anticipated in the original forecast. So that did help with our overall EPS. But we anticipate -- we have put a really good process in place and for go forward now, and that basically will assist us with that collection as we move forward.
I guess the other point I'd like to make on that, we're now to the point where we're very -- first of all, this was not a onetime hit. This is ongoing. But we are very confident that we are now to the point where we are able to recover approximately maybe a little over 90% of the tariffs that we get charged. So this should be less of a factor to us on a go-forward basis.
The next question comes from Christian Schwab of Craig-Hallum Capital.
Congrats, James, on the new role. As far as WFE outlook for calendar 2026, I understand you're seeing conflicting data points and third-party research is kind of all over the place as well. But that being said, do you think the company is positioned to outgrow WFE growth in calendar '26 regardless of what that number is?
Historically, kind of in an upturn, you've kind of done 10% or more growth on top of WFE. Is that what we should expect? Or would you expect the business to kind of follow whatever WFE looks like?
Christian, this is James. Nice to meet you virtually. So I think that, as I mentioned, the 26% is really a kind of 5% to 8% of year-over-year growth, depending on which analyst you're looking at. And from the UCT perspective, it's hard for us really to give you a concrete forecast on how much is our year-over-year growth. For the following reasons because number one is that we still see some of the customers still have inventory. So the consumption of inventory actually kind of delay the revenue from UCT perspective, right? So we're not synchronized because of that, number one.
Number two is also, if you look at the NPI cycle of our customers, it takes quite a long time for them to really ramp up their NPIs and really kind of qualify UCT, especially for the NPI products. So therefore, you probably see them to have this incremental revenue while the UCT revenue growth from the NPI product will be a few quarters behind. So therefore, we cannot fully capture the NPI growth. But -- and then the third is really the product mix.
If you look at the leading-edge spending, right, you can see that the litho is more than 40% of the spending. UCT historically is really edge and that intensive. But with that said, we're working very closely with our third customer, which is a litho company and grow our revenue with them. So I think that longer term, you will see that we're more kind of matching the double-digit growth when we grow that litho business.
And finally, I think that this also goes to the China factor, right? So I think the domestic OEMs in China depending on the analyst report, you kind of follow, there could be an increasing percentage of the worldwide WFE growth. And [indiscernible] not necessarily have the same market share as we have the rest of the world. With all that factors, I cannot give you the exact number, but we're pretty confident we will outgrow the WFE.
Your last question comes from Edward Yang of Oppenheimer.
Welcome aboard, James. Can we just close the loop on your comments about reduced visibility? It just seems a bit discordant from the rest of the industry so far, where I think the tone seems to be a bit more positive. So what are you seeing specifically in your order book? Just want to better understand the offsets. Is it China? Is it memory? I saw that your memory revenue was down. Or is it specific customers that give you some caution?
Ed, this is Cheryl. I'll start sort of with the industry view and then let James talk a little bit more in terms of some of the products. So when we look at the industry, we do have a number of the companies and third parties who are indicating second half should be positive. There's a lot of things that are going in on that. But we also have some of our large growth customers who are indicating some level of concern, whether it translates to them saying their revenue is looking to be flat or others.
So there are at least 2 of our customers who are looking at flat revenue, flat to up, others who are still forecasting significant gains opportunities, but all on the second half. So -- and we've had 2 or 3 or 4 years of saying second half growth. So I think we are just looking at remaining prudent in how we're looking at things since we are getting some level of conflicting information. However, I do think we have a lot of programs going on that James will reference that indicate that we do expect to see a level of growth through that, but we just want to remain cautious about how we're looking at it and how we structure things.
Well said, Cheryl, I think that the only thing I want to add is that it's really the business nature. I leave in both words at semi-cap OEMs and now with a subsystem company like UCT. I see the visibility is a little bit different. The other side is about 6 to 9 months, if you will. Here, it's really a quarter plus, I'd say. So therefore, there is a visibility kind of difference. Therefore, I think we want to stay very, very precise on what we know and what we can really kind of share with you and the rest.
Okay. That's helpful. And James, I mean, you spoke a lot about efficiency and optimization, but I would love to get your thoughts also on your plans for restarting the growth engine at UCT. Where do you think the best opportunities are? Is it in leading edge, AI? Is it M&A, China? Would love to get your thoughts there.
I think that those are all relevant. I would love to do all of them, but I think that we're also constrained by the resource, and I want the team really focused on the fundamental first, right? So as a subsystem partners to our OEM customers, we want to make sure we really deliver on time. We really have the least quality excursion. And also, we continue to drive the cost efficiency, right? So that's really my first priority. Then I think that the growth really -- it's always follow that Horizon 1, 2, 3 cadence. I always want to focus on Horizon 1, which is really expand the business with our partners in the OEM space. The top 3 customers is definitely our focus.
And then we can look at the diversification in that space means that some of the other semi-cap OEMs. I really want to continue the vertical integration that Jim and Clarence already did in the past 5 years. And integration is part of that, that we can further expand the engineered product as long as it fit our core competency and also fit in the vertical integration strategy we have.
And finally, as Horizon 2 or 3, we can look at all the areas you mentioned. So -- but I think that we'll have an upcoming investor conference, and we can share more of my growth strategy with you and the other folks.
There are no further questions at this time. I will now turn the call over to James Xiao for the closing remarks. Please continue.
Thank you for joining us for this earnings call. I look forward to further chat with you at the follow-up call.
Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Ultra Clean Holdings, Inc. — Q3 2025 Earnings Call
Financial data from Ultra Clean Holdings, Inc.
Revenue
Revenue is the sum of all sales generated by a company, e.g. for its products or services.
Revenue (TTM) metric explainedDirect Costs
Direct costs are the costs incurred directly in connection with the manufacture of the product or service.
Gross Profit
Gross Profit indicates how much of the revenue remains in the company after deducting direct production costs. If the percentage share of sales is calculated, this is referred to as the gross margin.
Gross Profit metric explainedSelling and Administrative Expenses
Selling, general and administrative expenses (SG&A) include all expenses for marketing and sales as well as the general administration of the company.
Research and Development Expense
Research and development costs (R&D) provide information on how much the company invests in the research and development of its products. The costs are particularly interesting as a percentage of revenue and in comparison to direct competitors.
EBITDA
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is the company's earnings before interest, taxes, depreciation and amortization. The EBITDA margin is calculated as a percentage of sales.
Depreciation and Amortization
Depreciation represents reductions in the value of the company's assets (e.g. due to wear and tear on machinery).
EBIT (Operating Income)
EBIT (Earnings Before Interest and Taxes) is the company's profit before interest and taxes, also known as the operating income. The EBIT Margin is calculated as a percentage of sales at
.
Net Profit
Net Profit represents the profit or loss after deduction of all costs.
Net Profit metric explainedStocksGuide Premium
| Jun '26 |
+/-
%
|
||
| Revenue | 2,195 2,195 |
3%
3%
100%
|
|
| - Direct Costs | 1,848 1,848 |
3%
3%
84%
|
|
| Gross Profit | 348 348 |
0%
0%
16%
|
|
| - Selling and Administrative Expenses | 251 251 |
3%
3%
11%
|
|
| - Research and Development Expense | 34 34 |
15%
15%
2%
|
|
| EBITDA | 139 139 |
7%
7%
6%
|
|
| - Depreciation and Amortization | 77 77 |
1%
1%
3%
|
|
| EBIT (Operating Income) EBIT | 62 62 |
16%
16%
3%
|
|
| Net Profit | -23 -23 |
85%
85%
-1%
|
|
In millions USD.
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Ultra Clean Holdings, Inc. Stock News
Company Profile
Ultra Clean Holdings, Inc. designs, manufactures and sells its products and services primarily to customers in the semiconductor capital equipment industry. It operates through the following segments: Semiconductor Products & Solutions (SPS) and Semiconductor Services Business (SSB). The SPS segment provides warranty on its products for a period of up to two years and provides for warranty costs at the time of sale based on historical activity. The SSB segment provides part cleaning, coating and analytical expertise, to IDM and OEM customers. The company was founded in November 2002 and is headquartered in Hayward, CA.
StocksGuide Premium
| Head office | United States |
| CEO | Mr. Xiao |
| Employees | 6,948 |
| Founded | 2002 |
| Website | www.uct.com |


