Ultra Clean Holdings, Inc. (UCTT) Earnings

Management highlights

### Industry & Demand Trends - Increased demand across both product and service businesses, driven by AI-driven semiconductor capital equipment investment that is expanding beyond GPU training clusters to CPU-based inference workloads, requiring scaled semiconductor manufacturing capacity globally. - Customers are engaging UCT earlier in product development cycles and sharing longer-term forecast visibility, allowing UCT to plan capacity, supply chain, engineering and talent investments aligned with customer pipelines. ### UCT 3.0 Strategic Execution - **Ramp Readiness Capacity Expansion**: Added 26,000 square feet of clean room space at the Malaysia facility, with additional capacity expansions planned for existing footprints in Singapore and the Czech Republic over coming quarters. These expansions will support a $4 billion annualized revenue run rate aligned with a $200 billion global wafer fab equipment (WFE) market by mid-2027. UCT is already evaluating greenfield expansion to support a $5 billion annualized revenue run rate aligned with a $250 billion WFE market, aligned with long-term customer demand. - **NPX Co-Innovation Initiative**: Launched the first NPX Center of Excellence in Hillsborough, Oregon to enable closer early engagement with customers, accelerate product qualification, improve development-to-high-volume manufacturing transitions, and win new product business with favorable long-term margin profiles. - **Digital Transformation**: Modernizing core systems, processes and data infrastructure to improve operational visibility, accelerate decision making, and enable faster global execution. Combined with automation, advanced analytics and AI-enabled tools, this is increasing productivity and supporting more efficient scaling as demand grows. ### Organizational Update - Long-time CFO Sheri Savage retired after 17 years of service, strengthening UCT's financial foundation through periods of high growth and transformation. Mike Keough assumed the CFO role starting August 5, 2026.

Guidance

- Third quarter 2026 total revenue is guided between $700 million and $750 million, with earnings per share (EPS) expected between $0.83 and $1.03. - The 2026 full-year corporate tax rate is expected to remain in the low 20% range, consistent with prior expectations. - UCT reaffirmed its long-term target of 20% gross margin at a $4 billion annualized revenue run rate, expected to be achieved during 2027, with gross margins projected to rise to the 17% range by the end of 2026. - Capacity is on track to reach $3.5 billion annualized capacity by the end of 2026, $4 billion annualized capacity in the first half of 2027, and $5 billion annualized capacity in the second half of 2028.

Segment performance

Ultra Clean reported record total Q2 2026 revenue of $644.9 million, up from $533.7 million in Q1 2026. The Products segment generated revenue of $572.7 million (88.8% of total revenue), up from $465.7 million in the prior quarter, with a gross margin of 15.1% (up from 14.6% Q1) and an operating margin of 6.5% (up from 4.2% Q1). The Services segment generated revenue of $72.2 million (11.2% of total revenue), up from $68 million in Q1, with a gross margin of 28.9% (down from 30% Q1) and an operating margin of 11.2% (down from 11.5% Q1). Total gross margin for Q2 was 16.7% (up from 16.5% Q1), total operating margin was 7% (up from 5.1% Q1), and operating expenses were $62.5 million (9.7% of revenue, down from 11.4% Q1).

Risks & headwinds

- Gross margins can fluctuate quarter-over-quarter due to changes in volume, product mix, manufacturing region mix, and volatility in material and transportation costs. - Ongoing double-digit quarter-over-quarter WFE industry growth will put continued pressure on global semiconductor supply chains, with a risk of component availability excursions that require active management. - Corporate tax rates can fluctuate through the year based on the geographic mix of earnings.

Analyst Q&A

• Q: Given the strong Q3 guidance from your largest customer and their 30% sequential expected growth, why is your Q3 guidance not higher? Is it timing, customer inventory, or deliberate conservatism? Also, are customers shifting overflow subsystem work to you as their internal capacity is constrained, creating upside risk?

  A: There is a mix of timing lags and deliberate conservatism. Timing gaps come from integration lags for UCT subsystems into customer end systems, and differing quarter-end dates across customers that shift revenue recognition. Aggregated across two quarters, UCT's revenue matches or exceeds customer growth. UCT is seeing clear upside from customer overflow: in strong upcycles, customers focus internal capacity on final test and integration, and outsource more subsystem manufacturing to trusted partners like UCT, which has historically driven UCT outperformance of market growth.

• Q: Can you confirm the timeline for your $4 billion and $5 billion capacity plans, and what will trigger starting the $5 billion expansion? What is your updated long-term margin target?

  A: UCT is following a phased approach: $3.5 billion annualized capacity will be ready by end of 2026, matching current run rates, and $4 billion capacity will be online in the first half of 2027 as planned, with construction ongoing across Malaysia, Singapore and Czech sites. Evaluation of new Southeast Asian expansion for the $5 billion run rate is underway, with a decision coming soon and $5 billion capacity expected in the second half of 2028. UCT reaffirms its target of 20% gross margin at $4 billion run rate to be hit in 2027, with gross margins expected to reach ~17% by the end of 2026.

• Q: How is your customer base evolving beyond your top two customers, and what is driving that growth?

  A: The combined revenue share of the top two customers has fallen from 64% to the high 50% range, as UCT diversifies its customer base to reduce volatility across WFE segments. Growth with non-top-two customers is being driven by increasing EUV adoption across leading-edge foundry, logic and memory segments. UCT expects this segment to grow in absolute terms, but does not project a rapid large increase in non-top-two revenue share in 2026-2027 due to the ongoing higher intensity of capex for leading-edge WFE.

• Q: Have you experienced component shortages or delivery delays like your competitor reported, and what underpins your expectation for continued WFE growth beyond 2027 that justifies the $5 billion capacity expansion?

  A: UCT did not face component shortages or delivery push-outs in Q2, because it launched a proactive supply chain readiness campaign well in advance of the current demand cycle and secured most critical components. UCT anticipates the global WFE market could exceed $200 billion as early as 2027, with a projected range of $190-$220 billion, and additional pre-built capacity is a competitive advantage in a strong upcycle, justifying proactive expansion planning.