Ichor beat its earnings forecast. Why did cash fall $43 million?

Ichor earned more than it had forecast in the third quarter, without needing sales above its forecast range. The chip-equipment supplier's reported earnings reached $0.55 per share, above the $0.25 to $0.35 range it set in August. Revenue of $328.7 million was within its $315 million to $345 million outlook.

Higher margins and lower operating expenses helped. On the standard accounting basis, net income rose to $20.9 million from $1.0 million in Q2. Yet cash fell $43.0 million during the quarter.

More of each extra sales dollar reached profit

Research by Ticker Byline shows that about 46% of the revenue increase from Q2 flowed through to operating profit. Sales rose $33.9 million, while operating profit increased $15.6 million.

Gross profit improved and operating expenses fell. Lower restructuring charges helped the expense comparison. Ichor makes systems that deliver and control gases used in semiconductor manufacturing.

Growth tied up more cash

Inventories absorbed $39.5 million of cash in Q3. Another $36.0 million went into customer receivables, sales awaiting payment. Higher amounts owed to suppliers and other changes provided a partial offset.

Those movements left operating cash flow at negative $28.8 million. After $10.7 million of capital spending, free cash flow was negative $39.5 million. In Q2, the cash outflow after capital spending had been $23.6 million.

Chief Executive Officer Phil Barros said demand visibility extends well into 2027 and that Ichor is investing to support customers' growth beyond this year.

The cash cushion came from an earlier share sale

Ichor ended Q3 with $213.5 million in cash, down from $256.5 million at the end of Q2. It had raised $195.4 million after fees by selling about 2.5 million shares during Q2.

For Q4, Ichor expects revenue of $345 million to $365 million and reported earnings of $0.50 to $0.60 per share.

The Ichor company profile records the forecast comparison, cash movements and a change in its adjusted earnings definition. Elsewhere in the chip-equipment supply chain, our Advanced Energy analysis examines how growing inventories and receivables affected cash over the first nine months.