Good day ladies and gentlemen and welcome to I-Corps third quarter 2026 earnings conference call. At this time all participants are in a listen only mode. Later we will conduct a question and answer session and instructions will be given at that time. If anyone should require operator assistance please press star zero on your telephone keypad. As a reminder this call is being recorded. I would now like to introduce your host for today's conference, Claire McAdams, Investor Relations for I-Corps. Please go ahead.

Thank you, Operator. Good afternoon, and thank you for joining today's third quarter 2026 conference call. As you read our earnings press release and as you listen to this conference call, please recognize that both contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control and which could cause actual results to differ materially from such statements. These risks and uncertainties include those spelled out in our earnings press release, those described in our annual report on Form 10-K for fiscal 2025, and those described in subsequent filings with the SEC. You should consider all forward-looking statements in light of those and other risks and uncertainties. Additionally, we will be providing certain non-GAAP financial measures during this conference call. Our earnings press release and the financial supplement posted to our IR website each provide a reconciliation of these non-GAAP financial measures to their most comparable GAAP financial measures. On the call with me today are Phil Barros, our CEO, and Greg Swyt, our CFO. Phil will begin with an update on our business and then Greg will provide additional details about our results and guidance. After the prepared remarks, we will open the line for questions. I'll now turn over the call to Phil Barros. Phil?

Thank you, Claire, and welcome everyone to our Q3 earnings call. We are pleased to report another quarter of strong growth and expanding profitability. The strategic priorities we laid out a year ago continue to translate into results. Third quarter revenue of $329 million grew 12% sequentially and increased 37% compared to the same period last year. Year to date, Q3 revenue volumes represent a nearly 50% increase from our Q4 revenue trough, which is an unprecedented demand ramp across just three quarters. Gross margin of 16% exceeded the high end of expectations and increased 190 basis points compared to Q2, driving significant upside to earnings. Customer demand remains robust and our visibility extends well into 2027. With every segment of the semiconductor market ramping in unison, the pain points within the tightly constrained supply environment have clearly risen to the surface. Some of these constraints are impacting high-end edge and depth position applications. These advanced applications require highly precise gas delivery, and highly precise gas delivery also represents I-Corps' primary product offering. For example, high aspect ratio dielectric edge systems shipping into gate-all-around architectures and the most advanced DRAM fabs today call for pressure-based mass flow controllers in their delivery systems. and the majority of I-Corps products support exactly these types of high-end applications. Which means that I-Corps product mix is heavily weighted to one of the industry's most pressing bottlenecks. Let me spend a moment talking about how we adjusted shipments in Q3 in response to these continued constraints affecting gas delivery. Essentially, we focused on increasing gross profit dollars and generating significant earnings leverage in the face of revenue limitation. We expanded the reach of our component business into other areas of the systems we support. We secured new component wins during Q3 across six new tool platforms, which reside entirely outside of the gas panel. These wins broaden our opportunities for revenue growth and diversification as these programs ramp. While components carry lower ASPs than complete systems, they deliver a stronger earnings contribution per dollar of revenue. We are seeing this benefit in our results and the pace of our earnings growth. We are also addressing supply risk directly with our product strategy by prioritizing the components that are most constrained, namely valves, fittings, substrates, and soon, flow control. We are working closely with our customers and suppliers to keep pace with demand. During this unprecedented ramp, we are executing ahead of plan on all the initiatives aimed at increasing our gross profit and earnings generation. There's no question that a demand ramp of this magnitude will continue to expose pain points in the supply chain. As an industry, we've worked through these challenges before and we will again. What you can count on from I-Corps is that we will continue to deliver strong execution on all of our key profit drivers within our control. By delivering 16% gross margin in Q3, we are effectively one quarter ahead of planned. Our incremental gross margin in Q3 was 33%, well above our ongoing expectations of 25 to 30% as we increase the proprietary content in the gas systems we build for our customers. Our strategy to broaden component deliveries outside the gas box in Q3 also gave us an additional gross margin tailwind of favorable product mix. Therefore, as you evaluate I-Corps results in Q3, we encourage you to look at gross profit generation which was $3 million above the midpoint of guidance. This was much more meaningful to our earnings than $1 million of gas panel revenue. Our guidance for fourth quarter indicates continued sequential growth in revenues, gross margin, and earnings per share. With our current visibility, we expect full year 2026 revenue growth of roughly 30%. The supply chain constraints that are affecting the high-end segments of etch and deposition are fully incorporated in our expected second half growth of 24% at the midpoint, compared to at least 25% growth above the first half as we forecasted one quarter ago. Importantly, we have increased net income by 100% sequentially every quarter this year. In Q4, we expect to deliver earnings growth outpacing revenue growth once again. This type of earnings leverage and operating model improvement is exactly what our strategic initiatives set forth a year ago are intended to deliver. Turning to our key strategies to scale I-Corps capacity for the growth ahead. Last quarter, we discussed our plans to scale I-Corps capacity to $3 billion of revenue within our existing manufacturing footprint. As we expand operations to this level, we are focused on three priorities. Completing the alignment of our volume manufacturing footprint increasing proprietary content, making strategic investments in machining capacity and adding headcount required to support next year's demand. I am pleased to report strong progress achieved in each of the three priorities during Q3. First, our manufacturing footprint. Our high-volume manufacturing sites in Malaysia and Mexico continue to ramp. Both machining and welding in Malaysia are qualified by both of our largest customers. All planned moves to Mexico are now complete. We are already seeing the benefits of this in our product margins. Malaysia will continue to ramp through the fourth quarter of 2026 with additional capacity to continue to come online in 2027. Next, increasing proprietary content. We exited the third quarter ahead of plan of over 30% proprietary content within the gas systems we sell compared to 25% in Q2. We remain on track for about 35% proprietary content exiting the fourth quarter. Every point of in-house content improves our margins and reduces our reliance on outside suppliers. We are seeing strong growth in sales of proprietary content outside gas delivery systems. This will continue to be a focus for DesignWinds as we continue to execute our strategy. Now turning to our plans to transition existing brick and mortar into finished manufacturing capacity. This will happen in three phases. Phase one is converting the shelves into cleanroom space. During the third quarter, we finished building out our planned cleanroom capacity that supports 2027 demand as described in August. Converting an additional footprint into cleanroom capacity to support demand in 2028 and beyond requires about three to four months of lead time. Phase two is completing equipment orders and installation. For gas system integration, with cleanrooms now in place, the largest remaining item is to install test fixtures, which are relatively low in capital cost and shorten lead time. and we can place these additional orders here as needed. We have expanded our welding capacity by nearly 2x ahead of the coming grant. With our current visibility, this expanded capacity of weldments will support both our internal and external needs through 2027. We expect our capital spending in 2027 to chiefly support our proprietary products and machining capacity. These include flow control, valves, fittings and substrates. We received our first wave of new machining tools from Malaysia during the third quarter. They are now being installed and will ramp through the fourth quarter. All the equipment we need to support 2027 is now on order and is on track for installation within the next six months. We have also partnered with qualified third parties to help us ramp our proprietary products faster with less capital. We've been qualifying these partners throughout the year. This additional capacity keeps us agile while meeting our margin targets for these products. Phase three is manufacturing headcount. We are hiring and training ahead of demand. This year we have expanded manufacturing headcount by 40% through Q3 with 320 hires in Q3 alone to support the production rate. We expect to execute on continued aggressive hiring plans for the next few quarters. To summarize, we are executing on a steep revenue ramp at the same time We are expanding gross margins every quarter and achieved 16% gross margin a full quarter earlier than expected. The operating model improvements we planned a year ago are delivering significant earnings leverage, with greater than 100% growth in net income achieved every quarter year to date. Customer demand remains robust, and we are investing today to support our customers' growth into 2027 and beyond. We expect the structural improvements in our operating model to drive continued strong earnings leverage as revenues grow. As we look ahead to 2027, all evidence available today indicates that it will be a strong revenue growth year for all OEMs and subsystem suppliers within the WFE. While pain points in the supply chain are going to continue to emerge from time to time, we expect every quarter in 2027 will be a growth quarter for I-Corps. We expect to deliver continued gross margin expansion as we move through the year, and we expect I-Corps' earnings growth in 2027 will outpace revenue growth by over 2x. To sum up, within a WFE environment that supports solid revenue trajectory for all suppliers, it is I-Corps' earnings growth story that truly sets us apart. And we look forward to continuing to deliver strong earnings leverage through this historic ramp. And with that, I will turn the call over to Greg to discuss our financials in greater detail.

Thanks, Phil. Before I begin, I would like to emphasize that the P&L metrics discussed today are non-GAAP measures. These measures exclude the impact of share-based compensation, amortization of acquired intangible assets, non-recurring charges, and discrete tax items and adjustments. There is a useful financial supplement available on the investor section of our website that summarizes our GAAP and non-GAAP financial results. as well as a summary of the balance sheet and cash flow information for the last several quarters. Third quarter revenues of $328.7 million increased 12% sequentially and were up 37% year over year. Revenues came in within 0.4% of the midpoint of our guidance. With Q3 product mix shifting more toward high margin component sales, gross margin exceeded the high end of our guidance at 16%, up 190 basis points sequentially. Gross margin flow through exceeded 30%, reflecting strong execution and increasing proprietary content in addition to the more favorable mix profile. Stronger gross margin drove the majority of upside in operating income, Q3 operating expenses came in below forecast at $24.4 million with a portion of expected spending increases now expected in Q4. Operating margin improved to 8.6% up from 5.5% in Q2. EPS was 63 cents, well above the high end of our guidance, based on 38.2 million diluted shares outstanding. both interest expense and tax expense were favorable to our earnings forecast. Turning to cash flow, adjusted EBITDA in Q3 was $33.9 million. And after interest and taxes, cash generation from the P&L was roughly $30 million, a new four-year quarterly record. In the current steep ramp of demand, we are quickly generating significant earnings leverage and cash flow from the P&L. At the same time, we must continue to invest in working capital to support the continued growth ahead. Total use of cash from operations was $29 million, reflecting $75 million of increase in inventory and receivables. These increases closely aligned to the revenue ramp with both inventory terms and DSOs similar to Q2 at 3.6 turns and 39 days, respectively. Capital expenditures were $10.7 million, supporting the expansion of clean room space and our next wave of new machining equipment. We ended the quarter with cash and equivalents of $213.5 million. total debt at quarter end was $119 million and our net debt coverage ratio was 0.8. Now turning to fourth quarter guidance. We currently anticipate Q4 revenues in the range of $345 to $365 million. At the midpoint, this represents sequential quarterly growth of 8% and full year 2026 revenue growth of 30%. We expect Q4 gross margin will increase sequentially to 16.5% plus or minus 0.5%. Our operating expense forecast for Q4 is $26 million plus or minus $500,000. Our EPS guidance of 65 to 75 cents assumes total interest and other expenses of $1 million and more. As we look to 2027, I will share a few parameters to give an early indication of how we are framing the shape of the year. We expect our revenue growth in 2027 to be aligned with our customers' growth in systems. Based on current visibility, those plans support sequential revenue growth every quarter. Given our expectation for another year of strong revenue growth ahead, we expect to deliver on continued gross margin expansion aligned with our new higher incremental gross margin model of at least 25%. We currently expect operating expenses to increase around 15% for the full year of 2027 as we invest in R&D, and in the people required to support our growth. Current expectations are to manage OpEx growth to about one half the rate of revenue growth as volumes increase and we'll continue to update you on spending plans. We expect the most significant step up in OpEx will be in Q1, reflecting hiring increases, annual adjustments for payroll taxes and benefits and other seasonal increases. for modeling purposes, we currently estimate total interest and other expenses of about $1 million per quarter as we move through 2027. Based on the expected geographic distribution of profits next year, we are currently forecasting a slightly lower tax rate than the previous 20 to 25% rate. For now, we are estimating an effective tax rate of approximately 15% in Q4, and a range of 15 to 20% for fiscal 2027. Our acceleration of CapEx in 2026, currently estimated at approximately 4% of revenues, will continue into 2027. We expect significant investments over the first half of 2027 given expected equipment deliveries. We will continue to add additional machining capacity in Malaysia and Mexico, as well as complete the final build out of clean room space in our Singapore facility. While the investment may be skewed to the first half of 2027, we still expect the overall spending to be within our target of three to four percent of revenue for fiscal 2027. Our capital position remains strong with significant borrowing capacity and a current net debt coverage ratio below one. with adjusted EBITDA generation in 2026, estimated to exceed $100 million, roughly five times last year's level, we have significant financing flexibility available in order to support the working capital and CapEx investments necessary to execute on the strong growth ahead. In summary, our third quarter results demonstrate the earnings leverage of our operating models. Revenue is growing with our customer system shipments. Gross margin is expanding faster than we planned and our incremental margins are structurally higher. We believe this positions I-Corps to convert revenue growth into strong earnings growth through 2027. Finally, a reminder that periodically we must adjust our fiscal year end to align with the calendar end and consistent with our prior practice This adjustment will occur in fiscal 2027, which will have 53 weeks compared with 52 weeks in the current fiscal year. Operator, we are now ready for questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that analysts limit themselves to one question and a follow up so that others may have an opportunity to do so as well. One moment please while we poll for questions. Our first question comes from Brian Chin with Stiefel. Please proceed with your question.

Hi there. Good afternoon. Thanks for letting us ask a few questions. Maybe the first one, and I have a follow-up, will be on some of the supply and component constraints. Obviously, this environment for components has gotten tighter. Semicap OEMs have corroborated that. I guess looking at your 4Q revenue outlook, how much does the midpoint provide maybe more cushion or risk tolerance than in recent quarters, or maybe said another way, is your line of sight to the midpoint of this revenue range better from a component supply standpoint than in recent quarters? I guess the part B to that, I'm sorry, the part B to that is just when do you have an impression or indication at this time in terms of when that kind of sub-tier component constraint could begin to ease some?

Yeah, I would say a couple things there, Brian. First thing is, first of all, both great questions. I would say sitting here on November 2nd, I feel very, very confident that anything we're guiding today is what we're going to hit. We're guiding that for a reason. I will give you two little tidbits to keep in the back of your pocket. First one would be, I would say about half of the The removal of about $10 million of revenue in Q4 was due to our commercial space business as well as the component constraints we see in the semi space. So I do want to just highlight there that there is a little bit of a push out from our commercial space business due primarily to launch schedules. I wouldn't say it's positions for wins. I would say we feel really good about the wins that we've gotten. As you can imagine, some of those launch schedules have pushed out and that's pushed out some of those revenues. With that said, what I would talk on top of that is obviously clearly components are constrained. They're going to be constrained. We're an innovative industry. I believe that we will solve this. We solved it before in the past. We'll solve it again. So I feel very good that at this point in time, in November 2nd, that we will definitely hit that midpoint based on today's visibility.

Got it. And in terms of maybe Is it too early to timestamp maybe when you could see maybe some decent progress made against some of those constraint headwinds?

Yeah, I would say a couple things. In terms of our revenue linearity this quarter versus last quarter, first and foremost, our revenue linearity this quarter is significantly higher than it was last quarter, so I do feel the constraints are starting to loosen. With that said, as we've talked about before in the past time, we figure we're going to be part of the solution long term. So I think the more and more of our I-Corps branded products that we can bring online the more and more we can relieve the constraints in the in the supply chain.

Thanks and then maybe for the the real follow-up here the from a gross margin standpoint obviously better in the quarter than the top end of the guide can you help to quantify how much of that was the benefit from shifting gears and shipping more components to non-gas panel applications and do you expect that to be and expanding tailwind into Q4 and is also lithography also a tailwind in terms of mix as well?

Yeah, I'll say a couple things there. Obviously, the more, and you and I have talked about this in the past as well, the more we sell on components, the higher our ceiling is for gross margin. So, clearly one of our focus areas, and I think I introduced this back in January, one of our focus areas is clearly to sell components outside of our core gas delivery systems. So, you know, at a broader brought a range. So I would say in general, that is a path forward and we're pushing that. That's a major focus for us from a design win perspective. And I would say a lot of that's converting into real revenue at this point. So I feel good about that. In terms of Litho, I think I may have discussed this in the past, but I see a small step up in Q4, a large step up in Q1. And as we talked about in the past, Obviously, our Litho customer is a good tailwind from a gross margin perspective as well.

Great. Thanks. Thanks a lot, Phil.

Our next question comes from Craig Ellis with B Riley Securities. Please proceed with your question.

Yeah, thanks for taking the question and congratulations on the gross margin progress. So, I'll start there. Guys, we had 30% fall through with gross margins in the quarter. And we're guiding to 25%. So can you help us understand what changes? Is it that there's just a little bit more gas panels coming back into the mix? Or was there just something unusual about the components mix in the quarter that gave us that 30% in 3Q? Yeah, what I would say is

Foundationally, our business has always been between 20% and 25% flow through. About 20% and 25% in flow through in general. The fact that we're showing 30% flow through this year kind of on average is a major step forward in showing that our strategy has really taken hold. With that said, our model going forward is 25% to 30%. So I would say 25% is the low end of the range, and that's where we expect to come in. to your point, you hit it right on the head is we do expect a bit more gas boxes to come through this quarter than we had last quarter. That will bring down that average down to about the 25% range.

Yep. And then just going over to the capacity side and the ability to turn the knobs up, we're being Optimistic, it sounds like, about our ability to match our customers' growth next year. So if they're coming in 30% to 35%, what are the things, Phil, that you feel like the business really needs to manage to grow at that level? And if their demand turned up by, call it, 10% to 15% in the year, do you have the flexibility with your supply chain to meet that?

Yeah, that's a great question. So clearly the first thing we need to manage is the supply chain. So we're managing that, you know, kind of hand in hand and hand in glove with our customers. I would say that in general, like I said to Brian's question, I feel like we're an innovative group of people in this industry and we'll figure it out. We always have, we always will. And I feel good about that loosening up over time. So with that said, I would say in order to flex, you know, kind of maybe a 10 to 15%, it's really going to be people. And then on top of that, it's going to be supply chain. So I would say it's those two levers. I feel really good about the capacity we're putting in place in terms of both for internal content, as well as our external content from a component standpoint, and as well as our system business. We have built built out the clean rooms and I would say The ability to flex within our Malaysia factory within this timeframe is really giving us an opportunity to grow rather quickly and have some flexibility with our customers as we go forward.

Got it. Thanks, guys.

Thank you.

Our next question comes from Chris Sincar with TD Cohen. Please proceed with your question.

Hey guys, this is Eddie for Khrushchev. You talked about outgrowing WFE next year and earnings growing 2x that all back 15%. So does that imply like gross margins would stay around 17 and a half percent, which would be incremental gross margins of 45%. I mean, it seems like that's in line with your view, but a deceleration from what you just reported in Q3. What can take us back to above 30% incremental gross margins if my view on 2027 gross margins is true? Thanks.

Yeah, what I would say is the way to accelerate our gross margins back to that level, to that 30% flow through is more and more components, right? I've talked about this quite a few times. It's all about accelerating the components. So we could see flowing through 30% if we have the right component mix. I think we can definitely hit that if that's the case.

Got it. Thank you. And regarding components, do you mean like increasing in sourcing of mesh flow controllers specifically?

Yeah, so I think of that in multiple ways. That's all of our proprietary content and kind of what I wanted to introduce on this call and maybe I haven't talked about it a lot. but we're seeing really good traction with it is selling those same components to other areas outside of the gas delivery system. That's actually offering a new platform for us to sell those components and the more and more of those components we sell, the higher and higher that ceiling is for gross margin.

Got it. And just to follow up on timing, when should we expect that to show up in revenues and margins?

Yeah, so we're already seeing that today. And actually, if you saw that, that's actually what helped us in Q3. So that's an ongoing progress that we're going through. You asked about flow control in particular, so I'm going to address that as well. What I would say is that what I've always said, which is it's a 2027 revenue event, I would say I've been in this industry and doing gas delivery for 25 years, and the appetite for change and the appetite for a new entrant like I-Corps in flow control is higher than I've ever seen. so I would say that there's a lot of appetite for us to get that across the finish line and I still believe that's a 2027 revenue event.

Got it, thank you.

Our next question comes from Charles Shi with Needham & Co. Please proceed with your question.

Hi, thanks for taking my question. So Greg, maybe I have a maybe a hypothetical question. Let's say a gas box you're delivering to a customer is a short of MFCs, Mass Flow Controllers. Are you able to ship that first? And then are you able to recognize at least a partial revenue out of that? This is a hypothetical question, but I think there's probably some relevance here. Thank you.

Yeah. Hi, Charles. This is Greg. I'll take that one. The answer is We are working with the customers to get clearance from them to enable us to ship if we do not have a specific component and in your example, the MFC. So we get the customer to authorize us to ship that. Once we get that, then yes, we can ship. And at this point, there is no material impact on revenue.

Okay, so let's say the customer authorized the shipment, then you are able to recognize the authorized the shipment, you are able to recognize the revenue without? Yes. Okay, but with some discount, I would assume or no?

Sorry?

Like, like, like, you know, Rick, you can recognize the full amount or no?

Yes, for most part, we are recognizing full revenue. It's based on the arrangement with the customer on their authorization, the short ship, whether they're paying for the full value or we're holding back a portion of it. But for the most part, it is at full value.

Got it, got it. I know we're allowed one question, one follow-up, but may I ask another question?

Absolutely.

Yes, okay, great, thanks. So the internal component, I mean, maybe let me not call it the internal content yet. The components, I think there are two different ways for you to monetize, right? Either it goes into the gas panel, doesn't help with the revenue, but it helps with your profits, or it goes out of the gas box, that's a contribution to both the revenue and the profits. So can you kind of quantify that for us that what happened in Q3 and maybe what you expect to happen in Q4, how much of that component upside really is about going into gas box versus outside of a gas box Q3 and Q4? Thanks.

Okay. Let me try to answer that clearly. and if I don't please feel free to follow up again. But what I would say is we talked about our internal content. So the internal content went from call it 25% to 30% last quarter. We'll exit Q4 at around 35%. When you look at our external sale components, that is an area that's growing rapidly. Just to put a quantification behind it, if you have a quantity around it, think of it as from Q1 to Q4, it's grown by 250%. So we've grown that business by 250% now off of a small base, but quite a bit. And I expect that to continue to grow between Q3 into Q4 and Q4 into Q1. and that's been a revenue driver for us through this year. Thank you.

Thanks. Our next question comes from Edward Yang with Uptimer. Please proceed with your question.

Hey Phil, Greg, thanks for taking my question. I just wanted to follow up on Charles' question. What would be the customer benefit of taking delivery of the gas panel without the MSC? Would they want an unfinished subsystem?

If you think about it, some of our customers, they have to test the tool before it ships as a complete unit. The benefit to them would be to take the subsystem so they can test the overall functionality of the equipment and make sure that they're meeting their customer requirements. That's really the benefit there. What I would say up to now, it's been pretty hit or miss whether or not that's something that they're willing to take or that they want to take. And so it's kind of on a case-by-case basis. What I would say is in general, we don't plan on that. What we plan on is shipping full boxes, and that's what we plan for. That's what we contemplated in our guidance, and that's what we contemplated in our bill plan.

Got it. For my follow-up, given the continued high level of demand, how are you thinking about long-term agreements? Are customers increasingly willing to make binding commitments on inventory and capacity?

What I would say, for the most part, what our customers are doing is they are backstopping inventory positions. That's a practice that is, I would say, newer. They've always done a bit of backstopping, but I'd say that the amount of backstopping that they're doing is much wider and much broader than they have in the past. So with that said, I would say that in general what they're doing is making sure that when we buy inventory and we place POs that we're not overextending ourselves. And they want to make sure that that inventory that's going to move for sure. And so basically the agreements we have with our customers, if it doesn't move for a period of time, then they own that inventory.

all right, thank you.

Our next question comes from Ben Taxell with Craig Hellam Capital Group. Please proceed with your question.

Hey guys, this is Ben on for Christian Schwab here. You know, there's a lot of internal content commentary before I got on, but can you just share a little bit about your targets for 27? Do you expect that number to keep going higher past 35%?

Yeah, I would say in the near term or short term target is to get the 40% internal content. To get much beyond that 40%, that's going to take flow control. Flow control, like I said before, is a 2027 revenue event. To get above that 40% of internal content, that's what that's going to take is flow control. My overall goal as a company is to get us to kind of 50-50 long term, but that's a long term objective. That's not a near term goal. perspective, if you will. So long-term is to get the 50-50 from components to systems. That gets us well above our forecast.

Thanks. And then my last question, just quickly on the $3 billion in capacity. Would that be with 25% margins at $3 billion, or could we get to 25% closer to $2 billion? And then how should we be thinking about the timeline of that capacity coming on?

Hey, Ben. I don't think we've positioned yet that we have a 25% gross margin target. It's a 20% gross margin target with that 25% to 30% incremental flow through, right? So our target at $2 billion to $3 billion is still 20%. We may revisit that, but it's still 20%.

Perfect. Thanks for the clarity there. I must have missed that. That's all I got. Thanks, guys.

Thank you.

Our next question comes from Mazurk Bamunkin with Freedom Broker. Please proceed with your question.

Hi, this is Mazurky from Freedom Broker. Congratulations on the strong margin performance and thanks for taking my question. So Phil, you mentioned that supply chain constraints are affecting high-end edge and deposition applications and creating revenue limitations despite strong customer demand. So could you help us understand how significant these constraints are today and which components represent the biggest bottlenecks?

You know, there's always I would always say there's about four components that keep me up at night or four suppliers that keep me up at night any given day and those four change every single day. So we have to spend a lot of time with our suppliers making sure that they have the capacities we need and making sure that they have the parts when we need them, where we need them. And that's what we do as a company. That's what we've done for over 25 years and we're going to keep doing that. So I would say I feel good that while things pop up from time to time, we figure out ways to fix those. With that said, I would say that supply chain constraints are fully contemplated within our guidance ranges. So that to me is where we think the constraints are and where they sit today. So what I would say is in general, the supply chain is starting to ramp up and get caught up to where we need it to be. And I feel a lot more comfortable today than I would have even just a quarter ago.

and a follow-up question would be as you expand internal manufacturing of wealth, fittings, substrates and eventually flow control components, could these investments help unlock additional revenue opportunities or are they primarily aimed at reducing supply chain risks and protecting existing shipments?

Yeah, I think the short answer to that is yes. What I would say is our initial thought of the strategy or take on the strategy was really to increase our internal margins and our gross margins by becoming vertical in the systems that we make. As we mature this process and we've gotten through kind of to where we're at today, we see a significant opportunity for us to sell these same components outside of the gas delivery systems that we build. So we see a lot of opportunities to grow revenue, not just gross margin and not just vertical content by going directly after these components in different areas of the tool. And actually that's exactly what happened in Q3. We saw some areas where we can win qualification positions and we did that. And those are the same proprietary components that we talked about that go into our gas systems can also be used on other areas of the tool.

Thank you.

Thank you.

We have reached the end of our question and answer session as there are no further questions at this time. I would now like to turn the floor back over to Phil Barros for closing comments.

Thank you operator and thank you everyone for joining our call today. A year ago we laid out our plan to build a structurally stronger I-Corps. In Q3 we reached our fourth quarter gross margin target a full quarter ahead of schedule. I want to thank our employees for making that possible while taking on an exceptionally steep ramp. I have complete faith in this team and I'm proud of what we're accomplishing together. We will keep executing on what's under our control, supporting our customers' growth, expanding gross margin, and converting revenue growth into strong earnings leverage. We look forward to updating you in our Q4 call in February. In the meantime, please reach out to Clara to arrange any follow-up meetings. Operator, you can conclude the call.

This concludes today's teleconference. You may disconnect your lines at this time.

Thank you for your participation.