Kulicke and Soffa Industries, Inc. Price & Performance (KLIC)

For a complete discussion of the risks associated with Killough and Sulfa that could affect our future results and financial condition, please refer to our recent and upcoming SEC filings, specifically the latest Form 10 ks as well as the eight ks filed today. With that said, I would now like to turn the call over to Fuzen Chen for the business overview.

Please go ahead, Fuzan. Good morning, everyone.

Over the past several quarters, our general semiconductor and automotive end market have shown signs of inventory and capacity additions. And we continue to anticipate a gradual improvement in fiscal twenty twenty five. In parallel, we have continued to demonstrate technology leadership position within the growing thermal compression and advanced dispense, With visibility within our higher volume board and the widget market is typically limited this time of the year. Regardless, our core business remains in the late stage of a market downturn. While we continue to anticipate a return to broader capacity addition within the Cobalt, Edge and the APS businesses. Through fiscal twenty twenty five. Due to improved year utilization rate, market trend, and a reasonable industry growth expectation. We remain focused on what is within our control. Primarily ongoing development customer qualification and the market adoption of our newest system. Additionally, continue to broaden and we are extending our leadership through new offerings customer engagements [indiscernible] three weeks ago, we shipped our latest Kulicke list [indiscernible] in the new dual head configuration to a key foundry customer, This system provide nearly twice the throughput as our existing production proven FTC system which was already qualified and already provide an additional value value population for advanced logic customers we think it's a single headcount integrations This new DuoHEC configurations will further extend value for advanced logic customers.

And also provide access into high bandwidth memory market. Liang is a new dual head system We are aggressively developing a future panel based platform which will further extend the value of FTC. Of note, we are pleased to extend our FTG customer engagement which now include a leading memory customer in addition to our existing base of leading IBM, five gs and the all set customers This new memory engagement is a supporting process future generation HBM applications, leveraging our FTC leadership FTC is positioned to enhance the future HBM process. Providing critical performance form factor and efficiency enhancements by significantly reducing pitch and increasing IO density. For future AI, the cloud computing workloads, [indiscernible] the copper to copper PCB process is continuing to pick up momentum and is currently being reviewed by a leading IDM Our copper solution provides hybrid benefits such as a zero die gap ultra fine pitch and a direct copper to copper interconnect, without the licensing fee. Front end production requirement, over year issues, which are associated with the initial hybrid bonding These benefits are available today through our brotherly FTC portfolio which is well positioned to provide additional value for emerging advanced logic and advanced memory applications.

This technology leadership in FTC is enhancing our positions within the broader TCV market as well. We recently accept order from two new advanced packaging customers for several new up Chula system. We estimate the ten forty in calendar year 2024 has exceeded $300,000,000 which represents a key market milestone for two significant reasons: First, [indiscernible] in annual revenue [indiscernible] Considering fleet chip has been in high volume production for over three decades.

This milestone has reached relatively quickly for summer completions. Second, PCB adds significant incremental value beyond [indiscernible] packaging technique due to its ability to efficiently stack dye [indiscernible] package label transistor density and the simplify the wafer fabrication process TGB Technology has a long life ahead and is anticipated to grow significantly over the Over the coming years, we anticipate the broad PCB market to grow. At a compound annual growth rate of 20% to 25% with FTC growth expected to grow materially faster over the coming years. During the fiscal twenty twenty five, we anticipate additional customers to move into higher volume FPC production. The need for more than more related packaging solutions are emerging rapidly and we are excited to be leading this transition with our market ready FTG solution. This broad industry evolution to more advanced [indiscernible] is still in an early stage and is anticipated to play out over the long term. Driven by emerging artificial intelligence. Cloud computing and edge device deployment.

As explained over the recent quarters, we have secured career leadership position in frontless thermal competition, which will play an increasingly important role within future heterogeneous and triple A based applications. Currently, Most advanced logic applications are dependent on aging free chip technology, which we anticipate will continue to transition to traditional TCV. Or flatless thermal conversion applications. We continue to demonstrate consistent progress to expand our GCD portfolio, customer base, the market access. This highlight our ongoing leadership industry focus and the long term potential of this emerging technology. [indiscernible] Turning to our financial results. For the December quarters, [indiscernible] $166,100,000 of revenue, 52.4% gross margin in the non GAAP EPS of $0.37 GAAP EPS of $1.51 was largely supported by customers' reimbursement associated with our fiscal second quarter twenty twenty four. Impairment charge of Project W Lester will provide additional details shortly. From an end market standpoint, the December quarter is generally driven by seasonality, within the general semiconductor market, Although we continue to anticipate broader industry growth, and demand for our core solution within fiscal twenty twenty five, [indiscernible] to be largely in a state of capacity digestion, With the mobile bundle revenue sequentially lower from September, as expected, We continue to expect we are in a late recovery stage and remain positive on broader recovery through fiscal twenty twenty five.

Our mobile vendor team remains very active developing [indiscernible] [indiscernible] to support evolving high volume assembly market. We look forward to sharing more information [indiscernible] vendor portfolio later in fiscal twenty twenty five. Within automotive and industrial, we have seen a demand improve over the same quarter last year. Related to EV and also power semiconductor demand, during the December, we shipped several set of battery assembly system to several customers, including a leading EV company and a promising solid state battery manufacturers. We continue to anticipate additional recovery in the power semiconductor market over the coming quarters. Similar to general semiconductor four volt bonding, auto and industrial is our primary And similar to both, our wage team is aggressively driven new system to expand our heavy wire wage position into thinner wire pinwhenever and also clip attach market, which will help us better support the rapid evolution of emerging automotive and power semiconductor This transition is being driven by growing global demand for more efficient power delivery and storage, We are playing a critical role leading the transition from lower conductivity alumina interconnect which we are the standard in the power semiconductor applications. Through copper interconnect. As we are currently demonstrating within the FTC copper to copper TCB process, and have also did the transition from gold to copper in the high volume gold bonding market over ten years ago, we have inherent competency in copper bonding in which the benefit of more expensive material like copper are significant it support more efficient charging, energy generation and high power applications such as AI and cloud computing.

We are excited to support customers through this potentially significant long term wage transition and will provide additional information on this emerging opportunity over the coming quarters. Finally, within memory, we remain focused on driving vertical wide adoption for emerging applications within both DRAM and NAND, Separately, Vertical Wire continued to be another emerging memory solution for several global memory customers, who are either requesting information developing their process and or beginning to produce a sample to drive market adoption for future stacked DRAM applications. As explained last quarter, vertical wire based assembly is positioned to support field high volume stack memory applications but also significant potential to enable future high volume stack logic applications. Similar to TCB, we have a significant leadership position with a growing base of engaged customers who are developing new vertical a way of Our process and development engagement have recently increased We are currently working with the leading memory customers in Korea, The U. S. And China. Over the coming year, Vertical wire connected memory applications are anticipated to move into higher volume production the longer term, we expect this enabling technology to expand into higher volume general semiconductor market. As I explained earlier, in addition to vertical wire, we are also supporting major memory customers who is examining frontless HBM alternative in coordination with our highly capable FTC process development team.

The company continued to be at a unique period of times. We are positioned for several promising high growth opportunity that are supporting long term critical technology transition in both leading edge and high volume semiconductor assembly. While we have already experienced core market improvement, we continue to anticipate both the both and the which will reach more normalized level of demand fiscal twenty twenty five. Although we anticipate this broad and coordinate recovery to be imminent, We remain focused on what is within our control. Our priorities are to maintain our aggressive [indiscernible] Of development across all supermarkets while we continue driving customer acceptance to our new product and service, I will now turn the call over to Lester for the financial update.

Thank you, Fusen. My remarks today will refer to GAAP results As Susan explained, we continue to anticipate a broader cyclical recovery for our ball and wedge businesses driven by cornered improvements within general semiconductor and auto industrial [indiscernible] We remain very focused to support multiple development programs product releases, timelines and customer qualifications.

Looking back at our December results, we generated $166,100,000 of revenue and 52.4% gross margin.

The strong gross margin performance was partially related to revenue recognized in the December for systems expense in prior periods.

During the December, we also recorded a gain of $71,000,000 due to customer settlement associated with our fiscal second quarter twenty twenty four impairment charge.

Non GAAP operating expenses which exclude this item, were $68,600,000 This was below prior expectations due to a favorable foreign exchange gain as well as an ongoing focus on operational and development During the December, we booked DAP tax primarily related to the customer sentiment benefit but also related to our mix of profit and loss across entities during the quarter. Continue to anticipate our effective tax rate will remain above 20% through fiscal twenty twenty five. As announced on 12/02/2024, we also completed our previous repurchase program and began our new $300,000,000 share repurchase program. Repurchases for the first quarter represented activity from both programs and totaled $36,900,000 reducing share outstanding by nearly 800,000 shares. Turning to the outlook for the March.

Expect revenue of approximately $165,000,000 plus or minus $10,000,000 with gross margins of 47%. Non GAAP operating expenses are anticipated to be $70,500,000 plus or minus 2% and we expect GAAP EPS of $0.03 per share and non GAAP EPS of $0.19 per share. As we await broader core market recovery, we remain very focused on key development qualification and market adoption across our growing portfolio of solutions. We look forward to announcing additional success with these efforts over the coming quarters. This concludes our prepared comments. Operator, please open the call for questions.

Thank you. We'll now be conducting a question and answer [indiscernible] Our first question is coming from Chris Sankar from TD I actually had three of them. Number one, Susan, you kind of said that March quarter general semi should grow. Is it fair to assume that sequentially into June and September, your bond revenue should grow sequentially?

Yes. Okay. So [indiscernible] [indiscernible] Semiconductor FY 2025 growth from 17% to 17%.

And we also see our Q2 actually due to the Chinese New Year and also global political dynamics some of our customer actually delayed their investment decision to up to TransUnion. But despite the change we still anticipate even 13% of semi growth in CY25 should benefit all of our business. And downturn typically take around June and that we are approaching ten quarters So we believe we are in the late stage of the downturn. So I wish I answered your question. And we still anticipate the transition to be below normal [indiscernible] later this year. So hope I answered your question, which Yes, that is helpful. So just to follow-up on that point, normalized level For fiscal twenty twenty five, is that a $550,000,000 run rate or how to think about what is normalized coal demand? Okay. So, Chris, let me end [indiscernible] So typically, our second half is always stronger than first half.

So and we expect the normalized label probably will reach prior end of like our '25 So it's not unreasonable to expect our second half will be 20%, 30% or even more than 30% higher than 1H first half. And giving you example, 20% will lead to about 73030% will lead to seven sixty, right, just for the revenue. So how I define the normalized, I'll give you example.

At the peak cycle, our broadband revenue is at $1,000,000,000 and but average of FY 2023, 2024 actually we only see just over $300,000,000 we believe our normal year just more on the revenue itself. Should be around $500,000,000 to $600,000,000 So that's really our expectation. Industry probably will enter normalized label maybe end of our fiscal twenty five And when we enter '26, we expect probably full year will be a normalized year. Got it. Got it. Very helpful. And then just a quick follow-up for Lester.

The December quarter margin strength you said [indiscernible] were these CCV and how many tools were they? No. So Krish, these are tools that is associated with Project W. The customer ordered these tools prior to the cancellation of the project. As part of the Impairment which we took in Q2 FY 'twenty four. The cost of these tools were included in the impairment. Now that we have settled with the customer on Project W, these machines have been recognized in the quarter. Which obviously helps strengthen the gross margin. Got it, got it. Awesome. Thanks, Esther. Thanks, Susan.

Next question is coming from Craig Ellis from B. Riley Security. Your line is now live. What you're seeing with high bandwidth memory DRAM. Houston, I wanted to go back to where Krish started and just see if I could get a follow-up. So So really like the potential for more normalized core business revenues in ball and wedge bonding, but from all the observable data points, I think we and others see PC, smartphone, other high volume demand and auto industrial is really very anemic and and clearly there's some good company specific things going on in ANI right now. But what are your customers telling you about their need for incremental capacity as they move into that second half fiscal period for you and need to add capacity to meet demand, which seems more bouncing along the bottom than than anything else?

Okay. So I think I mentioned even in Q2 we see customer investment decision actually [indiscernible] after late decision will be delayed until Chinese New Year And also because of the concern about the global dynamic [indiscernible] is really our stronger [indiscernible] So as I mentioned, I think our downturn take about rather than traditional like a June. So we do believe there will be also some investment, I think a mature note [indiscernible] will come up particularly in China for 28 nanometer and above So we are actually at this moment is quite still quite bullish about our second half. Also, when we enter later part of our second half, and into '26 So we believe for the long way affordable bond can reach to 500 to 600. 500 actually is not high. The peak level actually is $1,000,000,000 and at this moment, it's only 300,000,000 right? So 100,000,000 is just go back to a pre COVID label.

And the whole industry actually 700 content continued to increase And the Tantan take a very long and we do believe it's a very late stage of a downturn. So when we enter 26 I think we also not only bought have a good potential, we also see which BaoBanda we can take market shares from our new products [indiscernible] this is for high power semic and we also see the momentum of a vertical wire our AP and also ADS. So we shall give you that deeper for the next couple of quarters.

That's really helpful color, Piyushin. Thank you. The next question I had was a follow-up on deck slide number three. Very intriguing point made with a growing pool of high growth AI related opportunities for the company. The question is, can you quantify what the value of those is now, either in the recently recorded first quarter, what you would expect in the first quarter? And as we go through 2025 and 2026, how big can those opportunities become for the business?

Question, you were talking about our AP. [indiscernible] Yes. And just the the products that were referred to in deck slide number three, lower right, when you talked about a number of AI related opportunities.

Okay. So So I will give you so this is our forecast, we haven't changed it. But we believe we still have upside I think this year, when we define advanced packaging, Our revenue for advanced packaging, total packaging, including our multi die chiplet. SiP vertical wire and GCD, right? So 2024, actually the total AP is $2.20 and we deliver the 25 we are aiming at the $275,000,000 to $300,000,000 right.

We do believe the next couple months we might add a little bit more strong PCB forecast. After long term forecast, we will receive from some other customers.

Got it. That's helpful. Thanks for the color on those items, Jason. I'll get back in the queue.

Thank you.

Thank you. Next question today is coming from David Dooley from Steelhead Securities. Your line is now live. Yes. Thanks for taking my questions. I got a couple. Could you just talk a little bit more about help us understand how many customers now are using your thermal compression bonding tool? You've listed, I think, an OSAT, an IDM, a foundry. Just I got I didn't wasn't able to collect all the information. So if you could could just review that again and kind of let us know which ones will be the biggest growth drivers in the near term?

Okay. Actually, we actually have multiple customer. We have foundry, we also have IDN, I think we are in all the OSAT Actually, I don't have a total number. I think it will be quite significant So I think Dave, this is Lester. I think between customers who are using it in high volume production, who is about to use it in volume production plus qualifying, I think would be close to eight to 10 customers who are looking at or who soon receive shipments of our TCV bonders. Okay.

And then I think last conference call, I think you highlighted the thermal compression bonding opportunity in 2025, I think was $40,000,000 and that that was part of this $220,000,000 going to $275,000,000 $300,000,000 I think could you maybe just break out the pieces of that $275,000,000 to 300,000,000 your advanced packaging pieces?

Okay.

Actually, I don't think I have a breakdown over here. This is including, as I mentioned, this is like a multi die chiplet SiP, this free chip. Vertical wire and PCB. But TCP alone I think I mentioned last call. I think our 24 is 55 And this quarter, I think we are aiming at 75 to 100 And the total TCD market, I think this year, for total TCV is about RMB300 million RMB300 million. So we are probably this year we are aiming roughly about 30% of our total market shares. And we do believe we can grow market shares from here.

Okay. Thank you. And then excuse me, As far as the vertical wire solution, would you expect to see revenue from that in 2025? And and maybe help us understand if you do have revenue from how many customers?

Okay. So, Achin, we are very excited. Almost a AV memory customer, we are working with that. Also recently including China. So all is Korean and also major U. S. IBM we do believe this is very beneficial Although the first application is going to for the LP DDR5 This is for the sale But in the future, we believe this vertical wire, not only DRAM, We are also working with a NAND customer and Fangding actually a lot of new application In the future, we'll also go to a logic So we are quite excited So in terms of customer, working with a customer, with the revenue, I would say three at this moment. This is the initial production We do believe our 25 will be our initial production. Some of them just start to run their process And so including NAND, including this I think we're working part with seven or eight customers. Right. So we believe 25 we have low revenue, maybe I would say below 20 and we are looking forward for 26 to be bigger. And twenty twenty seven, I think, will take off be much, much bigger. So 26, if you want me to figure out a number, I can give you a number roughly say $50,000,000 dollars 26 and this year probably below twenty twenty and hopefully this will take off after that.

And we do have a strong [indiscernible] will be game changers. For the next couple of years.

Okay. And final question for me has to do with the dual head tool for the HBM market.

I think you've made mentioned in the past that you need to have a higher throughput tool in this market to win business and maybe help us understand what your throughput advantages are versus the competition or or what are some of the parameters or key metrics that will determine your success in winning business with an HBM customer?

Well, I think the HBM [indiscernible] I think we are engaging for our next generation. One is really the process are working for the future and our goal is target to ship the system end of the year. So the process, I think, is very, very important. We do believe we are able to create a copper to copper and you have so many there. I think we will provide very good electrical performance. And then I think it's going to be the throughput and productivity. We do believe our tool with TwinHead will have advantage or slightly better than our current competition, I think, at this moment. But we do believe the [indiscernible] and availability is what we are aiming at and with a better productivity compared to competitor.

Thank you.

Thank you. Next question is coming from Charles Sheehan from My first question is about TCV.

This dual head system versus single head you already shipped and qualified.

Wonder when this customer goes into our volume production, do you expect [indiscernible] The volume production tool to be single head or dual head or it's going to be a mix?

And maybe a related part of this question is, this shipment of the Duhep system sounds like it's evaluation system and if that's the case, when do you think you can get the quality [indiscernible] So Charlie, ask if this is evaluation system. No, this is not evaluation system. This is in one of the PO. We have So we do believe from our one chamber to a two chamber, it's robust mostly.

We believe our engineering capacity So the tool right now is used for pilot production and also for the new customer in our qualification.

And after maybe learning couple of months, would say maybe three months. Around that, we hope to receive a long term just outlook [indiscernible] Do you think the volume production tool will be dual head or single head? Yes, yes, that's correct. That's correct.

I see.

I think it's going to be due ahead. Will be due ahead, okay.

Maybe the second question also on fluxless TCG I think you mentioned about engagement with a leading memory customer, HBM, Can you provide a little bit details on what's the engagement right now that will what will be the next milestones, etcetera? Okay. So I think the first two years, we actually very focused on Logic, right? So I can tell you we really It's really for next generation HBM And we do believe we did successful demo And our goal is really to ship the system by the end of the year. [indiscernible] if everything is successful, we can catch high volume production [indiscernible] [indiscernible] eighteen to twenty four months, that's really our goal.

Got it.

Okay. So lastly, a question about the VFO. Thanks for the color you provided to to David earlier.

I want to ask you since DRAM wire bonding, I think traditionally, it's not market, it's a Japanese competitor.

Who had that market.

So for The top DRAM customers what's your expected market share in VFO I would assume that your the incumbent will also have some solutions and what would you [indiscernible] from where you stand today, the potential market share in VFO could be [indiscernible] don't know why you made a comment about Japanese I think the total the market shares just all broadband, I think we have close to 75% to 80% And So the NAND, I think we probably [indiscernible] And for the DRAM, [indiscernible] DRAM, I think at this moment, I would say maybe 60% is a free trip. And then probably, more on the traditional BaoBong Actually, I would say maybe 30%, 40% I think we still have a very, very high market share. We are still number one. Not only in the NAND, also in DRAM. So go back to the VFO. I think the first application is going to be DDR5. And this probably can reduce our total packaging and form factor about 30%. So that's why it's going to be useful, the cell phone. And it's a kind of a replace like a TSV [indiscernible] With a better processing year performance and also cost.

I hope I answer your questions. Yes. I mean, do you expect to have a VFO position at all three leading DRAM customers a few years down the road? That's actually my question. Yes, yes, yes.

Okay, yes. The answer is yes, we do expect that.

Okay. Thanks, Jose. Yes. Thank you. Thank you, Joel.

Thank you. Next question is coming from Tom Diffely from D. A. Davidson. Your line is now live. Okay. Thank you. Appreciate the chance to ask a couple of questions here. Fusen, just maybe some questions about the the general semi market or the core market.

What are the end markets where you're seeing the most excess capacity or maybe said a different way, which of the end markets do you think will recover first from a ballbonder utilization rate point of view?

Well, think actually the recovery in my mind right now is both auto and also general semiconductor is leading by China. So we like a front end wafer [indiscernible] I think it's always in past couple years always at the quite high level.

And we need to believe our next couple of years because of advanced packaging investment and also China China is expanding a lot of legacy capacity And after they finish our front end, facility. I think the back end investment will be needed. So the investment of back end and the front end non issue is availability, but I can actually, we can tell you, I think at this moment, what are really leading GenoSEMI and also auto [indiscernible] Actually is happening in China.

Okay. And maybe just taking on a one piece of the market. So a few of the other players in the semi cap world have talked about some NAND strength recently. It sounds like it's more just kind of on the technology side. Curious if you think you're going to get a boost from that on your NAND business or do you have to wait for true capacity buys excess capacity or in incremental capacity to come back in marketplace before you see a pickup in that business?

Okay. So what I can tell you is, I think net [indiscernible] And for the NAND, actually, we have if not above, we got close to 90% of market shares for the net.

Yes. So wondering about the health of that in if you're going to see uptick in that over the next couple of quarters like guys like Lamar on the equipment side or if it's going to be a delayed recovery for you versus those peers?

Sometimes I think the investment probably not in a ware coordination, right? So [indiscernible] I actually didn't know what [indiscernible] edge company [indiscernible] [indiscernible] development and capacity is more important. And for us, you finish a product and then it's a stick die. Actually, we can connect a stick die. So [indiscernible] this finished viewing in the front end. I think we will be benefit [indiscernible] Because then NAND packages is quite simple. [indiscernible] Okay. Thanks for that. And then maybe just a quick follow-up for Lester.

Lester, when you see the core markets come back in 2026 and get back to that normalized level, what does that do to the margin structure, if anything? Assume that those traditional core markets might be a little lower margin than some of your newer So I was curious if there's anything we need to think about from a gross margin point of view.

Well, Tom, from a a gross margin standpoint, we're still aiming towards 50%, right? And we think as we head to 26, even our traditional core products like BongWedge, we are introducing new products, which gives us higher margins for both ball and wedge. And Also, I think we continue to focus on cost reduction. Again, both in ballbonder and wedgebonders. So we think actually the margins will continue to improve as we roll into 26 And also obviously with higher volume, our margins does get better because our factory utilization Great.

Okay. Thanks. Appreciate it. Thank you. Next question is a follow-up from Craig Ellis from B. Riley. Your line is now live.

Yes. Thanks for sneaking in the follow-up question. Houston, I wanted to go back to some commentary around Charles' question around when we get the volume shipment intercept with high bandwidth memory on Flexless PCB. I think you said at the end of this year that's possible. And so the question is, is the enabling development, the industry's transition to HVAC [indiscernible] is it as industry goes to higher stacked and likely more volume 16 stack at that time or something else that's creating that window of opportunity for you?

Yes. Next generation right now is a three d. So I just wanted to make sure we have a right expectation. Before us trying to penetrate through a different market, there's already machine provider from Korea. And also a lot of other customers. So this one, I think, when we say we will ship a system, this will be actually after customer have confidence in the after the demonstration, We actually intend to ship the system maybe later part of the year. And I still need to go through a lot of development, right? So to really the wind, the high volume production, I think [indiscernible] [indiscernible] probably this already big milestone. We are targeting about eighteen months.

Okay, got it. So So commercial revenue really would be sometime in in calendar twenty six rather than something that would be exiting '25?

Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over for any further or closing Thank you, Kevin, and thank you all for joining today's call.

The coming quarter, we'll be presenting at several conferences and roadshows. As always, please feel free to follow-up directly with any a great day everyone.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.