Kulicke and Soffa Industries, Inc. (KLIC) Earnings

Management highlights

• Demand is improving at a faster and stronger pace than previously expected, with customer sentiment strong and utilization levels above average in largest markets, led by general semiconductor and memory demand. • Positive momentum in automotive and industrial end markets. • Introduced new and innovative offerings like Asturian TW system, ProMEM suite of memory features. • Global R&D teams engaged on many new technology fronts. • TCB transitions on track, with majority of sequential growth from large applications and heterogeneous packaging trends. • Ethlon dispense system deployed with customers.

Guidance

• For June quarter, revenue expected to increase by 28% sequentially to $310 million, gross margins 48%. • Non-GAAP operating expenses expected to be $85 million. • Gap earnings per share targeted to be 87 cents and non-gap earnings per share to be $1. • Capital expenditures of $20 million planned for expanding advanced solution segment production capacity, with $12 million deployed in fiscal 2026.

Segment performance

General semiconductor revenues increased by 19.4% sequentially to $148.9 million. Memory revenues increased by 93% sequentially to $31.3 million. Automotive and industrial shipments increased by 63% sequentially. Aftermarket products and services end market demand decreased sequentially. TCB business is expected to grow at least 70% sequentially this fiscal year, generating over $100 million of revenue. Vertical wire is anticipated to have strong sequential growth over the coming years.

Analyst Q&A

• Q: Why is that live? Yeah, hi. Thanks for taking my question, Lester. Congrats on the very solid results, and nice to see a $300 million plus quarter again. I just have two questions, Lester. One is... In the past, you gave some color on how to think about utilization rate across geographies. I'm wondering how is that now, given the demand is improving? Can you just give some color on where China, Southeast Asia, rest of geographies are in terms of utilization rate? And then add a follow-up.

  A: Sure. So, Krish, I think China has been very high utilization rate for the last couple quarters now. So for this quarter, they're over 90%, around 92%. We're also seeing strong utilization in Korea, Japan, and Taiwan, what we call other Asia. I think Southeast Asia is still a bit soft, but they have improved a little bit. And then I think North America and Europe also has improved. So I think it's still being led by China as well as Japan, Korea, and Taiwan.

• Q: That's very helpful, Lester. And then as a quick follow-up, you know, it's nice to also see your TCB revenues growing, and you said well over $100 million this year. I'm just wondering, I understand it's the logic vertical that's driving it. Is it actually the IDMs or the foundries, or is it OSAT being the incremental buyer this year on TCB?

  A: I think it's all three, Krish. I mean, we've always had a very strong position in IDM, right? And then over the last year and a half, we've moved into Foundry. Now we see a lot of the OSATs interested, and also we're also talking to some of the Fabless customers. So I think the growth is across OSATs, IDM, as well as the Foundry.

• Q: Great. Thank you, Nestor. Congrats.

  A: Thank you, Krish. Thank you.

• Q: Next question today is coming from Dennis Paiachin, Need them in company or might as well live. Great. Thank you very much. Well, it's nice to see there's a growing demand. And maybe given the improving visibility across the industry, will you be able to provide some outlook on revenue in future quarters? Do you think we can sustain these new levels that we'll be experiencing in June?

  A: Yeah, well, I think we did say that. I think for the fiscal fourth quarter, we expect – sequentially incremental, maybe 5% to 10%. I think we're getting much better visibility now through FY26. I think actually, you know, there should be strength throughout the business, the core business, as well as our advanced solutions business through the rest of the calendar 26.

• Q: Great. And then for my follow-up about fluxless thermal compression, can you maybe give us an update on which of your end markets are kind of seeing the strongest adoption of your fluxless thermocompression technology?

  A: Well, basically, it's General Semi, right? And it's, again, at foundries, at the IDMs. We're obviously focused on logic, even though we did deliver our first HVN system in December and it's undergoing qualification. So, again, it's General Semi that's driving it for end markets.

• Q: I got it. That's it for me. Thank you very much.

  A: Thank you.

• Q: Our next question today is coming from David Dooley from Steelhead Securities. Your line is now live. Good morning. Good evening. Congratulations on nice results. You know, in the press release and in your prepared comments, you talked about increasing your thermal compression bonding capacity, I think, to 400 million annually. You know, that's probably a 2 or a 3x of total capacity. I'm wondering what has triggered that investment all of a sudden. Do you have line of sight to much higher growth in fiscal or calendar 27, however you'd like to fiscal or calendar 27? Because I think you were planning on doing around $100 million of TCB revenue for the year at this point. So why the incremental investment now?

  A: Well, that's a great question, David. I think we are We're investing now because we definitely see a very bright future for us in fluxes thermal compression. We believe we have the best system in the market. We have a very flexible system. We have both formic acid as well as plasma. We're the only people who have that. Our material handling allows for a lot of different applications. There's also a lot of flexibility. I think our tour system has already been proven very robust and is a proven platform, both at the IDMs as well as the foundries and now into the OSATs. So I think we feel very comfortable with the solution. We have also gotten a lot of inbound interest, as I said earlier now, from not just the foundry and IDMs, but also the OSATs, and we're also talking to our fabulous customers or customers' customers. So I think we believe that this is the time to be prepared for a significant ramp in our Flexus TCV business over the coming years.

• Q: And do you think you'll be taking share from somebody, or will your solutions be finding new market niches? Because you have some established players in the sector that have, I think, bigger businesses. So how do you plan to fill up this capacity, so to speak? Where will the big orders come from first?

  A: Well, David, I think it's both. I think, you know, we see the market expanding, right? For example, we're not in memory right now. We're not HBM. So if that market opens up for us, that's a significant, very big market. I think within logic itself, I mean, you know, Our solution is proving to be, you know, very robust as well as, you know, it's holding up against most of the competition. So we think we will also take market share, right? And also we think additional customers, you know, will use the, you know, start qualifying more applications on the FTC. So both at the foundry and also at the OSAT. So I think we'll both take market share and the market will grow and we'll enter markets that we're currently not in.

• Q: Okay. Then I think in your prepared remarks and in the presentation, you talk about strength in the memory business. Could you just elaborate what you're seeing in memory and what's behind the big bounce back, I guess, in that segment? And will we see some vertical wire revenue this year? I guess it's a two-part question.

  A: Yeah, I'll answer the vertical wire first. I think there will be a little bit of vertical wire, but I think that's more of a 27 and beyond play. We're very excited about that, as I think we've mentioned before. Vertical wire is something that we came up with, and it's the best way to stack, and it's focused towards low-power DDR, which is definitely going to be needed on on-premise AI as well as perhaps in the data center. So we think vertical wire has a very bright future. As far as memory in general, we do see a rebound in our memory business, particularly in China. I think a lot of the Chinese memory OSAPs are expanding significantly, and that's really driving our business in China for ball bonding.

• Q: Thank you.

  A: Thank you.

• Q: Our next question is coming from Rebecca Zamsky from B-Reilly Securities. Your line is now live. Hello. This is Rebecca Zamsky. I'm for Craig Ellis. A&I was a positive surprise this quarter. Is this primarily automotive power device-related, industrial sensor-driven, or broader mature foundry capacity ads? And does this guide assume A&I continues to accelerate through the rest of the year? And then I have one follow-up.

  A: Sorry, I didn't – Rebecca, I'm sorry. I didn't quite catch you. You said what was the application or the tool that you were asking about from us?

• Q: Yeah, like, what was primarily driving the auto and industrial, like, positive supplies this quarter? Like, was it automotive power device-related, industrial sensor-driven, or more broader, like, mature foundry capacity ads?

  A: Okay. Well, I think it's more automotive. I think we're seeing, you know, obviously, semiconductor content is going up in automotive markets, both around ADAS as well as in infotainment. Also, I think it's the high IO count as well as, you know, again, we need, as the current increases, you know, I think our new tools are serving that market quite well. So it's mainly automotive.

• Q: Great. Thank you. And OPEX declined quarter on quarter on an absolute dollar basis despite the revenue ramp. How should we think about the OPEX trajectory through the rest of the year? And is there a step up in R&D or SG&A to support the TCB capacity build and new product qualifications?

  A: Yeah, so I think we guided for non-GAAP OPEX for $85 million. A big part of that increase from the Q2 OPEX is because of its variable. incentive compensation as well as sales commission, that's tied to revenue, which has increased significantly. But we are also investing more in terms of fixed costs particularly around R&D, particularly around advanced packaging. We mentioned panel-level architecture as well as hybrid bonding, which, as I indicated, we're going to try to accelerate that program. So, yes, a big part of it is variable, so a move of revenue, but we are increasing our investments in what we believe is critical growth areas.

• Q: Great. Thank you.

  A: Thank you.

• Q: We reached the end of our question and answer session. I'd like to turn the floor back over to Joe for any further closing comments.

  A: Thank you, Kevin, and thank you all for joining today's call. As always, please feel free to follow up directly with any additional questions. This concludes today's call. Have a great day, everyone. Thank you.

• Q: 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.

  A: