Kulicke and Soffa Industries, Inc. Q3 FY2025 earnings call

• Focused on extending market access through technology transition despite near-term trade uncertainty. • Saw steady core market improvement. • Automotive and industrial face order hesitation, but memory demand is strong. • Advanced Dispense has initial purchase orders from end automotive OEMs and others, with new capabilities to be introduced in September at SEMICON Taiwan. • Vertical wire market expectations on track with initial higher volume production planned for fiscal 2026 driven by memory technology transition. • TCB portfolio: Fluxless Thermo-Compression solution is best in class, with new capabilities added and expected to outpace overall TCV growth.

In the third quarter, Kulicke & Soffa generated revenue of $148.4 million. For the September quarter, revenue is expected to increase sequentially to $170 million with a gross margin of 47%. The company's segments include automotive, industrial, and memory. Automotive and industrial face order hesitation, while memory shows strong sequential demand increase. The gross margin in Q3 was 46.7%, and non-GAAP earnings per share was $0.07.

• Q4 revenue is expected to be approximately $170 million, a 15% sequential increase. • Gross margin for Q4 is anticipated to be 47%. • Non-GAAP operating expenses are expected to be $68 million. • GAAP earnings per share is targeted to be $0.08 and non-GAAP earnings per share at $0.22. • Fiscal 2026 is expected to have a gradual recovery with potential minor seasonality in the December quarter.

• Trade uncertainty clouds near-term industry visibility and affects customer capacity planning decisions. • Automotive headwinds are anticipated to linger into the September quarter.

Q: Nice to see sequential revenue improvement. Is it fair to assume December quarter revenues have to be down sequentially? And then they grow from there, but are we going to be bouncing around these $170 million level for a few quarters or how to think about it?

A: At this moment, the industry utilization rate is quite healthy, with general semiconductor and memory showing strength. Still facing automotive headwinds. Q3 revenue was $148.4 million, Q4 is $170 million. Q1 2026 may be flat, but 2026 is expected to be better cyclically with new products.

Q: How to think about the impact of Intel CapEx cuts because you do have some pretty good Fluxless position there, some of the copper to copper, et cetera. So I'm just wondering, is that a headwind? Or have you seen any progress there? Or do you think that potential opportunity in the future for FTC is probably minimized with Intel?

A: Engagements are still healthy, but revenue compared to previous year will be down.

Q: You said you're going to be shipping TCB or HBM end of this calendar year. Is this for HBM whole or is this one customer or how to think about it?

A: We are working with 2 customers, and one of the customers is intended to ship the system in calendar year 2025.

Q: Fusen, Lester, first one, I want to get buses, your soft guidance December quarter, meaning you don't have an official guide, but you did provide the direction. So the December quarter, how do I think about that the confidence level you have? Like is it -- you're basically guiding December maybe flattish. Is it the base stock orders on hand? Or how should I -- is it based on forecast, maybe you don't have all the orders on hand, but that may be coming along nicely. I want to gauge a little bit of confidence there.

A: It's a combination of high utilization rates, higher order intake, and recovery in end markets and regions.

Q: Maybe a second question. I want to ask a little bit more about TCB, maybe this is more about technology. So Fusen, I think you mentioned about preparation, physical or chemical preparation. But kind of want to ask you what that means? Is it to preparation or it's a separate tool. And I think related to that, there has been a debate on TCB, the 2 approaches, the chemical approach, which is the approach you guys have on the plasma approach. So are you by saying physical preparation, are you talking more about the plasma approach you're developing? Or what is that? And on HBM high bandwidth memory, which technology you're proposing or you're going to evaluate with customers?

A: The industry has customers in production, and the only technology in high-volume production is chemical base. We have developed physical technology and have integrated capabilities, confident in the chemical line's interface integrity quality.

Q: Great on, at the end of the prepared comments, you talked about being well positioned taking market share. Can you elaborate on what products that you plan on gaining market share, auto, industrial, memory, et cetera, just give a clear answer to that, please?

A: Clip-attach, advanced dispense, vertical wire, and TCB are areas where they plan to gain market share. Clip-attach is for high-power semiconductor products, advanced dispense has a big market, vertical wire will take off with bandwidth increase, and TCB is focused on making traction.