Q4 2023 Kulicke and Soffa Industries Inc Earnings Call
Greetings and welcome to the Kulicke and stop a third Corp fourth quarter 2023 results conference call. At this time, all participants are in a listen only mode.
A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded at this time I'd like to turn the call over to Joe <unk> Senior director of Investor Relations. Thank you you may begin.
Thank you welcome everyone to cool can surface fiscal fourth quarter 2023 conference call.
Susan Chen President and Chief Executive Officer, and Luster Wong Chief Financial Officer are also joining on today's call.
non-GAAP financial measures referenced today should be considered in addition to not as a substitute for or in isolation from our GAAP financial information.
GAAP to non-GAAP reconciliation tables are included within the light latest earnings release and earnings presentation. Both are available on Investor Dotcom Dotcom, along with prepared remarks for today's call.
In addition to historical statements today's remarks will contain statements relating to future events and our future results. These statements are forward looking statements within the meaning of the private Securities Litigation Reform Act 1995.
Our actual results and financial condition may differ materially from what is indicated in those forward looking statements for a complete discussion of the risks associated with killed itself that could affect our future results and financial condition. Please refer to our recent and upcoming SEC filings specifically the 10-K for the year ended September 30th 2023, and the 8-K filed yet.
Sturdy.
With that said I would now like to turn the call over to Susan Chen for the business overview. Please go ahead.
Thank you Joel.
Before discussing our business performance I want you to supposed to reference this humanitarian crisis in mid August.
Like many of our industrial P. O. We have had a long term play sense Israel.
We'd give up and produce all precision ambulatory products.
I'll, let you invest in all high swap facility MTBE, but meaningful innovation in the DBM product over there yes.
And we are pleased to report that they are not in a high risk area.
However, we continue to hope for a quick and a peaceful resolution.
As a global company with a diverse employee.
And the customer base, we are committed to strengthening our diversity and they include your initiatives to foster collaboration maybe great inherent bias and the growth opportunity.
Earlier this week, we used to assess what are your horse.
Yeah, I'll give it to everybody that women in engineering and the Pixar in Philadelphia.
He's a well attended event featured several keynote speaker phone kanis S. A wet and his team member for all the extra well communicated.
We are waiting for to be able to host these type like you bet.
And as a testament to our dedication to.
Enabling change and the excellent search and leadership within our local communities.
Turning to our business, we haven't seen a sequential improvement in key market little brother market recovery will be gradual.
The sequential change into the December quarter, being seasonal and in line with our long term average.
Furthermore, based on discussion with customers.
And our forecasts and are gradually improving in collision Paypal, we anticipate a moderate they might implement into the March quarter, and a stronger second half driven recovery.
He said Oh tayo much quota, we have seen significant improvement in the general semiconductor market and then some recovery within N O D. At the same time automotive and the memory continues to be something near term.
Regardless of the near term industrial condition.
And that.
With a major technology transition and the activity and the intensively engaged in qualification for our advanced packaging.
Automotive is Spanish and the bus display solution with multiple industrial leading customers.
Okay.
Coupled with ongoing improvement in our ball bonding business, yes for cutting edge that we owe you a more traction and the momentum in the second half, which we anticipate will be sustained through 2025.
We have also increased only purchase activity and there'll be less optimistic as we executed on several key long term project.
He recently.
The fourth constant.
Oh.
Have you done race and we continue to maintain the highest high just even a year relative to U S industry peer.
For the September quarter, we did about 202 points for Ya man donor over maybe Neil.
<unk> $3.4 million, often the income and the hoops you want says non-GAAP EPS.
We continue to see improvement in general semiconductor, which increased 50% sequentially well that'd be another clear indicator that we are we have young truck market conditions.
Yes, it's going to implement what minority due to higher demand for our old Navy's Sugar Bowl bound up pay for them, which is a best studios for the most complex wire bonding application.
We have also seen a pick up in demand for emerging political why application increasingly deployed in mobile and Iot based application to mitigate a F.
That's between beds.
We look forward to ongoing technology, driven change and the improving conditions within the key well above the market.
It depends on it.
We are well positioned to further optimize our high volume business with our recently introduced Paul come and the poll next play for them.
This new system will provide additional value and the margin opportunities yesterday them, all but it coming yes.
Well yeah. It would be we have also shown sequential improvement in the general license once we associate it with the U S and convince them that that took place this past April.
Well, yeah, it's great we can bring it to Nick a technical progress.
The Lumi next.
Put it for them and are approaching five nice yeah.
We also continue to execute toward project W did affordable.
But with them with you in the industrial.
Nick what dynamic, including heightened since rates have in end user demand and also in the near term.
Capex needs.
Our automotive and the industrial business. The net 80 enabler of battery Assembly and the power semiconductor applications, which are supporting long term electric vehicle in a sustainable energy transition globally.
We have recently.
In order of 120 battery Assembly system.
Which will be recognized primarily in the March and the June quarter.
24.
I know that.
As anticipated in last week in recent weeks.
The memory market remains challenging near term, we could see improving price dynamics. That's the way it is a specific technology treatment opportunities.
Next generation high bandwidth memory and are continuing to execute on emerging body cool thing Oh, we if all application.
Let's briefly discuss it last quarter.
Or is the main point is an atone or tier two switch silicon via or GSP.
Assemble la Porte I need a good ramp in a three D format.
These cost effective and flexible.
Approach enable higher density D. D are well supported in the established market such as Apollo efficient mobile devices and other H based applications.
We are currently engaged in evaluation with a stable NIM leaders and well keep you Felicia to support these emerging E, namely architectures.
Most emerging H P M in the b or opportunity it well, it's a new idea of diversification through our Netherlands body portfolio over the long term.
Next I want to discuss all participation, we didnt brotherly Aki strategic intelligence application and to provide a brief update on each play in that space.
It doesn't.
Seeing that your home Pcs small hole in the connected devices.
We increased the capacity need for the industry.
How deep is your intelligence application.
The Canadian both unit and the technology based growth opportunities for many of our businesses.
Tony Benn Korea, we have taken US, yes, with optical with high volume logic and also with the.
<unk> H heterogeneous do you by chance.
Police have OEM has all our ability to support long term trends, which are very much centered.
Assembly techniques.
I was wondering Oh girl in alignment with our key artificial intelligence threat I would ask you all night, how we ask specifically exposed to what we consider to be the three key beauty in Brussels.
Machine learning network infrastructure and devices on the edge.
Plus machine Dania has to be shipped most of attention over the past few quarters.
Here, we see English and market applications, such as the high bandwidth memory body that GPU based application and the emergence of that and the heterogeneous base Cpus.
Convenience with therapies support D D heterogeneous application with our somewhat comprehensive portfolio and anticipate both high bandwidth memory and multiple GPU based application will begin transitioning to find out in a finer pitches being questioned the need for our appreciation and solution.
I suppose it should be in and the GPU based application continue to move to find out I O P. G. As we expand our solution to be increasingly competitive.
As you know what with several key customers. We continue to be the Kansas is a significant enabler to the success of most leading edge applications supporting yeah.
Our tour in most qualification and production are extremely competitive and the customer engagement have strengthened over the past two quarters.
We look forward to sharing more feedback on our current evaluation and qualification status of our key leading edge logic opportunity or will it come in bunches.
Next is the AI become more integrated with the existing use application.
And the work at home and the sort of crop.
There is a growing need for higher bandwidth and the more efficient network and solution.
These needs are being met with the emergence of Silicon Photonics technology deployed in co packaged optics devices, which are anticipated to grow at the 66%.
Sure on the city St.
Importantly, our silicon Photonics Houston Austin.
Leading customers to take these optics production.
He used to support NIM walk retail application.
Because you have unit Assembly challenge once all connected system sippel with and have triggered the interest of multiple new customers.
To date, we are engaged with seven even customers who are critical to supporting these emerging silicon photonics overdone.
And they remain well positioned for future growth.
Yesterday evening, we announced.
The first in a series of expected order, who support customer a great deal of Silicon photonics capacity expansion.
The momentum and the interest.
Well our classrooms, he is really high.
These recent wins just to highlight our income and pollution and the technical leadership in this emerging silicon photonics and a cold picks upticks Lucky.
In addition to a machine learning and the network infrastructure is the AI training will continue with demand being higher complexity and higher volume production of devices on the edge side, Yes, Iraq.
Sensing connectivity and the logic based application, which deport employee fishing mobile Iot and the other client facing applications.
These applications will continue to leverage well then and of course it does seem assembly approaches such as our system in package applications in which.
And the wedge bonding atomic alone.
As well as emerging opportunities for spending why application used in both connectivity as Julian and the public if you shouldn't stick ebay.
Oh got it coming yes.
Wage and a similar completion, a policeman anywhere to directly support these <unk> right.
More complex assemblies, who come in are increasing the value of our market, leading bowl wage and that they be advanced packaging portfolio.
Despite.
The Guizhou industrial recovery cost of interest for qualification and the EBIT I shouldn't read and then really strong.
In addition to AI, we continue to make progress on all of the bunch of these spread opportunities supporting other banks big lighting and the future initiative the split.
S Muni and then Michael your wafer production costs improve and the types of Eisai is continuing to shrink and market use case will grow and the efficiency and the capability of Assembly will also increase.
Oh, a dedicated high throughput high accuracy looming next system is well positioned to support these upcoming marketing it.
Additionally, we continue to execute on projects.
And they expect to provide additional visibility into projects w's, although over the coming quarters.
Finally, the integration of all the new defense business continues to proceed very well with a key engagement across our extensive cost them when they work.
Market feedback on this new solution from multiple with leading customers has been very promising.
Michael It's best solution are extremely efficient capable and accurately.
Which is a significant value for critical applications supporting the bus display battery, Mexico and the same thing in China.
The market opportunity for these things are brought and I will provide more specifics on our target applications.
Over the coming quarters.
Newport into Frisco plentiful, we continue to anticipate a return to about a bridge semiconductor unit growth and also anticipate taking share in this new market.
We have very strong customer interest and the momentum across our emerging portfolio.
I have already shown career she couldn't call it improvement in our core market and look forward to releasing a steady pace of new system will feature and also announced a new customer and the technology wing over the coming quarters.
With that said I will now turn the call over to Leslie who will discuss our financial performance and outlook.
Thank you Susan My remarks today will refer to GAAP results unless noted.
While the business environment remains challenging for the entire industry. It remains a very exciting time for the company with clear signs of improvement within our core market and ongoing progress within our emerging opportunity supporting long term technology transitions, which address AI battery Assembly defense and <unk>.
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During the September quarter, we generated $202.3 million of revenue 47, 4% gross margin and 51 cents of non-GAAP EPS.
Gross margins came in slightly softer than expectations, largely due to product mix.
non-GAAP operating expenses came in just below $70 million in line with our prior expectations.
Finally tax came in slightly better than expectations due to favorable jurisdictional mix and discrete items.
We continue to target the long term, 20% effective tax rate.
Although anticipate coming in slightly above this level in December.
Turning to the balance sheet.
Working capital days decreased from 465 to 448 days in the September quarter, primarily due to the sequential revenue improvements.
Our repurchase program remain opportunistic and we have increased our repurchase activity sequentially to $9 $2 million during the September quarter.
As Susan mentioned, we have also increased our dividend payout, maintaining a very competitive dividend yield.
This growing and consistent dividend commitment highlights their confidence in our long term outlook.
Combined with the ongoing reduction in share count due to our opportunistic repurchase program. Our dividend program provides additional long term value to shareholders.
Looking out to the second quarter, we anticipate revenue of approximately $170 million plus or minus $10 million with gross margin of 47%.
non-GAAP operating expenses are anticipated to increase slightly to 71 million plus or minus 2%.
We remain focused on controlling and limiting noncritical activities, although continue to ramp head count to support our growing set of customer engagements.
non-GAAP net income for the December quarter is expected to be approximately $14 $2 million with non-GAAP earnings per diluted share of approximately 25 cents.
In closing we are uniquely positioned to capitalize on the growing value of semiconductor and display assembly.
Our market access is steadily expanding and we are positioned well to support and enable major long term technology trends for the industry.
Our core business gradually improves and increases in complexity remain focused on expanding access to positive long term advanced packaging advanced display automotive and defense needs.
We look forward to sharing our progress over the coming quarters.
This concludes our prepared comments operator, please open the call for questions.
Thank you we will now be conducting a question and answer session.
I'd like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue you.
You May press Star two if you would like to remove your question from the queue for participants using speaker equipment, and maybe made necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for your questions.
Our first questions come from the line of Krish Shankar with TD Cowen. Please proceed with your questions.
Yeah, Hi, Thanks for taking my question I actually had three of them first one foods and when I look at your commentary into a into the March quarter and beyond is it fair to assume you think the worst of the ball Bonder bottom is behind us and what kind of visibility do you have and conviction on why it should continue improving.
Okay. So fishing you asked why we had a ball bonder in second half.
So it is high is that right.
Yeah, Yeah, what do you think that the worst is behind us.
Okay. Okay. So I think there are a few reasons one is of course a cost in most of the feedback.
And also historically, we are second half actually.
Higher than the first half.
And the industrial actually went through a few inventory digestion. So when you feel like you know E should grow and also the reason actually a forecast from IDC and the governor.
They all point to a strong you know she went over the plentiful.
Especially as you know we see you're all set.
Older. Although I think what we do but they won't even all the more second half.
Actually we are quite close to a cosmos, so I hope I answered your questions.
Got it got it that's really helpful. And then just wanted to follow up on some of the commentary you made on on the B M in GPU applications.
And number one I'm kind of curious are the status of your thermal compression bonder evolved with one of the largest Taiwan foundries and second do you expect some degree of many of the Gpus for AI is using Cobalts do you see them migrating to D C being the future.
Oh, yeah, Okay. So krish I, we are actually quite excited about prospect of a O T. C. D. So look at the year to solar.
All right with you what you said single digit.
I'm, sorry, I've seen plenty of 20.
And actually our 'twenty to 'twenty three are actually we'd reach to a 64.
Yeah.
And we expect Oh Gee should be it will be over 100 million dollar in 2020 five.
So when we are plenty and plenty of five O T C. B the whole dedicated AP actually it will be over time.
So the progress has been very good pick up by a strong AR technology.
So currently I think we have a multiple engagement. We saw was that was the idea in and also with our foundry.
And each company might also have a multiple project.
The engagement and a positive quarter EBIT, even more so hum.
Going to your questions are we.
We as a company you ask Colin to Azure, we have engagement in both a sheet without you and she's ways.
So very strong solution, which is extendable to find peach.
Feedback has been good and we hope to finish up all partly because you in the next few months. So I hope I answered. Your question. So next question is H I G. P U and it should be and actually is also would require a the T. G. B, it's tough to make it into.
Christian so.
The tool actually support multiple application and then they say you mentioned he said one of them.
So I hope I answered all your questions.
Yeah. Thanks for the food and then you have that is very helpful. And then maybe a quick follow up for the Leicester.
Can you give some color on how much the backlog was and how much was China supposedly a total sense.
Hi, Chris Yeah. Thanks for the question.
The backlog was up $423 million at the end of our Q.
Q4, and then as far as China is concerned are you talking about how much was China revenue.
Yeah, that's right yeah.
So far our Q4 I'm kind of revenue was 49%, but 46 for that Oh, those are China headquarters, so not M N CS and for the year actually China.
Headquarters actually dropped down to about 40% for FY2023 in FY 'twenty four it was actually closer to 46%.
Got it. Thank you very much that's it thank you.
Okay. Thank you krish.
Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next questions come from the line of David Duley with Steelhead Securities. Please proceed with your questions.
Dave could you. Please check if yourself muted yeah. Thank you I wasn't hum.
Could you just talk a little bit about the general semi business recovery that you saw.
You know how much that grew sequentially, what you would expect it to do.
And in the following couple of quarters and then as a follow on I think you mentioned that one of the four cat D. C was forecasting strong unit volume growth in 2024 could you talk about what sort of forecast you are expecting for unit volume growth in 2024.
Oh, okay. Okay. So took a ball the quota business expectation.
So as you know are we actually second half historically ease of stronger than the first half. So this means.
She said and then he will happen.
The transition from a second half to first half.
The closer you know she said analogy you know for the last September December quarters.
And the average sequential revenue change from last September quarter to December eight.
Hey, rich historically is a certain percent.
So you know our Q1 FY 'twenty for guidance. It actually is in life. We saw a huge study called image. So that's a Q1 so.
So in Q2, a full all our current view and the customer feedback.
We see we will see a sequential growth.
And in terms of the second half.
You know currently we have are actually ongoing in tissue in the.
Very intensive qualification and what was the old customer or a P.
Disparate.
And a very very strong feedback on what the expansion and coupled with our broad the ball bonder business recovery.
As you know, which are actually not a Christian just to ask you.
You know, maybe a I D C D C actually forecast a 20% semiconductor gross this just came out recently the governor the unit actually.
It is a it's a very very high but the.
I think what Eva she was about six 6%.
The forecast I think guys are close to 10%, but even with.
7% would even be.
Higher than you know our historical I think movies video vertical for US you know as I mentioned I think industry inventory write down and it's been that many many times coupled with our kinase I think historically, our second half revenue is a 60% computer first how about 40%.
And also we saw that unique momentum.
Many many qualification AP.
I think well see that was stronger.
Hum just for goodness, so I hope.
And same question, maybe it lets say you own that are little bit more yeah, hi, Dave So you're right. Our general semi revenues did increase 50% quarter on quarter and I think as you know generally somebody is always our biggest end market segment at a council, what you're saying, 50% to 70% of our revenues I think another point to pay.
Up is utilization rates. So general semi has been below 70 for couple of quarters now, but in the last quarter. It's a it's broken 70, we think it's actually going to continue to rise actually overall utilization as increased 10% from the from the beginning of FY2023 to Q4. So those are all signs pointing out towards you know a much stronger.
Longer FY 'twenty for particularly in the second half is fusin set.
Okay and then.
Follow up question for me is I guess two of them could you just elaborate a little bit more about this new battery Assembly order you got I think you mentioned it was 125 systems or units just talk a little bit more in greater detail about what that is about the delivery schedules there and then.
A lesser I I.
Don't know if the new wire Bonder. So you mentioned in your press release are the ones that address the new general semi bucket I was just curious about the update for that particular wire bonder, when there's that kind of higher margin product going to ramp and hit market. Thanks.
So far the battery assembly equipment, we see that coming into Q2, and Q3 of a year. It's a one of our traditional customers who haven't bought for a while but now is back into the market again, so we're very very happy to see that.
As far as deep the new products as power next and telecom are they have been introduced those odd ball Bonder is that serves the high end mid end general semi market.
Market are those should become more meaningful in Q.
Q3, and Q4 are as they qualify and deploy them and that should be accretive to our gross margins.
Thank you.
Thank you our next questions come from the line of time definitely with D. A Davidson. Please proceed with your questions.
Yeah. Good morning, So you talked a little bit about some tech advances with Illumina X what about the market update.
What are you seeing right there in that marketplace for those tools.
Okay.
Yeah.
So so let me let me say this I think are we in the twos are various doses above a piece a lot David.
Based on this work, but in the meantime, we also understand industrial D D. They have a higher productivity.
Uh huh.
Oh technology, so in the Twenty's fleet, we focus our own twist technological ones Illumina X. This is Elisa transfer.
It can be multiple X a speed higher than the piece hold ups and so as a project W.
Lumi next I'd say at this moment.
But prior earning call I described by many of our Oh, sending technical milestone has been achieved so what we already know is they have a multiple engage with customer, but maybe very full because just what we saw one leading customer you know to.
To complete all the high volume production.
No how you bought in production qualification by Q2, let me see so all in all the much somebody up for I think Q3, they can't go to production, but so we are very very excited.
I think Uh huh.
Like what would be the size of it will continue to go down and the industry need to have a hypothetically be tool are currently I think steel you know large die still supported by type on the type of Lloyd and technology, we believe the transition.
It's going to come for the next one or two generation.
Again, I think we hope to put in one major customer to high volume production and Oh finish all the qualification and get it with land they can't go to production in maturity.
So also maybe update a little bit about the project W.
This year plentiful.
We are building initial production tool as well as our prepared in Florida.
Do you mean in 'twenty four and actually we are quite optimistic you know we said he used with technology.
Move forward I think we will see.
Gross and this year, we hope.
Target for $50 million to get a 14th two technology and told you fight we believe <unk> can do.
Much higher than that.
So Tom I Hope I answered your questions.
Yes, no I appreciate the extra color on the marketplace. Susan you also obviously acquired a dispensing company a few quarters ago, maybe just a quick update on how that integration is going and the beautiful to expand the customer base for that product.
Okay, you mean, not dispensing right. So actually we are very very excited I think dispensing is a very very huge market.
Uh huh.
You know I'll cover multiple industry right and the AAV customer of our kinase a ball bonder customer. They all have a neat. So it is easier for us to actually penetrate akin to a customer we are full it was always a few customer and what their Mo a demo.
Distribution.
The dispensing by now reached to a critical stage need we call Mike what the spacing needs to be very precise debated a Q&A.
Right amount.
And has become a bottleneck for many many customers and we can focus on a few major one the feedback has been very very strong. So we are very confident I think.
We always see our initial success, maybe me, though of a plentiful and we do believe we can grow this product too.
Too much higher revenue in the next couple of years.
Great and then final question.
A little bit about increase in head counts are any sense on the magnitude of that.
Well I think we said we would increase head count in critical areas, which particularly has to do with I think the R&D projects that we talked a little bit about the the growth initiatives that will pay off in the mid to long term. We are very careful on all costs, including head count for.
All other functions are given the a little bit uncertainty. So we're not looking to increase head count significantly, it's probably overall, it's probably neutral or down a little bit.
Alright, thank you.
Thank you we have reached the end of our question and answer session I would now I'd like to turn the floor back over to Joe <unk> for any closing remarks.
Thank you Daryl and thank you all for joining today's call over the coming months, we will be presenting at investor conferences in Arizona, and New York as always please feel free to follow up directly with any additional questions. This concludes today's call have a great day everyone.
Okay.
Yeah.
Yeah.
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