Q1 2024 Kulicke and Soffa Industries Inc Earnings Call
Greetings and welcome to the Kulicke and saw for 2024 first quarter results Conference call.
At this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
If anyone should require assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded it is now my pleasure to introduce your host Joe <unk> Senior director of Investor Relations. Thank you. Please begin.
Thank you welcome.
Welcome everyone to cure itself its fiscal first quarter 2024 conference call.
Susan Chen President and Chief Executive Officer, and Lester 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 our latest earnings release and earnings presentation. Both are available on Investor day, Okay. That's dot com 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 of 1995 and are subject to risks and uncertainties that may cause our actual results and financial condition to differ materially from the statements made.
Today.
For a complete discussion of the risks associated with Coke and sulfur that could affect our future results and financial condition. Please refer to our recent and upcoming SEC filings specifically, our most recently filed Form 10-K, and the 8-K filed yesterday.
With that said I would now like to turn the call over to Susan Chen for the business overview. Please go ahead Susan.
Thank you Joel.
I'm wondering have you won.
Hey into fiscal 'twenty 'twenty four we remain focused in the Artemis, they're all businesses remain on track to support new enable value creation, it's alcohol lucky because we continue to anticipate a return to an above average industry growth rates by the end of the fiscal year.
As the semiconductor industry you'd be tethered to a more normal growth patterns through a physical opinion plentiful.
I mean, they leadership position across coal market and will continue to aggressively drive.
Key strategic initiative, whereby additional path to long term value creation and our profitability.
Yeah.
Specifically these strategic initiatives are centered around three key business is doing well.
Its packaging and otherwise display.
We'll pull that additional detail to each of these points shortly.
But first I would like to summarize all of our financial performance.
Market observation and the shifts and update on the advanced displays business.
For the December quarter, we did about $171.2 million or revenue above our guidance midpoint with GAAP net income of $9.3 million and non-GAAP earnings per share of Citycenter.
Well that market standpoint, the fiscal first quarter. It was a night with our seasonal expectation based on external market forecast customer feedback and the discussions.
We continue to anticipate improvement over the course of 'twenty 'twenty four.
With a more significant demand in the second half of 'twenty 'twenty four.
We anticipate overall industrial conditions will remain favorable going into 'twenty as we expand our market positions.
Over recent months, yes.
We have made significant progress with all of the bus is pants business and are actively competing for several opportunity in apparel.
We continue to target key opportunities across our served end market. Once you require high precision dispense capability.
As a world class in Washington, Consoled capability.
He is known for.
Initial customer feedback has been strong and we are increasingly confident we will leverage and grow this opportunity over the coming years.
Turning to our end market view, we continue to see size, Oh brother to get caught improvements.
And also anticipate gradual recovery through the physical yes.
She said no dynamic impacted our December quarter results.
This.
This effect was most pronounced we didn't you know semiconductor yeah, we experience softer demand due to seasonal pattern, which is that the ball bonding business and several policy and because of that.
Conducting a market condition would you in fact, oh, which bonding businesses.
The policy, although the market is going through a period of inventory and the capacity digestion, causing a near term headwind in which bonding we continue to expect trend in policies.
Improve over a long time and the support of all which bonding business.
Football game, we anticipate demand environment to improve as the semiconductor unit growth will be tested in the physical plentiful.
Next you.
You mean relatively soft.
What is the demand primarily attributable to a general lighting, we remain focused on the existing qualification engagements for both alumina and the projects W and I wish you and update you both.
But then he shortly.
The automotive and the industrial.
And the industrial sector has impacted the near term to be met or Oh, which solution. Despite the well known softness in automotive in near term. We continue to anticipate specific opportunity for goodness in battery Assembly space later this year.
Specific battery opportunity is unique who came to us and it will help mitigate some of the existing demand softness affecting the broader automotive market.
So I'll, let him answer.
I love the content and the complexity of weird in vehicle, thereby we remain strategically at night with the automotive trends.
We will continue to provide leading cross equipment to support the transition to more advice and insights into what you call, including efficient policy the body and the storage application.
Finally, we didn't memory, we have seen the main input significantly or do you think the end solution across multiple customers.
Memory revenue in the first fiscal quarter exceeded revenue for the prior fiscal year.
Yes, Don will then provide further confidence that we are past trough in the memory market and we continue to actively pursue near and long term strategies to expand share in high volume in the leading edge DRAM application.
You need the December quarter, we have also a book revenue for multiple system capable of supporting political saying Oh obligation.
Production in the region.
I'm very positive on the long term potential of these small piggy approach.
Okay.
We currently anticipate overall end market demand will return to a more normalized level by the end of fiscal 'twenty 'twenty, four and continue well into fiscal 'twenty 75.
As we prevail for the next period of demand recovery. We are extremely focused to ask you can as the opportunity, which will further diversify the living room.
They're lucky girls and the sustained the body enhanced earnings potential over the long term.
I would like to provide a brief update on our unique position within the Webmd I thought that was.
And obviously, it's a great opportunity.
The semiconductor market continues to evolve.
And we are well positioned to eight more industry value.
In a phone or power efficiency performance package labeled transistor density and the cost.
These technology evolution, we didn't assembly is demanding more feature rich and the capable assembly solution, which we are well prepared to deliver.
These semiconductor opportunity, we'll continue to see Oh, ballgame and advanced packaging business over a long time.
We didn't build them again, we continue to deliver a new future rich solution, which will further extend our leadership position.
Russia again, and also help enhance and sustain long term gross margin.
All the initial two system Paul come in the poll next well.
<unk> recently released and I have been aware of the chute by customers. We are ramping the production of these initial system during March quarters.
Yeah.
It's expanded all all previous call the ball bonding process remain the most dominant in a cost effective solution for both high volume single and multi die packages as a pioneer in both of them was that the case.
Of industry leadership, we continue to maintain a dominant market share in these key growth areas.
Additionally, we continue to see many consumer mobile and Iot applications in high volume market seeking new packaging approach.
These new approaches.
Well by greater label off tranches of density and the package label and the pull that came to us with opportunities to add additional value.
We didnt ball bonding this technologically driven change.
More comprehensive open and Ohio, while column, but package.
Our market leadership, and the persistent development or provide a unique position.
Pollution to track industry was able to change.
Currently we see new marquee emerging in Sweden, and also we didn't hire putting you'll stick by applications, such as that but you're going to say at all.
We can provide specific long term and that unique opportunity for the company.
And usually what the applications are being deployed for both long and the short distance wireless communication.
It's been we've increased in the wireless communication become more ingrained in consumer electronics, we expect ongoing growth in this new wire bonding market.
This shouldn't approach was you brought in a few years ago, and it's now being rather but also an idea and that is utilized in high volume production.
We expect these European neat to continue supporting near term recovery and the long term growth in our ball bonding market.
Jim that's what we're shooting.
A few years ago.
There has recently been significant interest from customers for all of a bunch of people, saying, Oh, Oh, we if all solution.
The opportunity is anticipated to further extend old, namely market access over the course of the fiscal of 'twenty 'twenty four.
Operator: Greetings and welcome to the Kula Kinsalpha 2024 first quarter results conference call. At this time, all participants are in a listen only mode.
The next few years, we anticipate similar vertical Y approach will provide our customers.
With you who through silicon via or T. S. B.
Operator: A brief question and answer session will follow the formal presentation. If anyone should require assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joe Elgindy, Senior Director, Investment Relations. Thank you.
For high volume C D applications beyond the initial adoption within the memory market.
The value of V F O step for its ability to create a complex three D starches, which pay by phone factor.
All the efficiency improvement and a significant cost benefit overall advanced packaging solution.
Joseph Elgindy: Thank you. Welcome, everyone, to QLIC's Office Fiscal First Quarter 2024 Conference. Fusen Chen, President and Chief Executive Officer, and Lester Wong, Chief Financial Officer, are also joining us 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 measures.
One customer has reported a 27% improvement in the phone and a 5% improvement in power efficiency alone with allowing the Hyatt I O in the beta.
Yeah.
You mean, the December quarter, we book at all it's just some revenue of just over half a million dollars to a first mortgage customer.
Joseph Elgindy: Gap to non-gap reconciliation tables are included within our latest earnings release and earnings presentation, both of which are available at investor.kns.com along with prepared remarks. Thanks for joining us on this call. In addition to historical statements, today's remarks will contain statements relating to future events and or future results. These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that may cause our actual results and financial condition to differ materially from the statements made today. For a complete discussion of the risks associated with Culicansopha that could affect our future results and financial condition, please refer to our recent and upcoming SEC filings, specifically our most recently filed Form 10-K and the 8-K filed yesterday With that said, I would now like to turn the call over to Fusen Chen for the business overview. Please go ahead, Fusen.
It would be playing into your production approach.
We are currently engaged with the three D memory customers, who are seeking cost effective three D packaging approaches.
Initially, we anticipate either application such as a lower part D. D O L. P. D D ops through more in low volume production in Canada, Yeah, pardon me plenty of false and the higher volume production and probably 25.
Based on initial customer feedback there is also strong interest and the potential that we are full can be deployed for high bandwidth memory applications in the next few years.
CRD V F O and the overall growth of high volume marquee type application.
Of course, right technology need and our competitive position within the sizable bolt on the market.
We believe we are best positioned to leverage this new market opportunity long term.
Fusen Chen: Thank you, Joe. Good morning, everyone. Looking ahead into fiscal 2024, we remain focused and optimistic. Our businesses remain on track to support new levels of value creation. As our cold market recovers, we continue to anticipate a return to an above-average industry growth rate by the end of the fiscal year. As the semiconductor industry returns to a more normal growth pattern through fiscal 2024, we remain in a dominant leadership position across the core market and will continue to aggressively drive key strategic initiatives, providing additional paths to long-term value creation and profitability. Specifically, these strategic initiatives are centered around three key businesses: broadbanding, advanced packaging, and advanced display. I will provide additional details on each of these points shortly. But first, I would like to summarize our financial performance and market observations and the shares and update on the advanced expense bill. For the December quarter, we delivered $171.2 million of revenue, just above our guidance midpoint, with a gap net income of $9.3 million and non-gap earnings per share of $0.30. From a market standpoint, the fiscal first quarter was aligned with seasonal expectations.
Turning to advanced packaging, we continue to actively support several customer engagement and payroll and anticipate additional order flow or is that idea and the foundry customer as we complete evaluation and the qualifications.
In addition to our income and policing in high volume semiconductor market.
This is Peggy if a law to pick shifts in new high it goes to market would be indeed, a geologic mobility and our co packaged optics.
We are increasingly confident on the longevity and the market potential for <unk> portfolio and that you expect to extend that technology, whether it be on the previously target 10, My Palm Beach.
You shouldn't be low this time nightclub space, you'll walk further unlocking the flexibility and the long term potential of our TTP solution.
Increasingly anticipate he will be an essential component with leading edge assemblies for many years to come.
In addition to find another pizza capability, which extended the lease and the transistor density.
Our TCE solution also provides direct copper to copper in the come there.
Better copper to copper connections are best in cost due to lower leases and the high performers.
Oh frictionless DCD solution is well positioned to enable these industrial breakthrough because high volume and the leading H heterogeneous market.
Fusen Chen: Based on external market forecasts, customer feedback, and discussion, we continue to anticipate improvement over the course of 2024, with more significant demand in the second half of 2024. We anticipate overall industry conditions will remain favorable going into 2025 as we expand our market position.
We are confident of our significant technology lead in.
Similar competition, which we intend to extend for that.
Even if we're also seeing is the right thing and we are long in silver qualification, we didn't all set again in our foundry customers in peril.
Over the coming weeks, we intend to ship several more qualification systems. So plenty in front of it X D. C. D. I go forward to shut in new products and the new customer milestone over the next few quarters as we drive broader market adoption.
Fusen Chen: We have made significant progress with our advanced dispense business and are actively competing for several opportunities in parallel. We continue to target key opportunities across our self-aimed market, which require high precision dispense capability combined with world-class motion control capability KNS is known for. Initial customer feedback has been strong, and we are increasingly confident we will leverage and grow this opportunity over the coming years. Pending the end market review, we continue to see signs of broader technical improvement and also anticipate gradual recovery through the physical years. Seasonal dynamics will impact our December quarter results as expected.
We are disappointed we continue to expand access into a brother named media end up Michael L D market.
Oh growing portfolio of supposedly evolving display market siblings small format I performance.
Well that is weight as well as a large format I bought it at and the recognition of it this way.
We expect to secure a quantification wind or looming exit later this year doing this to provide a dedicated mainly Italy, which will be increasingly a nation as meaning it would be you guys have continued to shrink.
Fusen Chen: This effect was most pronounced within General Semiconductor. Here we experienced software demand due to seasonal patterns, which affects the ball bonding business, and the software power semiconductor market condition, which affects our weight bonding business. The power semiconductor market is going through a period of inventory and capacity digestion, causing a near-term headwind for wage bonding. However, we continue to expect trends in power semiconductors to improve over the long term and support growth of our wage bonding business. For broadbanding, we anticipate the demand environment to improve as semiconductor unit growth returns in fiscal 2024. Next, LED demand remains relatively soft, with demand primarily attributable to general lighting.
And then he was a consummate in the 20th Shaw is has become clear that it would.
Technology is a significant performance in April for the LCD market.
Oh did they split.
Have improved over the past years, delivering a higher level of.
And the quality and the leveraging the large installed base of L. E D capacity.
As I said, it's reviews, we are confident the industry would you dedicate your high throughput solution such as one system.
All our key opportunity in disgrace project W.
And I am happy to be pulled out.
Reaching new milestones.
Back to ship additional capacity do you need a bunch of quarters and I recognize you really do need the upcoming June quarter.
Fusen Chen: We remain focused on the existing qualification engagement for both Luminex and Project W, and I will share an update on both opportunities shortly. We are Automotive and Industrial. Maykot and the industry factor have impacted the near-term demand for our wage solution.
Yeah.
As we walk so essentially qualify a previously ships system, we are beginning to ramp production in support of our customers and long term capacity plan.
All of our global R&D operation.
Our city and our supply chain team have been working tirelessly to support this major initiative and we look forward to sharing more information over the coming quarters.
Fusen Chen: Despite the well-known softness in the automotive near-term, we continue to anticipate specific opportunities for Kenneth in that reassembly space later this year. This specific battery opportunity is unique to KNS and will help mitigate some of the existing demand softness affecting the broader automotive market. Longer term, as semiconductor content and the complexity within vehicle advances, we remain strategically aligned with the automotive trend. We will continue to provide leading-class equipment to support the transition to more advanced and sustainable vehicles, including efficient power delivery and storage applications. Finally, within memory, we have seen demand improve significantly for our leading-end solution across multiple customers. Memory labeling in the first physical quarter exceeded labeling for the prior physical year.
These are women are very tight.
And the interesting time at the company.
Oh coal market recovers, we are again transitioning into a more optimized and the most diversified company.
We are very excited to this new milestone of course olive garden, okay. Okay.
Looking through physical plenty painful we continue to anticipate wage or unit demand recovery and also technology driven growth as our core market evolved and we've continued to extend our foothold in a new market.
Customer interest and the momentum across our emerging portfolio remains strong.
We look forward to reading a steady pace of new system.
Got you and also announcing a new customer in the technology when it's in the core business would return to a more normalized growth rate.
What did I say I will now turn the call over to Leslie who will discuss our financial performance and the outlook that's stuck.
Fusen Chen: This strong improvement provides further confidence that we are past 12 in the memory market, and we continue to actively pursue near and long-term strategies to expand shares in high volume and leading-edge digital applications. During the December quarter, we also booked revenue for multiple systems capable of supporting vertical fan-out applications in production, and we remain very positive on the long-term potential of this smart packaging approach. We currently anticipate overall end market demand will return to a more normalized level by the end of fiscal 2024 and continue well into fiscal 2025.
Thank you Susan My remarks today will refer to GAAP results unless noted well there continues to be headwinds across specific end markets related to the macro economic and industry conditions. It remains a very exciting time for the company.
Our core market has shown signs of improvement and we are reaching new milestones with key customer engagements, which provide new market access and enhance our long term financial potential.
During the December quarter, we generated $171 $2 million of revenue.
46, 7% gross margin and 30 <unk> of non-GAAP EPS.
Fusen Chen: As we prepare for the next period of demand recovery, we are extremely focused on executing T10 as an opportunity, which will further diversify revenue, expand market growth, and sustainably enhance earning potential over the long term. I would like to provide a brief update on our unique position within broadbanding, advanced packaging, and advanced display opportunities. The semiconductor assembly market continues to evolve, and we are well-positioned to add more industry value in the form of power efficiency, performance, package label, transistor density, and cost.
Gross margin as well.
I'm, a expectations and anticipate it to improve with volume and new product launches.
non-GAAP operating expenses also met expectations at $69 8 million.
Finally tax came in just ahead of expectation at just below our longer term, 20% effective tax rate.
Turning to the balance sheet working capital days increased from 448 to 525 days in the December quarter.
Over this period, the absolute value of working capital decreased slightly.
Fusen Chen: This technology-driven evolution within assembly is demanding more future-rich and capable assembly solutions, which we are well prepared to deliver. This same kind of opportunity will continue to benefit our broadband and advanced packaging business over the long term. We continue to deliver new, future-rich solutions, which will further extend our leadership position, thrive, share, gain, and also help enhance and sustain long-term growth models. Our initial two systems, Polcom and Polnex, were recently released and have been well-received by customers.
Our repurchase program remained opportunistic and we have increased our repurchase activity sequentially to $26 $8 million during the December quarter, nearly three times the valley repurchase in the prior quarter.
Additionally, we recently raised our quarterly dividend to <unk> 20 per share.
This has allowed us to maintain an industry, leading dividend yield nearly 1.6% as our most recent payable date on January 9th.
Looking out to fiscal 'twenty 'twenty four we continue to invest in the future and are anticipating capital expenditures to be $23 million to $27 million.
Fusen Chen: We are ramping the production of this initial system during the March quarter. As explained on our previous call, the ball-bounding process remains the most dominant and cost-effective solution for both high-volume single and multi-die packages, as a pioneer in law bounding with a big case of industry leadership. We continue to maintain a dominant market share in these key growth areas. Additionally, we continue to see many consumer, mobile, and IoT-based applications in high-volume markets seeking new packaging approaches. Use a new approach, provide a greater level of transistor density at the package level, and provide candidates with the opportunity to add additional value. Within Mobundi, these technology-driven changes are demanding more complex looping and higher wire-current perpendicularity.
These investments will support growth over the coming years and will be deployed to enhance and expand operations facilities R&D and corporate systems.
Considering the ongoing softness in automotive and power semiconductor, which is affecting near term demand for our wedge Bonder solutions, we anticipate revenue of approximately $170 million plus or minus $10 million with gross margins of 47% in the March quarter.
non-GAAP operating expenses are anticipated to increase slightly to $72 5 million plus or minus 2%.
We remain focused on controlling and limiting noncritical activities, although continued to ramp head count where necessary to support our growing set of customer engagements.
non-GAAP net income for the March quarter is expected to be approximately $14 million with non-GAAP earnings per diluted share of approximately 25 cents.
Fusen Chen: Our market leadership and persistent development efforts provide a unique position to track industry labor trends. Currently, we see a new market emerging in shielding and also wielding high-potential stack-type applications, such as vertical fan-out, which are providing specific, long-term, and unique opportunities for the company. New shielding applications are being deployed for both long and short-distance wireless communication.
In closing over the long history of the company, we have never enjoyed as many different market and growth opportunities. The core semiconductor assembly market continues to evolve and is adding more value to the industry.
New levels of capabilities, optimizing our high volume business, which you'll see demand recovery over the coming quarters.
At this core market recovery is underway, we are taking share and expanding our position in leading edge logic applications memory, automotive transitions and high potential display opportunities, which will add diversification and meaningfully enhance free cash flow generation over the coming years final.
Fusen Chen: As bandwidth increases and wireless communication becomes more ingrained in consumer electronics, we expect ongoing growth in this new wire-bounding market. This shielding approach was in development a few years ago and has now been broadly adopted by OSET and IDM and is utilized in high volume production. We expect this shielding need to continue supporting near-term recovery and long-term growth in the bond market.
We are starting to see material opportunities in advanced dispense and continue to adopt and active a cautious posture and exploring future M&A opportunities.
Over the coming quarters, we look forward to sharing new milestones on our progress across this broad set of opportunities.
This concludes our prepared comments operator, please open the call for questions.
Fusen Chen: There has recently been significant interest from customers for our vertical fan out, or VFO, solution. This new opportunity is anticipated to further expand our memory market access over the course of the fiscal 2024. Over the next few years, we anticipate a similar vertical wire approach will provide a cost-effective alternative to through silicon via OTSB for high volume 3D applications beyond initial adoption within the memory market.
Thank you the floor is now open for questions. If you would like to ask a question. Please press star one on your telephone keypad at this time.
Confirmation tone will indicate your line is in the question queue you.
You May press star two if he 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.
Once again Thats Star why don't you Register a question at this time.
Today's first question is coming from Krish Shankar of T. D. Cowen. Please go ahead.
Yeah, Hi, Thanks for taking my question I had a couple of them number one oh food.
Fusen Chen: The value of VFO stems from its ability to create complex 3D structures which provide form factor, power efficiency improvement, and a significant cost-benefit over alternative advanced packaging solutions. One customer has reported a 27% improvement in the form factor and a 5% improvement in power efficiency alone, with VFO allowing higher I-O count and better heat dissipation. In the December quarter, we booked VFO system revenue of just over half a million dollars for our first moving customer as they refine their production approach. We are currently engaged with three leading memory customers who are seeking cost-effective 3D packaging solutions. Initially, we anticipate D-RAN applications such as low-power DDR, LPDDR, to move into low-volume production in calendar year 2024 and higher-volume production in 2025.
Susan I think last quarter, you said, you expected kind of like a sharp recovery in the fiscal second half of your Oh Who's wondering is this true or is it more of a calendar second half recovery, which is the fiscal second half.
Okay. So.
Krish I with cities I think all Q2.
Extra yeah.
We can use in the auto industry and the Polysomy actually impact our Q2 outlook.
And also a Q2 is a show with a quarter like we had with Chinese new year.
So actually Q2 was a I'm going to Oh, originally expected as you know it wasn't Noah and we see some pushout.
But we still actually are still baby feel good about the second half.
We still believe the industrial recovery actually you will Nick Oh boy bundled recovery, mostly because you can.
Fusen Chen: Based on initial customer feedback, there is also strong interest and potential that VFO can be deployed for higher bandwidth memory applications in the next few years. Shielding, VFO, and the overall growth of high-volume multi-tier applications have increased the growth rate, technology need, and our competitive position within the flexible voluntary market. We believe we are best positioned to leverage this new market opportunity long-term. Turning to advanced packaging, we continue to actively support several customers' engagement in parallel and anticipate additional orders from OSAT, IDM, and Foundry customers as we complete key evaluations and qualifications, in addition to our incumbent position in the high-volume semiconductor market. Our advanced packaging effort allows us to take shares in new high-growth markets, including digital age logic, mobility, and core package uptake.
In addition, I think we have a specific okay in this.
Gross wins.
Which are second half can do better than the first half.
Great. We if all I mentioned in the script a battery some customers are battery Assembly and also T. C D.
You put out Q2 in the second half I just mentioned I think it's unlikely.
The push out in Q2.
10, 40 actually you know in a fiscal year over 2024.
But so some of them probably will go beyond plentiful you know.
But we still feel very good that we will be able to achieve a you know a $800 million. So to answer. Your question is yes, we still feel good about the second half, but we do have a push you all.
From a Q2 you know are these are Q2.
Push it all my actually suffer you know you know suffer compute you original expectation.
Fusen Chen: We are increasingly confident in the longevity and the market potential for our TCB portfolio and expect to extend the technology well beyond the previously targeted 10 micron pitch. Using below this 10-microns ratio will further unlock the flexibility and the long-term potential of our TCV solution. We increasingly anticipate TCV will be an essential component for leading edge assembly for many years to come. In addition to final pitch capability, which extends the width and the transistor density, Our TCE solution also provides direct copper-to-copper interconnect. Direct copper-to-copper connections are best in class due to low resistance and high performance.
Actually I think we still quite positive to move forward.
Ah I answer your questions.
Yeah got it. Thank you for that Susan and then two other quick questions. One is is the timeframe until around April to figure it out any kind of P. C D qualifications in Taiwan.
Yeah.
Hum.
Okay. So actually interests are in our Tisha b, obviously, the folks at T should be actually has increased significantly.
We currently have multiple engagement Ah, we saw or is the idea and the foundry, including a top two potential customers and even some company we have multiple engagement projects.
So I believe you know where do you feel pretty good quantification all qualification.
Fusen Chen: Our flux-less TCE solution is well-produced to enable this industrial breakthrough across high volumes and leading-edge heterogeneous markets. We are confident of our significant technology lead in thermal compression, which we intend to extend further, given our solution is writing, and we are running several qualifications. William Osset, IBM, and Foundry customers in parallel. Over the coming weeks, we intend to ship several more quantification systems supporting flux-based DCV. I look forward to sharing new products and the new customer milestone over the next few quarters as we drive broader market adoption. Finally, within Advanced Display, we continue to expand access into the broadening mini and micro-AOD market. Our growing portfolio supports the evolving display market, serving small format, high performance, mobile display, as well as large format, high volume, and direct image display. We expect to secure a qualification win for Luminex later this year. Luminex provides a dedicated mini-LED, which will be increasingly necessary as mini-LED devices continue to proliferate. At this year's Consumer Electronics Show, it has become clear that mini-LED technology is a significant performance enabler for the LCD market. Me, I'll be displayed, too!
For me well and what you expect on qualification win you know sue on the 20th plentiful.
Particularly I think are in a foundry process.
These actually are the engagement project.
But as you know a new technology.
We believe is what ticket additional quarter or maybe a little bit more to final right you know everything but actually we do feel good about the progress.
And the overall momentum of our tissue.
Got it thanks for the food just a quick one for Les good can you just help us understand what was the backlog exiting the quarter and how much was China as a person who can screens.
Well I think the backlog has been coming down as we've talked about before from the ramp it's closer now to the normalized AR, which is close to our our lead times are as far as China, China constitute a close to 60% of our revenues in Q1.
A 46% of it was China headquartered Ah Ah customers. So China. It continues to be a important part of our business and we do see some strength in China right now.
Got it. Thank you very much that's it thanks Susan.
Thank you.
Thank you. The next question is coming from Dave Duley of Steelhead Securities. Please go ahead.
Dave Please make sure your phone is not on mute.
Fusen Chen: have improved over the past years, delivering a higher level of brightness and quality and leveraging the large installed base of LTE-D capacitors. As disasters reduce, we are confident the industry will require a dedicated, high-risk throughput solution such as our Luminex. All other key opportunities in display are Project W, and I am happy to report that we are reaching new milestones, expect to ship additional capacity during the March quarters, and recognize revenue during the upcoming June quarters. As we work successfully to qualify a previously shipped system, we are beginning to ramp production in support of our customers' long-term capacity plans. Our global R&D facility and the supply chain team have been working tirelessly to support this major initiative, and we look forward to sharing more information over the coming quarters. It remains a very dynamic and interesting time at the company.
Thank you.
Hum.
Good evening guys I was wondering if you could talk about what are some of the signs that you might be seeing now that lead you to believe that your core business is growing is in recovery mode is it higher utilization rates or you know customers coming in and asking for capacity.
Just talk about what signs you're early signs youre seeing our four core business recovery.
So.
If I.
Actually we.
We see actually.
We have a frequent engagement with all customers.
But from an industrial point of view memory excellent recovery associated with the memory actually Ah is a phone you know a lot of people are talking about.
IPhone and a P C and D D bodies.
Spot and you know Vicki coalition I think they still probably can they come in later.
Although I think at least the industry you know are actually.
Fusen Chen: As our cold market recovers, we are again transitioning into a more optimized and diversified company. We are very excited to reach new milestones across our growing market. Looking through fiscal 2024, we continue to anticipate gradual unit demand recovery and also technology-driven growth as our core market evolves and we continue to extend our foothold in the new market. Customer interest and the momentum across our emerging portfolio remain strong.
We do believe our new capacity probably is needed.
Some customer what's the one phase right now.
They point to second half.
You know I think we will have more opportunity, particularly you know both on the <unk>.
And we also have some project we'd be default will be more realized in the second half. So that's the only comment yeah. So you're right in terms of utilization I mean utilization obviously as always is mixed around the different end markets as well as regions, but China, which I mentioned before.
Lester A. Wong: We look forward to releasing a steady pace of new systems, new features, and also announcing new customers and technology wins as the core business returns to a more normalized growth rate. With that said, I will now turn the call over to Lester, who will discuss our financial performance and outlook.
It's over 80% is actually closer to the mid eighties, now and we're seeing some real strength there. The other end the end market that is also doing very very well and also this is also related to China is memory memory for the first time the last last two quarters of over 80% are this hasn't happened since <unk>.
Lester A. Wong: Thank you, Fusen. My remarks today will refer to GAAP results unless noted. While there continues to be headwinds across specific end markets related to macroeconomic and industry conditions, it remains a very exciting time for the company. Our core market has shown signs of improvement, and we are reaching new milestones with key customer engagements that provide new market access and enhance our long-term financial potential. During the December quarter, we generated $171.2 million of revenue, 46.7% gross margin, and $0.30 of non-GAAP EPS. Growth margins were aligned with expectations and are anticipated to improve with volume and new product launches. Non-GAAP operating expenses also met expectations at $69.8 million.
22, so we see a real real buildup in AR utilization in memory, especially in China. So we feel that that without helped drive our ball bonder business in.
In a in the quarter and in the second half.
Okay and then.
Could you just talk about what your expectations are for unit volume growth for 2020 for overall industry unit volume growth and then maybe characterize what you think it would be in the first half in the second half is it kind of sounds like.
First half unit volume growth is flattish with the acceleration in the back half, but I'd just like to.
To hear what you guys think about first half and second half.
So I.
I think we.
We have a market forecast a high single digit.
Although as you know I think the auto right now.
Actually yes, or it could be a week and policy and you also have a somewhat inventory.
Lester A. Wong: Finally, tax came in just ahead of expectation at just below our longer term 20% effective tax rate. Turning to the balance sheet, working capital dates increased from 448 to 525 days in the December quarter. Over this period, the absolute value of working capital decreased slightly. However, our repurchase program remained opportunistic, and we increased our repurchase activity sequentially to $26.8 million during the December quarter, nearly three times the value repurchased in the prior quarter. Additionally, we recently raised our quarterly dividend to $0.20 per share. This has allowed us to maintain an industry-leading dividend yield, nearly 1.6% as of our most recent payable date on January 9th. Looking out through fiscal 2024, we continue to invest in the future and are anticipating capital expenditures of $23 to $27 million.
So with this too but you look at it.
General semi content. So I think that's your posture.
So actually first half wasn't weaker compared.
Or you can go.
Thinking so steel industry I think from all customers and also industry forecast.
Second half will be.
Well you know.
Although I can't forecast in the high you know like a single digits, we still quite positive I think 678% I think it should still be achieved including our second half.
So one way to think about that is the growth rate in the first half is probably under 6% to 8% and it's probably over 6% to 8% in the back half.
Yeah, I would say that it's probably close to flat in the first half and then I think and Susan said high single digits in the second half.
Lester A. Wong: These investments will support growth over the coming years and will be deployed to enhance and expand operations, facilities, R&D, and corporate services. Considering the ongoing softness in the automotive and power semiconductor markets, which is affecting near-term demand for our wedge bonder solutions, we anticipate revenue of approximately $170 million, plus or minus $10 million, with gross margins of 47% in the March quarter. Non-GAAP operating expenses are anticipated to increase slightly to $72.5 million, plus or minus 2%. We remain focused on controlling and limiting non-critical activities, although we continue to ramp headcount where necessary to support our growing set of customer engagements. Non-GAAP net income for the March quarter is expected to be approximately $14 million, with non-GAAP earnings per diluted share of approximately $0.25.
Okay and then.
You talked a lot about the defense opportunity could you just highlight.
What sort of revenue opportunity you might have there and dispense in 'twenty 'twenty four and 'twenty 25. Thank you.
Oh, Okay. So actually we're quite excited with our equities in the dispense a unit.
Actually this is a huge market and with a Tam you know all the time is about $2 billion.
And actually have adjacency to our business the overlap, including like coal like a bolt on the display and the S. M. Pete's.
So almost like a it would be Oh boy in the boiler company I think they have a need for a defense so what make us excited.
You know the technology is pretty good I said, we are entering a lot of coal Michael dispensing.
It's really a need to have appreciation dispense and the appreciation of emotion.
Operator: In closing, over the long history of the company, we have never enjoyed as many different market and growth opportunities. The core semiconductor assembly market continues to evolve and is adding more value to the industry. New levels of capabilities are optimizing our high volume business, which will see demand recovery over the coming quarter. As this core market recovery is underway, we are taking share and expanding our position in leading-edge large applications, memory, automotive transitions, and high potential display opportunities, which will add diversification and meaningfully enhance free cash flow generation over the coming years. Finally, we are starting to see material opportunities in advanced suspense and continue to adopt an active but cautious posture in exploring future M&A opportunities. In the coming quarters, we look forward to sharing new milestones on our progress across this broad set of opportunities.
And a lot of company expenses become a bottleneck.
So we are engaging with our more than 10 customer some of them are quite skinny pier one.
And all of the feedback are pretty good.
Quite strong so I'll go actually are in a quantify we we hope we hope you will be able to achieve.
Achieved about $25 million to $30 million and 26 of course that would be faster growth, but maybe a target of about $50 million.
Of course.
You know we.
Actually talking to a customer and this is the area I think I need to have a breakthrough micro dispensing with a capability of our precision control over their pet dispense and the motion is really needed in this industry. So we are quite excited.
Thank you.
Thank you. The next question is coming from Charles She asked Needham and company. Please go ahead.
Operator: This concludes our prepared comments. Operator, please open the call for questions. Thank you. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.
Hey, good evening.
I have a couple of questions. Firstly I wanted to it got a little bit more color on how the business up a wedge bonding equipment has been trending.
Thank God, you probably talk about put signs of moderation for awhile, but it does seem like that.
Krish Sankar: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Once again, that's star one to register a question at this time. Today's first question is coming from Krish Sankar of TD Cowen. Please go ahead. Hi, thanks for taking my question. I had a couple of them.
So the softness that's a little bit about that.
I mean about I mean beyond what you have stumbled in the past.
So my question is how.
How much weaker would you be expecting in terms of the wedge bonding equipment business, yeah, but the ball bonding side about looks like about some signs of recovering the largest OS at those sites I guess increasingly our capex. This year based on what they've said last night.
Fusen Chen: Number one, Fusen, I think last quarter you said you expected kind of a sharp recovery in the fiscal second half of your year. I was wondering, is this true or is it more a calendar second half recovery versus the fiscal second? Okay, so, uh... Chris, I will say this. I think I'll cue to you, actually weakness in the auto industry and the power economy actually impact our Q2 outlook, and also Q2 is a shorter quarter like we have with Chinese New Year. So actually, Q2 was, compared to our original expectation, was lower, and we see some push-up. But we still actually still really feel good about the second half.
Much like our ball bonding requirements that offsets that that wedge you found him to come out with most of those on the call. It will be great between the puts and takes up.
The two largest product categories. Thank you.
So hi, Charles we do see as Susan mentioned in.
Is there much that's why I said, we we do see weakness in our wedge bonding, particularly driven by automotive.
So I think it has been trending down for one or two quarters, but we think for Q2, it's gonna be a more significant downward.
But hopefully it will recover near the latter part of the fiscal year.
Fusen Chen: We still believe the industry recovery actually will make our broadband recovery more significant, and In addition, I think we have specific awareness growth, which the second half can do better than the first half in a display, VFO, as I mentioned in the script, battery, some customers, battery assembly, and also TCB. So if you put Q2 and the second half I just mentioned together, I think it's unlikely the push out in Q2 can fully happen, you know, in fiscal year 2024, uh, but some of them probably will go beyond 24, you know. But we still feel very good that we will be able to achieve, you know, our 800 million dollars. So to answer your question, I think we still feel good about the second half. But we do have a push out from over Q2. You know, at least Q2 push out might actually suffer, you know, you know, suffer compared to, you know, original expectation.
So.
Actually I did mention though that we can use.
Not only our policy, which bombed out right.
So our industry. So the customer Oh toll expose yours I think they not only push your somewhat which bongo sort of push you. Also include you know balder in a public company because of our Oh to also have a ball bonder associated with that so I E.
Let's say I won't say all of push all actually Oh, which upon the 40 score this.
Yeah.
Got it about it so what's the I know eruption.
Irrationally.
Do you expect or bundling.
I mean other than what you said about a push out on the auto industrial stopped for some on the bulb on those but in general.
What kind of expectation that the profile.
Our ball bonding.
Revenue throughout this year and it does sound like it based on your commentary about a unit growth you were expecting properly.
A more gradual and modest.
Increase our ball bonding revenue for the first.
Fusen Chen: But actually, I think we're still quite positive about moving forward. I hope I've answered your question. Yeah, I got it. Thank you for that, Fusen.
Three quarters of this fiscal year, maybe a little bit of updating that September is that the right way to think about it.
Yeah.
Fusen Chen: And then there are two other quick questions. One is, is the time frame still around April to figure out any kind of PCB qualifications in Taiwan? Okay, so actually, interest in our TCB, particularly the flux TCB, has actually increased significantly. We currently have multiple engagements with OSAID, IDM, and Foundry, including the top two potential triplet customers, and even some companies, we have multiple engagement projects. So I believe, you know, we feel pretty good about the qualification, all the qualifiers are performing well, and we expect our qualification win, you know, throughout 2024.
So I think as Susan said Q2 ball Bonder is also a little bit weaker than we expected right.
But we think actually Q3 was definitely start seeing recovery from conversations we've had with our customers as well as seeing what I mentioned earlier about utilization rate, increasing particularly in China. So we think Q3 will definitely pick up the ball Bonder and definitely Q4 would be a much stronger so I wouldn't.
Say the first three quarters would be we'd sort of barbell on I would say Q3 and Q4 for ball Bonder I think we think the recovery will start in Q3, and then really pick up pace latter part of Q3 into Q4.
Yeah.
Got it thanks last one maybe I wanted to ask one last question.
So you didn't provide a new update on project W.
Fusen Chen: Particularly, I think in our foundry process. These are actually the engagement projects are advanced, you know, new technology. We believe it will take an additional quarter or maybe a little bit more to finalize everything, but we do feel good about the progress and the overall momentum of our team. Just a quick one for Lester, can you help us understand what the backlog was exiting the quarter and how much was China as opposed to the U.S.? Well, I think the backlog has been coming down, as we've talked about before, from the ramp. It's closer now to the normalized rate, which is close to our lead times. As far as China is concerned, China constituted close to 60% of our revenues in Q1. 46% of it was China headquartered customers.
I know checkpoint, but without with the management team.
You still expect volume production to be employing you quantified.
That work should be maximized.
Yeah.
I'm not asking about the timing of the next milestone, but what exactly should be the next milestone. Thank you.
So Charles I think for project W. That the next milestone I think as Suzanne mentioned, we shipped six shipped one system Michelle any more capacity.
For the customer I think the next milestone Paul they would be the qualification.
Oh, yeah. The initial mass production tools, which have been shipped as far as why do we believe mass production will kick in in 2025 allowed that to deal with the customer right and the readiness of the entire supply chain for project W. So we still see our I mean for 'twenty four 'twenty five.
Preproduction tools going in and we're getting ready for the ramp which could be the latter part of 'twenty five 'twenty six but again, a big part of it depends on the.
Lester A. Wong: So China continues to be an important part of our business, and we do see some strength in China right now. Thank you very much, Lester.
The customers' readiness.
Fusen Chen: Thanks, Susan. Thank you. The next question is coming from Dave Duley of Steelhead Securities. Please go ahead. Dave, please make sure your phone's not on mute.
Yes.
Yeah.
Thank you once again that is star one if he would like to register a question at this time.
Next question is coming from Craig Ellis of B Riley Securities. Please go ahead.
Operator: Thank you. Um, Good evening, guys. I was wondering if you could talk about what are some of the signs that you might be seeing now that lead you to believe that your core business is in recovery mode? Is it higher utilization rates? or customers coming in asking for capacity? Talk about what the early signs or early symptoms are. Corbett.
Yeah. Thanks for taking the question and good evening guys. So I wanted to just go back to some of the earlier comments and try and stitched together what are what we're saying about fiscal 'twenty poor. So fusion I think early on you said that you think 800 million in revenues as possible.
And it seems like with with your traction and dispense a 25 to 30 million.
That's going to drive about 60% of the incremental year on year growth. So oh, so does that mean that the balance of the growth is is from ball bonder wedge bonder or do we have something hitting with our advanced display and T. C. B Fisher.
Fusen Chen: So, uh... If I actually, we actually, we see actually, you know, we have frequent engagement with our customers. But from an industry point of view, memory actually is a recovery, right? Associated with memory is a phone.
No.
The extra day I make a comment I think quantify we expect.
Spin is probably a really momentum.
Fusen Chen: You know, a lot of people are talking about the AI phone and the PC. We believe this is a bright spot. And, you know, the iteration; I think Lester can make a comment later. But I think this industry, actually, we do believe a new capacity is probably needed. Some customers want to own phones, but they point to the second half, you know, probably, you know, I think we'll have more opportunity, particularly in our ball boundary. And we also have some projects we believe will be more realized in the second half. So, Lester, do you want to comment?
Because these.
Plentiful we have a lot of engagement was obtained customer right. So early so I think patching is going to be a quantify which are 25 to city millions already so what we're looking for and what I mentioned in the second half I think got it.
In addition through our ball Bonder recovery actually even though the recovery it'll come get through a pick we even not a 40% of the peak volume yet so as you know Bob long the warhead a lot of runway to go.
Fishing too little bolt on with a recovery in the second half I think we also expect our many things we have a U F. O. We expect a disparate right and we have a you know a you know other areas to grow.
Lester A. Wong: Yeah. So, Dave, you're right in terms of utilization. I mean, utilization, obviously, as always, is mixed around different end markets as well as regions. But China, which I mentioned before, is over 80 percent. It's actually closer to the mid-80s now.
As I mentioned in my script.
Lester A. Wong: And we're seeing some real strength there. The other end markets are also doing very, very well. And also, this is also related to China, memory.
So I hope I am I correct it.
Okay that that helps us and thank you for the clarification there.
Lester A. Wong: Memory, for the first time, the last two quarters were over 80 percent. This hasn't happened since 2022, so we see a real build-up in utilization of memory, especially in China. So we feel that that would help drive our ball bond business in the quarter and in the second half. Okay, and then, um.., talk about what your expectations are for unit volume growth for 2024, overall industry unit volume growth, and then maybe characterize it would be in the first half and the second half. It kind of sounds like this.
And then I wanted to dig into another comment you mentioned that it's possible that you'll see some auto battery shipment.
Shipment acceleration later this year for I believe it was Reg and and I wanted to get a sense for what you thought the magnitude that that would be and how 'bout linear linearity played out in the back half of the year.
Yeah, So Craig I think.
Bang It too is it's not.
Huge but it is significant this is the first big buy we've had from a customer for quite a while I think as well as far as linearity concern I think we believe that it will be there'll be some in this quarter, but I'm, mostly it'll be in the second half of the year.
Fusen Chen: First half unit volume growth is flattered, and acceleration in the back half, but I've, We'd love to hear what you guys think about FIRSTAP. So I think that we... We have a market forecast, high signal digit. Well, as you know, I think the auto right now is actually a little bit weak, and poor semis also have some inventory.
Yeah, and then lastly, if I could sneak in one more certainly some encouraging signs in China memory.
The question is or for Korean memory, and U S memory companies, what's your expectation for when we get.
Fusen Chen: So with these two, but if you look at it, in general, semiconductors, I think are still positive, uh, actually, first half was a weaker uh compared to our original thinking so. Steel industry, I think, from our customers, and also industry forecast, steel second half will be, a low, I think, forecast is high, you know, like a single digit. We are still quite positive.
Get back to 80% plus utilization rates that can benefit the business in those geographies with those customers. Thank you.
Well I think right now well when you say U S. Not many companies just not many companies also have operations in China as well right.
I think our utilization in those geographic areas is a game right now and nonspecific the memory, but it's probably in the mid 60 to 70, so I.
Fusen Chen: I think 6, 7, 8% should still be achieved, including the second half. So, one way to think about that is the growth rate in the first half is probably under 60, probably over 68% in the second. Yeah, I would say that. It's probably close to flat in the first half and then, as Fusen said, high single digits in the second.
I think all we hope that by again, there is a recovery in memory prices, we hope that by the second half that will start picking up.
Body.
Got it thanks, very much guys I'll hop back in the queue.
Yeah.
Thank you at this time I'd like to turn the floor back over to Mr. <unk> for closing comments.
Lester A. Wong: Okay, and then you talked a lot about the dispensers. Highlight. Thank you. Oh okay, so actually, we're quite excited about our ecological dispense unit. Actually, this is a huge market. And with time, you know, our time is about $2 billion, and we actually have adjacency to our business overlap, including a call like a broadband display and SMT. So almost like every Boeing company, I think they have a need for a dispenser.
Thank you Dana and thank you all for joining today's call as always please feel free to follow up directly with any additional questions. This concludes our today's call have a great day everyone.
Okay.
[music].
Fusen Chen: So what makes us excited is, you know, the technology is pretty good. I think we are entering a lot called micro dispensing, which really needs to have a precision dispenser and precision motion, and a lot of companies dispense become a bottleneck. So we are engaging with more than 10 customers, some of them are quite significant ones, and all our feedback is pretty good, and quite strong. So our goal, actually, in 2025, we hope we will be able to achieve about $25 to $30 million. And in 2026, of course, it will be even faster growth, maybe target about $15 million. Uh, of course, you know, we're actually talking to a lot of customers, and this is the area I think I need to have a breakthrough. Micro-dispensing with the capability of precision, you know, control of the dispense and the motion is really needed in this industry.
Operator: So we are quite excited. Thank you. Thank you. The next question is coming from Charles Shee of Needham & Company. Please go ahead. Good evening.
Charles Shee: I have a couple of questions. First, I want to get a little bit more color on how the business of the wedge funding equipment has been trending. I think you probably have talked about potential moderation for a while, but it does seem like the softness is a little bit beyond what you have expected in the past. So my question is, how much weaker would you be expecting in terms of the wedge-bounding equipment business? And on the ball-bounding side, it does look like there are some signs of recovery. The largest offset is increasingly CapEx this year based on what they said last night. How much would the ball-bounding equipment strength offset the wedge-bounding equipment weakness this year? And the color would be great between the puts and takes of your two largest product categories. Thank you. So, hi Charles.
Lester A. Wong: We do see, as Fusen mentioned in his remarks, that's what I said, we do see weakness in wedge bonding, particularly driven by automotive. So, I think it has been trending down for one or two quarters, but we think for Q2 it's going to be a more significant decline, but hopefully, it will recover near the latter part of the fiscal year. So Joe, actually you mentioned the weakness, not only a power semi-wage bonder, right? It's also an industry. So the customer with auto exposures, I think they not only push out some wage bonders.
Fusen Chen: So push out also includes, you know, bonder in a particular company because of the auto industry also have bonder associated with that, right? So I would say, I won't say all the push out actually are all wage bonder for this quarter. Got it, got it.
Charles Shee: So what's the, I know directionally, you do expect a ball bonding business. I mean, other than what you said about the, yeah, there is a push from the auto industrial sectors on the ball bonders. But in general, what kind of expectation, the profile of the ramp of the ball bonder revenue throughout this year? It does sound like, based on your commentary about the unit growth, you were expecting probably a more gradual and modest increase in ball bonding revenue for the first, three quarters of this fiscal year, maybe a little bit of an uptake in September. Is that the right way to think about it?
Lester A. Wong: So, I think, as Fusen said, Q2 ball bonder is also a little bit weaker than we expected, right? But we think actually Q3 would definitely start seeing recovery, you know, from conversations we've had with our customers, as well as seeing what I mentioned earlier about utilization rates increasing, particularly in China. So we think Q3 would definitely pick up for ball bonder, and definitely Q4 would be much stronger. So I wouldn't say the first three quarters would be weak for ball bonder.
Lester A. Wong: I would say Q3 and Q4 for ball bonder. I think we think the recovery would start in Q3 and then really pick up pace in the latter part of Q3 into Q4. Got it. Thanks, Lester.
Charles Shee: Maybe I want to ask one last question. You didn't provide a new update on Project W. I just want to check with the management team. Do you still expect high volume production to be in 2025? And what should be the next milestone? I'm not asking for the timing of the next milestone, but where exactly should the next milestone be.
Lester A. Wong: Thank you. So, Charles, I think for Project W, the next milestone, I think, as Fusen mentioned, we've shipped one system, and we're shipping more capacity for the customer. I think the next milestone probably would be the qualification of the initial pre-mass production tools, which have already been shipped.
Lester A. Wong: As far as whether we believe mass production will kick in 2025, a lot of that has to do with the customer, right? And the readiness of the entire supply chain for Project W. So, we still see, I mean, for 2024-2025, pre-production tools going in, and we're getting ready for the ramp, which could be the latter part of 2025-2026. But again, a big part of it depends on the customer's readiness. Thanks, y'all. Thank you. Once again, that is star number one.
Operator: If you would like to register a question at this time, the next question is coming from Craig Ellis of B Riley Securities. Please go ahead. Yeah, thanks for taking the question. And good evening, guys. So I wanted to just go back to some of the earlier comments and try and piece together what we're saying about fiscal 24. So, Fusen, I think early on, you said that $800 million in revenues is possible. And it seems like with your traction in dispense at $25 to $30 million, that's going to drive about 60% of your incremental year on your growth. So does that mean that the balance of the growth is from ball bonders or wedge bonders?
Craig A. Ellis: Or do we have something hitting with advanced display and TCB this year? So actually, I make a comment, I think 25, we expect dispense to probably have really good momentum, you know, because this year, 24, we had a lot of engagement with the 10 customers, right? So at least I think the projection is going to be 25, which is 25 to $30 million is what we're looking for.
Fusen Chen: And what I mentioned in the second half, I think, in addition to a bull-bound recovery, actually, even a recovery, you know, compared to a peak, we aren't even 40% of the peak volume yet. So I think a bull-bound recovery will have a long way to go. So in addition to the bull-bound recovery in the second half, I think we also expect many things. We have a VFO; we expect it to be displayed, right?
Fusen Chen: And we have, you know, other areas to grow, you know, as I mentioned in my script. So I hope I cleared that up. Okay, that helps, Fusen. Thank you for the clarification there. And then I wanted to dig into another comment.
Craig A. Ellis: You mentioned that it's possible that you'll see some auto battery shipment acceleration later this year for, I believe it was Wedge. And I wanted to get a sense for what you thought the magnitude of that would be and how the linearity played out in the back half of the year. Yeah, Craig, I think, you know, the magnitude is not huge, but it is significant.
Lester A. Wong: This is the first big buy we've had from the customer for quite a while. I think, as well, as far as linearity is concerned, I think we believe that it will be, there'll be some in this quarter, but mostly it'll be in the second half of the year. Yeah.
Craig A. Ellis: And then lastly, if I could sneak in one more, certainly some encouraging signs in China memory. The question is, for Korean memory and U.S. memory companies, what's your expectation for when we get back to 80% plus utilization rates that can benefit the business in those geographies with those customers? Thank you. Well, I think right now when you say U.S. memory companies, U.S. memory companies also have operations in China as well, right? So I think utilization in those geographic areas is, again, right now in the, not specifically in memory, but is probably in the mid-60s to 70s.
Lester A. Wong: So I think we hope that again there is a recovery in memory prices. We hope that by the second half, that will start picking up for everybody. Got it. Thanks very much, guys. We'll hop back. Thank you. At this time, I'd like to turn the floor back over to Mr. Elgindy for closing comments. Thank you, Donna, 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.