Kulicke and Soffa Industries, Inc.

Greetings and welcome to the Kulik and Soffa 2021 First Fiscal Quarter Results Conference Call. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Joe Elgindy. Please go ahead.

Thank you. Welcome, everyone, to Kulik and Soffa's Fiscal First Quarter 2021 Conference Call. Joining us on the call today are Fusen Chen, President and Chief Executive Officer, and Lester Wong, Chief Financial Officer. For those of you who have not received a copy of today's results, the release as well as the supplemental earnings presentation are both available in the investor relations section of our website at investor.kns.com. Beginning this period, we have changed our non-GAAP disclosures and adjusted the end market categorization of capital equipment sales. These changes better align non-GAAP reporting with our peer group and provide better insight to the underlying demand drivers expected to affect our business. 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. 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 Kewlick and Soffa that could affect our future results and financial condition, please refer to our recent SEC filing, specifically the 10-K for the year ended October 3, 2020, 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. Thank you, Joe.

We are pleased to report strong financial performance. progress in our advanced display business and the improvement to our outlook on today's call. First, we have recently acquired U.S.-based Unicarta, Inc. in an all-case transaction, which enhance our competency and the ultimate potential in the fast-growing advanced display market. Even prior to this acquisition, we worked closely with Unicarta to accelerate the adoption of advanced mini-LED backlighting By combining Unicada's domain knowledge and unique intellectual property with our operational and development competencies, we have improved our position in this exciting advanced display marketplace. We expect our next-generation advanced display system will accelerate broader adoption of advanced displays that utilize locally controllable backlighting and also direct-initiative micro-LED approaches. By the close of fiscal year 2021, we expect to introduce and initiate qualifications for our next-generation advanced display system. We anticipate strong demand for this solution throughout fiscal year 2022 as the broader LCD market begins to adopt new forms of daylighting. Next, the ongoing strength of the general semiconductor and the LED end market and ongoing recovery in automotive demand has improved our fiscal year outlook. Broad trends such as 5G and advanced display as well as the fundamental transition in the automotive market have only recently become meaningful to our business. We expect this new secular trend to provide significant growth and market expansion opportunities over the coming years. The current demand for our product and solution is strong and stands for several areas. First, the underinvestment in big-end capacity spending over the past two years was historically unique and is now behind us. And the return to more typical semiconductor unit growth, which benefits our capital equipment market, has just begun. Over the coming years, we expect semiconductor unit growth to exceed the historical average of 6% to 6.5%. Next, we also see strong demand in our new advances for business and expect multiple design wins with our APAMA and Cadillac system, which will generate more significant revenue starting in fiscal 2022. We will provide more updates over the coming few quarters. Finally, We are also seeing increased capital intensity due to more complex back-end assembly approaches. Increasing complexity is a more secure driver expected to accelerate further into the future. I will explain in more detail shortly. Given our close alignment to this trend and ongoing interest from customers, our outlook has improved significantly. since our prior annual health on November 20th. Currently, due to improved visibility into our second half, we are now anticipating revenue for the year to be approximately $1.1 billion, representing a significant improvement over 75% from fiscal year 2020. We have aggressively ramped our production capacity and are operationally prepared to support this higher level of demand. The ability to scale production quickly and efficiently is an inherent and long-established operational competency at KNS. With that said, we are closely monitoring broader supply chain and the logistical constraints. At this moment, we are comfortable we can achieve this steep year-on-year growth target. And into the December quarter's result, we generated $267.9 million of revenue, representing a 51% increase from the September quarters. The APS segment increased by 5% sequentially. Driven by higher production level, we continue to make progress to extend our shares within the APS market. Capital Equipment represent 83% of overall revenue and increased by 65% sequentially, largely due to improvement within the general semiconductor, LED, and auto industrial and markets. In the December quarters, we disaggregated our dedicated advanced packaging and market category. What we previously deemed Advanced Packaging Revenue is now primarily allocated to the general semiconductor end market. As we mentioned last quarter and I discussed earlier, advanced packages are more complex assembly techniques, have become material components within our other end markets. This increasing complexity is largely related to the growth of modified packages. which provide a cost-effective solution to extend form factor benefits. These approach help to overcome the well-known North Stream challenge by increasing transistor density at the package level. We anticipate demand and the capacity needed for multi-die package will continue accelerating and will continue to improve capital intensity of our soft market. Within general semiconductor, We estimate over 40% of December sales support multi-die assembly, which require more assembly capacity than a typical single-die package. Within memory, over 60% of our exposures support stagnant, one of the highest volume and the most transistor dense package available. Finally, within the LED market, About 50% is associated with advanced display. For the December quarter, we estimate 38% of capital equipment sales are supporting more complex advanced packaging applications, increasing the capital intensity of general semiconductor, LED, and the memory market. Turning to a compilation of capital equipment sales in the December quarters. General Semiconductors, which support a broad set of applications, such as smartphones and consumer electronics, continue to be very strong and has increased by nearly 70% sequentially. As discussed, increasing complexity adds an additional layer of demand to this critical end market. The automotive and industrial end markets experience a dramatic improvement over 100% sequentially. At this point, there is a shortage of semiconductors throughout the automotive supply chain, and we have experienced a strong sequential increase in the utilization rate of our automotive install base over the December period. Due to this near-term dynamic, combined with a broader long-term transition to fully electric and fully autonomous vehicles, We are optimistic on our outlook and look forward to further support our broad base of automotive customers over the long term As expected LED demand has improved due to the ongoing adoption of our advanced display system and also sequential improvement for general lighting LED capacity Looking ahead, we are confident in our position Technology roadmap and customer engagement with both high-volume general lighting and also high-growth advanced display applications. As a reminder, despite clear challenges last year due to COVID-19, we were still able to achieve our fiscal year 2020 advanced display revenue target and expect a production ramp to continue through fiscal year 2022. Our acquisition of Unicata further enhanced our position within this exciting advanced display market, and we anticipate a meaningful improvement to our outlook. We will provide additional feedback on our development progress and the longer-term advanced display expectations over the coming quarters. After a delayed period of meaningful market extension, we are very optimistic in the near-term outlook and in our ability to participate meaningful in long-term and more secure opportunities. We continue to focus on self-market expansion through our participation within the advanced LED market, the fundamental transition in automotive and the ongoing adoption of more complex semiconductor assembly. After two years of Soffa demand, industry momentum is currently very high. Our solutions are increasingly aligned with this major trend, and we anticipate a transition into a multiple year expansion period. Over this period, we expect our self-market growth will accelerate and provide additional opportunities to create lasting shareholder value. I would now like to turn the call over to Lester Wong, who will cover this quarter's financial overview in greater detail. Lester? Thank you, Fusen.