Kulicke and Soffa Industries, Inc.

Hello, and welcome to the Kulik and Salfa 2023 First Quarter Results Conference Call and Webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Joe Algindi, Senior Director, Investor Relations. Please go ahead, Joe.

Thank you. Welcome everyone to Kuehl-Gonzalves Fiscal First Quarter 2023 Conference Call. Fu Xinchen, President and Chief Executive Officer, and Lester Wong, Chief Financial Officer, are joining us on today's call. Non-GAAP metrics will be referenced throughout today's call. The non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from, our GAAP financial information. Complete GAAP to non-GAAP reconciliation tables are available within the earnings release filed yesterday, as well as the earnings presentation, which may be found on the investor relations section of our website at investor.kns.com. 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 fuel and SOFA that could affect our future results and financial condition, please refer to our recent SEC filings, specifically the 10-K for the year ended October 1, 2022, and the 8-K filed yesterday. With that said, I would now like to turn the call over to Fuzan Chen for the business overview. Please go ahead, Fuzan.

Thank you, Joe. Over the prior quarter, we continue to execute on our development plan and the customer engagements supporting secure trend in the automotive, semiconductor, and advanced display market, and also our technical margin optimization and market share gain strategy within the higher volume wire bonding and also electronic assembly market. I will discuss this specific opportunity in more detail shortly. Over the same period, we have been monitoring and internally addressing the recent positive feedback on COVID within China. Over the last few months, we experienced a rapid increase in internal COVID cases within our Suzhou facility. Why this little impact on our production capability during the quarters? This wave of COVID in China is broadly impacting the operational capacity of our customers within China. We currently anticipate this effect creates additional capacity uncertainty, and it will have a slight impact on our near-term outlook, although it will likely support a quicker rebound as China's GDP forecasts have recently improved. We also anticipate this policy shift dramatically reduce the potential for regional lockdowns, which have had both supply chain and demand implications for us over the prior years. In addition to the potential for a three-term NACO recovery in China, the Consumer Electronics Show, which took place last month, helped to provide a glimpse into the future for existing and the new applications such as electric vehicles, artificial intelligence, wearable and display technology. Our business continues to be very aligned with this long-term trend, and we look forward to supporting them over the coming years. Collectively, our longer-term industry outlook remains consistent. We currently anticipate semiconductor unit growth, excluding LED, will return to a more normal growth rate in calendar 2023 and a nearly 10% unit growth in calendar 2024. In addition to a more normal level of growth for the non-LED semiconductor market, LED units are expected to grow at a 19% CAGR, roughly 300 billion units of production annually through calendar 2025. in support of new mini and micro LED applications. Also of note, our book-to-view ratio exceeded one for the first time since June of 2021. While near-term inventory digestion and medical improvement are necessary to support industry growth, this data point provides additional confidence to our outlook. Coming to a December result, we generated $176.2 million of revenue and a $0.37 of non-GAAP EPS, coming in ahead of our projection from last quarter. Our total capital equipment revenue was $135.4 million in the December quarter, with a majority of sufferings stemming from general semiconductor as anticipated. While general semiconductor is typically driven by capacity needs, they are growing technology trends, which are providing additional strengths. First, within our high volume wire bonding market, assembly complexity continues to require more equipment capabilities. These capabilities allow us to enhance our margin profile. This will provide some additional information on our optimization focus shortly. The next is within the power semiconductor market, which is replanted in general semi and also our automotive and industrial end markets continue to evolve with the growth in both traditional silicon and emerging compound semiconductor applications. This power semiconductor trend have supported multiple record revenue quarter for which bonding in fiscal 2022 and allow us to reach a new record revenue even in the December quarter. In addition to our dominant long-established pollution within the traditional wage-bound market, we also address power and compound semiconductor needs capabilities, including clip-attached, larger bounding area, and the laser-assisted bounding approach. Emerging compound semiconductors using gallium nitride and silicon carbide support fast-growing applications such as high-speed vehicle charging, 5G base station, alternative energy, and a high-powered server, we will provide additional updates on these emerging opportunities over the coming quarters. Additionally, we are pleased to report that we continue to see very strong demand for our robot thermal compression solution, which supports advanced logic applications and are very aligned with emerging chip debt trend. Our effort to engage with a broader group of Fabless companies over the recent quarter have been very beneficial and have positioned us for additional share gain in a larger market. At this point, we are increasingly optimistic on the future of thermal compression and are growing our engagement with key customers. Several new customer have request system allow we remain very supply chain limited over the near term. Our TCB team is working aggressively to support multiple customer engagement in parallel. Additionally, we have previously anticipated a 10 micron pitch limitation for TCB. We now see the potential to extend this technology to below 10 micron pitch, which can materially expand the size and the long-term potential for our competitive TCB portfolio. Finally, regarding TCB, I'm pleased to report that we have received customer acceptance on our first flux-less chip-to-substrate TCB system and have shipped our first flux-less chip-to-wafer TCB system. This will be followed by an additional system shipment to a leading boundary customer. As we highlighted over the past several calls, we continue to expect the majority of the heterogeneous assembly needs can be addressed with our growing portfolio of TCB solutions. Moving to the LED market, we remain engaged and are supporting multiple customers with multiple advanced display solutions. We continue to make progress across several different initiatives in advance this way. I'm very pleased to highlight that we have recognized revenue of our first Luminex system. Over the coming quarters, we intend on shipping additional system and earning additional purchase order for Luminex, which support backlighting application and the large format direct emissive applications. Additionally, we have received interest to utilize this high throughput system in more traditional semiconductor assembly market, in addition to the growing advanced display opportunity. By the end of fiscal 2023, we also expect to receive acceptance on the next phase of the customer-specific advanced display solution, which we will refer as Project W going forward. Demand for this system is expected to accelerate into fiscal 2024. Within automotive, the ongoing electrification and the autonomous transition will continue to benefit our business over long term. Power semiconductor and the compound semi-train are benefiting our automotive customers in addition to some general semiconductor customers. The consumer electronics shows last month highlighted new electric vehicles from established and emerging automotive companies which continue to drive innovation, bring down costs, and broaden market adoption. We are currently preparing to launch our next battery model for larger form factor using both ultrasonic and laser interconnect solutions. In addition to supporting the production range for vehicles, and also long-haul trucks. Memory remains soft over the near term, although we continue to anticipate a slight pickup in the second half. In addition to payroll, customer engagement, and the development program, we remain on track to close a pending expense acquisition as planned. As a reminder, this strategic acquisition provides additional access to adjacent expense opportunity in both semiconductor and electronic assembly. Collectively, these two areas represent a $2 billion addressable market and provide a new set of long-term opportunity. In addition to continuing on a prudent M&A path, we are also very focused on scaling our own equipment manufacturing capability further fiscal 2023. During our prior fiscal year, we increased our capital equipment manufacturing footprint by 148,000 square feet, or 44% to 485,000 square feet, and remain very focused to build up this footprint through 2023. Overall, despite persistent macro and regional challenge, over the past few years, we have consistently executed and have fundamentally expanded our long-term opportunity. There's no shortage of new opportunities, and our global team has been very focused on supporting our customers by delivering new solutions and driving acceptance. While consumer-driven software is anticipated to create an ongoing takeaway for our high-volume product line over the near term, We remain very optimistic and continue to anticipate a seasonal recovery in the second half, followed by broader capacity and technology growth in fiscal 2024. With that said, I will now hand the call over to Lester, who will discuss our financial performance and outlook.