Kulicke and Soffa Industries, Inc.

call. At this time, all participants are on a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator 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, Joseph El-Gindi, Senior Director of Investor Relations for Kulik & Safa. Thank you, Mr. El-Gindi. You may begin.

Thank you. Welcome, everyone, to Kulikin's Office Fiscal Fourth Quarter 2025 Conference Call. Lester Wong, Interim Chief Executive Officer and Chief Financial Officer, also joins me 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 at investor.kns.com. along with prepared remarks for today's call. In addition to historical information, today's discussion contains forward-looking statements regarding our future performance and outlook. These statements are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties that may cause actual results to differ materially. For complete discussion of the risks associated with fuel consult, that could affect our future results and financial condition, please refer to our latest Form 10-K and upcoming SEC filings for additional information. With that said, I will now turn the call over to Lester Wong for the business overview. Please go ahead, Lester.

Thank you, Joe. Good morning, everyone. Before discussing this quarter's business performance and outlook, I want to briefly discuss recent organizational changes we announced on October 28th. I have taken over as interim CEO due to Fu Xinchen's recent retirement and will continue my existing duties as the company's executive vice president and chief financial officer. FUSEN is actively recovering and doing well, and we appreciate everyone's thoughts and concerns. While a search for a permanent successor among external and internal candidates is underway, we are fortunate to have a deep bench of talented leaders in the executive team and an involved board of directors who are committed to ensuring the continuity of leadership, stability, and strategic focus of the company. We expect this transition to be seamless and customers can accept continued innovation, global support, and strong commitment from K&S to serve the evolving needs and to enable next-generation devices. I want to thank Fusan for his leadership over the past nine years. Under his guidance, we pursued meaningful new business opportunities and expanded our market assets by securing a foothold in several high-potential technologies. We have also dramatically increased the volume of customer engagement and improved time-to-market execution. In doing so, we have accelerated the growth of our advanced portfolio of solutions, which enable meaningful share gain in leading-edge logic and has paved the path for additional expansion in DRAM, Power Semiconductor, and Advanced Dispense. FUSEN's legacy is an organization defined by growth, agility, and close customer focus. We appreciate that he has agreed to provide advisory support over the coming year and believe his vast experience and industry knowledge will be a useful resource to the company as we extend our leadership in advanced packaging and adapt to industry transitions such as the rise of chiplet architectures and heterogeneous integration. I, along with the entire organization, would like to wish FUSEN a happy and healthy retirement. I am confident we will continue to win market share and grow the business over the long term. As all of our end markets are showing signs of improvement, we have recently begun to prepare for higher production while continuing to aggressively drive several exciting technology transitions. Additionally, in my role as interim CEO, I am grateful to have met many customers in person over the past month and look forward to meeting with many others over the near term. We are fully committed to consistently providing customers with best-in-class capabilities and high-performance solutions they expect from K&S. Turning to our recent business results, we are encouraged by improved order activity, supported by favorable utilization trends in general semiconductor and memory end markets, while we continue to execute our key initiatives. Within our fourth fiscal quarter, we generated revenue of $177.6 million, GAAP earnings per share of 12 cents, and non-GAAP earnings per share of 28 cents. We remain focused on operational efficiency as we expand our reach within thermal compression, vertical wire, advanced suspense, and power semiconductor transitions. From an end market standpoint, utilization rate for high volume general semiconductor and memory applications continue to improve, while dynamics within the automotive and industrial markets are now showing early improvement. General semiconductor revenue increased by 24% sequentially, driven by technology and capacity needs which increased thermal compression and ball bonded demand during the September quarter. We estimate utilization rates are currently over 80% for this key end market. Memory has also improved sequentially, similar to General Semi, in both utilization and revenue. Memory-related revenue increased by nearly 60% sequentially to $24.4 million and was driven predominantly by NAND-related capacity additions. Historically, our memory solution were tailored for high density NAND assembly. Although we remain closely engaged in supporting advanced packaging transition within DRAM, we continue to expect the growth in high performance edge application like on-device AI or AI on the edge will begin to accelerate this trend. Order hesitation within automotive and industrial has continued into the September quarter with a relatively sharp sequential decline. While the broader automotive market has been softer, we anticipate a sequential improvement during the current December quarter, and are pleased to report a more positive outlook through fiscal 2026. As a reminder, we remain an active technology partner, providing many new innovations within power semiconductor, which are supporting long-term transitions within the EV and other clean tech markets. Last, APS has increased by 17% sequentially, which aligns with improving utilization data and more distinctly highlights increased production activity across our high-volume install base. We are optimistic about fiscal 2026 and remain encouraged by improving end-market dynamics, along with strong traction we are seeing across our growing set of advanced packaging, advanced dispense, and power semiconductor opportunities. Within Advanced Packaging, we continue to support the industry adoption of advanced thermal compression and vertical wire applications and remain closely engaged with multiple leading customers on these exciting initiatives. First, within Fluxus Thermal Compression, or FTC, we continue to directly address the needs of advanced heterogeneous logic applications. We are pleased to see growing demand across our customer base driven by the increasing capacity needs of IDM, foundry, and assembly and test customers. Our operational and supply chain teams are actively preparing for a production ramp through fiscal 2026 as adoption for our FTC process begins to accelerate. Additionally, we are preparing to ship our first HBM system within the current December ending quarter. Within the HBM market, we continue to anticipate advanced thermal compression capabilities such as FTC, provides an attractive assembly alternative as bandwidth requirements increase with future HBM standards. On the mobility side of DRAM, we continue to expect on-device AI applications to demand high level of bandwidth and increase the need for new vertical wire-based assembly over the coming years. This is a great example of how advanced packaging techniques are directly supporting power efficiency, performance, and form factor improvements helping to offset the rising cost of traditional transistor strength. We remain engaged with a broad group of memory customers who are actively preparing for this transition. Our vertical wire market expectations into fiscal 2026 remain consistent, and we continue to anticipate a shift to high-volume market production by the end of the year. Longer term, we anticipate Stack DRAM, or mobile HBM, will continue to grow aggressively with high-volume edge-related applications. Next, with advanced dispense, we are pleased to release our recent dispense system, Esalon, during Semiconductor Taiwan in September. Esalon leverages our unique and high precision dispense capabilities with a highly robust architecture platform, which has been proven in critical production environment. Transitions in many of our end markets are increasing demands for high precision and more capable dispense systems. We continue to receive recurring purchase orders as well as new customer purchase orders for our growing line of advanced dispense systems. Finally, while the current automotive and industrial market remains dynamic, we continue to develop innovative solutions to address increasing level of assembly complexity surrounding power semiconductor applications. In summary, we continue to expand our market presence on multiple fronts and remain cautiously optimistic as key regions and end markets show signs of cyclical improvement. We are pleased to see ongoing general semiconductor capacity digestion and expansion within our key regions, as well as memory technology transitions and pricing improvements, which are all promising indicators and that increases our confidence in the outlook. We continue to navigate a uniquely exciting time in semiconductor assembly, where the potential to capitalize on a wide set of opportunities in the industry. With that said, I will now provide a brief financial update. My remarks today will refer to GAAP results unless noted. We deliver revenue above guidance, continue to execute on close customer engagements, and maintain an ongoing focus on cost control. Gross margins came in at 45.7%, and we delivered $0.28 of non-GAAP earnings. Total operating expense came in at $80.3 million on a GAAP basis and just below $70 million on a non-GAAP basis. we continue to remain focused on operational efficiency while we support a growing set of opportunities. We continue to anticipate non-GAAP operating expense to be around $70 million over the coming quarters, which provides a strong foundation for operational leverage as demand for our solution ramps. Tax expense came in at $0.3 million, and we continue to anticipate our effective tax rate will remain above 20% over the near term. During the September quarter, we continued our repurchase program and deployed $16.7 million to repurchase 464,000 shares. Over fiscal year 2025, we repurchased 2.4 million shares, representing nearly 5% of shares outstanding, for $96.5 million. Looking ahead, end market improvements within general semiconductor and memory are becoming more evident, supported by regional utilization improvement and a strong sequential increase in APS demand. While automotive and industrial was previously expected to create an ongoing headwind into fiscal 2026, we are pleased to now anticipate sequential improvement into the December quarter. For the December quarter, revenue is expected to increase by approximately 7% sequentially to $190 million, with gross margins at 47%. Non-GAAP operating expenses are expected to be $71 million with GAAP earnings per share targeted to be $0.18 and non-GAAP earnings per share of $0.33. While we remain focused on production readiness and key growth opportunities, we have also strengthened operational and development efficiencies over the past few quarters. We are confident that these efforts position us to emerge from the extended soft demand period a leaner and more growth-optimized organization. Today, we're either a dominant incumbent leader or are aggressively taking share in every key market we serve. We continue to ensure our highest potential opportunities are well resourced and our customer development efforts are on a positive trajectory. Looking into fiscal 2026, we anticipate that half of our incremental growth will stem from technology transitions and share gains in new markets. At the same time, the other portion of sequential growth is increasingly encouraging due to the anticipation of ongoing cyclical recovery over the coming quarters. We look forward to ongoing execution and progress on advanced packaging, advanced suspense, and power semiconductor opportunities as we prepare for the broader core market recovery. In closing, we remain focused on executing our strategic priorities, are confident in our capabilities and technology leadership, and prepare to navigate the near-term macro environment. This concludes our prepared comments. Operator, please open the call for questions.