Kulicke and Soffa Industries, Inc.

Greetings and welcome to the QLIC and SELFA first quarter 2026 earnings 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 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, Joe Elginy, Senior Director, Investor Relations. Thank you, sir. You may begin.

Thank you. Welcome, everyone, to Kewlkins Office Fiscal First Quarter 2026 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 statements, 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 a complete discussion of the risks associated with Kuehl-Gonzalva 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 market and financial overview. Please go ahead, Lester.

Thank you, Joe. Good morning, everyone. We are pleased to report that demand is improving at a faster and stronger pace than previously expected. Customer sentiment has strengthened meaningfully, and utilization across the most significant markets and regions remains favorable. While residual headwinds in the automotive market may persists near-term, general semiconductor and memory markets continue to demonstrate robust demand, supported by broadening technology improvements and renewed production activity across multiple regions. Turning to recent business results, we continue to see improving order activity with addition visibility through fiscal 2026, which is supported by favorable utilization trend in general semiconductor and memory end markets. Separately, demand for our portfolio of advanced packaging solutions including our fluxless thermal compression bonding tools, remains robust, and we continue to anticipate a strong growth year for our advanced packaging opportunities. For the first fiscal quarter, we generated revenue and earnings above expectations and remain focused on ramping production to support strong customer demand in addition to driving parallel technological transitions within advanced packaging, advanced dispense, and power semiconductors. Dynamics within the high-volume general semiconductor and memory end markets remain favorable, while we also experience a slight sequential revenue improvement within the automotive and industrial end markets. In the first fiscal quarter, general semiconductor revenue increased by 27% sequentially and over 90% from the same period last year, driven by both technology and capacity needs of our customers. Across our portfolio solutions, all reportable segments recognize sequential increases within general semiconductor this past quarter. We estimate utilization levels remain over 80% for this key end market. Turning to memory, after a 60% increase last quarter, demand sequentially declined due to product and customer mix. While the concentration of memory customer can create demand variability quarter to quarter, we have observed ball bonding utilization rates which exceed 85% of the memory market up from the mid 70 range last year. This indicates a healthy capacity environment for our NAND assembly solutions. While AI related workloads are driving capacity tightness across the memory market, they're also driving new packaging solutions to cost effective stack DRAM in addition to emerging requirements for high bandwidth flash or HBS. I will provide a brief update to our memory opportunities shortly. Within automotive and industrial, we experienced a 15% sequential revenue improvement in the December quarter, although continue to anticipate industry headwinds that linger through fiscal 2026. Despite these near-term headwinds, we remain positive on long-term automotive and industrial trends, anticipate semiconductor content per vehicle, supported by ADAS requirements to double over the coming 10 years. We also remain well-positioned to continue benefiting from gradual long-term share growth in battery and plug-in hybrids as we deliver new power semiconductor technology and capacity requirements. Lastly, aftermarket products and services increased by 14% from the same period last year, reflecting increased production activity and improved utilization across a high-volume install base. We're optimistic about fiscal 2026 based on current demand levels and utilization level improvements, and remain focused on ramping production to meet high volume demand. Also, our traction within advanced packaging, advanced dispense, and across power semiconductor opportunities continue to be encouraging. Within advanced packaging, transition of both vertical wire and thermal compression remain on track. We continue to anticipate that the advanced solution segment will strongly grow this year as advanced PCB capacity is in demand throughout our customer base. Over the years, we have created a competitive portfolio of TCV solutions supporting a wide range of leading-edge logic applications and are pleased to also extend our footprint into high-bandwidth memory, which is extremely important for AI as HBMs provide fast, high-performance memory, which AI accelerators need to efficiently process massive amounts of data. In this regard, we are pleased to have shipped our first HBM system to a large memory customer during the December quarter. We continue to anticipate fluxless thermal compression remain a strong alternative to hybrid bonding for the next generation HBM needs. Our other DRAM opportunity stems from vertical wire, which provides a high potential alternative for cost-effective bandwidth through die stacking. We have already seen positive customer feedback on our vertical wire solutions and continue to anticipate strong sequential growth in both TCB and vertical wire over the coming years. Advanced dispense also continue to progress as planned. We introduced our latest Esalon dispense system in November at Productronica. Feedback from customers has been positive, with multiple customers engaged. We continue to prepare several systems to support this initial customer interest. Last, within Power Semiconductor, we have market-leading solutions and continue to expand our portfolio in support of growing power efficiency requirements across automotive, mobility, and data centers, power semiconductor applications are rapidly evolving. This transition is demanding more efficient materials, more complex assembly techniques, and more capable equipment solutions, which we are well positioned to support. Over the past three years, we have navigated a challenging demand period for our core products while we invest in several areas to expand our market access. As we now move beyond this period of soft, poor market demand, we are optimistic and remain well-positioned to capitalize on a wide set of opportunities across our served markets. 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. Growth margins came in at 49.6%, and we delivered 32 cents of GAAP earnings and 44 cents of non-GAAP earnings. Growth margins improved sequentially due to customer and product mix, as well as revenue recognized from systems which were previously expensed. This was largely related to prior impairment charges as well as previously expensed R&D systems. Totally operating expense came in at $81.1 million on a GAAP basis, and $74.2 million on a non-GAAP basis. We continue to remain focused on operational efficiency while we support a growing set of opportunities. Tax expense came in at $5.7 million, and we continue to anticipate our effective tax rate will remain above 20% over the near term. Over the coming quarters, general semiconductor and memory end markets are expected to continue driving strong demand for our solutions. For the March quarter, we expect revenue to increase by 15% sequentially to $230 million, with gross margins of 49%. Non-GAAP offering expenses are expected to be $73 million, with GAAP earnings per share targeted to be $0.53 and our non-GAAP earnings per share of $0.67. Looking ahead, we continue to focus on ramping production as we continue to execute multiple growth strategies across key markets. As mentioned last quarter, this is an interesting time at the company. We're either a dominant incumbent leader or are aggressively taking share in all key markets we serve. We look forward to ongoing execution and progress in advanced packaging, advanced suspense and power semiconductor opportunities as we prepare for broadening foreign market recovery. In closing, we remain focused on executing our strategic priorities, are confident in our capabilities and technology leadership and look forward to demonstrating our operational leverage over the coming quarters. This concludes our prepared comments. Operator, please open the call for questions.