BE Semiconductor Industries

The conference is now being recorded.

Good morning, good afternoon, ladies and gentlemen, and welcome to BASI's quarterly conference call and audio webcast to discuss the company's 2022 first quarter results. You can log into the audio webcast via BASI's website, www.basi.com. Joining us today are Mr. Richard Blickman, Chief Executive Officer, and Ms. Hedwig van Kerkhove, Senior Vice President, Finance. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, ladies and gentlemen, this conference is being recorded and cannot be reproduced in whole or in parts without written permission from the company. I would now like to turn the call over to Mr. Richard Blickman. Please go ahead, sir.

Thank you. Thank you all for joining us today. We will begin by making a few comments in connection with the press release issued earlier today, and then take your questions. I would like to remind you that some of the comments made during this call and some of the answers by management in response to your questions may contain forward-looking statements. Such statements may involve uncertainties and risk. as described in the earnings release and other reports filed with the AFM. For today's call, we'd like to review the key highlights for the first quarter ending March 31st, and also update you on the market, our strategy, and outlook. First, some overall thoughts on the first quarter. Basie posted strong results in Q1. with revenue of 202.4 million euros and a net income of 67.5 million euros at the high end of guidance despite a challenging semiconductor equipment environment. Revenue grew 17.9% versus the fourth quarter last year, and 41.3% versus the first quarter, 21. Given continued strength for high-performance computing applications, including data centers, advanced logic, and hybrid bonding, and in automotive and user markets, we exceeded anticipated quarterly shipment levels amid supply chain disruptions through strategic inventory and production planning. Of note, shipments of hybrid bonding systems increased in the quarter as Basie overcame flood-related challenges in Q4 and met customer qualifications necessary to further ramp production. Orders for Q1 this year were €204.8 million, an increase of 1.1% versus the fourth quarter last year. due to increased demand for high-end performance computing applications, including follow-on orders for two customers for hybrid bonding systems. As compared to Q1-21, orders decreased by 37.4%, primarily due to significantly lower bookings for high-end mobile applications post-new model introductions launched in 2021. In addition, it reflected decreased demand from Chinese subcontractors for both smartphone and mainstream electronics applications, continuing a trend which began in the second half of last year. We believe that current demand from Chinese customers is restraint given both current capacity levels and rolling COVID lockdowns, which have adversely affected production, deliveries, and new order development. Basie suggested net income reached 75.5 million euros in the first quarter, representing increases of 13.9% and 59.3% respectively versus the fourth quarter last year and the first quarter last year. Further, our adjusted net margin of 37.3% rose significantly versus the 33.1% achieved in the prior year period. Profit efficiency has remained at elevated levels over the past four quarters due to relatively stable gross margin and baseline OPEX development. This was achieved by increasing prices as necessary to offset inflationary input costs and successfully limiting overhead growth, even despite significantly increased spending for wafer-level assembly activities. A dividend of €3.33 per share was approved at the AGM today. This dividend plus purchases through yesterday bring total distribution of €287.6 million so far this year. Since 2011, we will have paid out almost €1.2 billion to shareholders, or 25% of cumulative revenue during this period. Given strong projected cash flow generation and current market uncertainties, we intend to accelerate share repurchases from 15 to 25 million euros per quarter under the current program. Basie's liquidity position continues to expand with cash and deposits, of 696.6 million euros at the end of Q1, growing 3.6% versus year end 2021, and 15% versus the fourth quarter of last year. Similarly, net cash of 407 million euros increased by 9.9%, versus the fourth quarter last year, and 88.3% versus the first quarter of last year, due to strong cash flow generation and the conversion into equity of a portion of our 2023 and 2024 convertible notes. Post quarter end, we issued 170 million euros of 1.875% convertible notes due 2029. The net proceeds from which we will be used to help fund the expansion of our wafer-level assembly portfolio, share-by-backs, and general corporate purposes, including acquisitions. Next, I'd like to speak a little bit about the current market environment and our strategy. The semiconductor equipment industry has continued to grow during the first half of 2022 reinforced by strength carried forward from the second half of last year and CAPEX announcements from the leading semi-producers in the first quarter of this year. From an assembly equipment perspective, Tech Insights recently increased its 2021 growth rate to 71% versus the 55% initially forecast with growth continuing in 2022 by 10.8%. The market grew to a record of $6.5 billion in 2021, with growth expected to reach $7.2 billion in 2022, excluding any hybrid bonding revenue. At present, the assembly equipment industry is faced with many cross currents and limited visibility. We see continued strength in the first half of 2022, from advanced computing, automotive, and hybrid bonding applications. In addition, growth is further supported by customer complex roadmaps and the anticipated construction of 47 new wafer fabs over the next three years. Many of such new FABs are for advanced packaging and wafer-level assembly applications. In contrast, BASIC's order development in 2022 has been limited by a number of headwinds, including lower demand for high-end smartphones following the 2021 new model cycle, weakness in Chinese markets, global GDP uncertainties, disruptions to global supply chains, and geopolitical conflict. Our strategic priorities for 2022 focus on satisfying customer delivery schedules, navigating global supply chain and pandemic related challenges and building out basis development, support and production capabilities to scale hybrid bonding and other wafer level assembly activities. Towards this end, Gross R&D spending increased 23% in the first quarter this year compared to the first quarter last year. Hybrid bonding process continues with shipments and orders increasing in Q1 and work continuing with AMET to commercialize a cluster tool solution. In addition, we named an SVP to run bases below 10 nanometer diatage group to further our efforts in this area. Now a few words about the guidance. For Q2 22, we estimate that revenue will increase by 10% plus minus 5% versus the first quarter of this year, with gross margin levels staying in the range 59 to 61%. Operating expenses are anticipated to decrease by zero to 5%, as lower share-based compensation expense is partially offset by increased spending for development and service support activities. At the midpoint of the guidance, we guide for the first half of 2022, revenue of €425 million and an operating profit of €176 million, increases of 15% and 14% respectively, versus the first half of 2021. Longer term, we are encouraged by the favorable drivers for basic business as we advance further into the digital society, including the proliferation of artificial intelligence and industrial automation, cloud computing, 5G network expansion, data analytics, vehicle electrification, and increased enterprise demand as employees begin returning back to office. That prepares That ends my prepared remarks. I would now like to open the call for some questions. Operator.