BE Semiconductor Industries

Good morning, good afternoon, ladies and gentlemen, and welcome to BE Semiconductor Industries quarterly conference call and audio webcast to discuss the company's 2024 second quarter results. You can register for the conference call or log in to the audio webcast via BASE's website, www.basee.com. Joining us today are Mr. Richard Blickman, CEO, and Mr. Leon Vervaeen, Senior Vice President Finance. Currently, all participants are in listen-only mode. Later, we will conduct a question and answer session and instruction will follow at that time. As a reminder, ladies and gentlemen, this conference is being recorded and cannot be reproduced in whole or in part without written permission from the company. I would like to remind everyone that on Thursday's call, management will be making forward-looking statements All statements other than statements of historical fact might be forward-looking statements. Forward-looking statements reflect basis current views and assumptions regarding future events, many of which are by nature inherently uncertain and beyond basis control. Actual results might differ materially from those in the forward-looking statements due to various risks and uncertainties, including but not limited two factors that are discussed in the company's most recent periodic and current report field with the AFM. Such forward-looking statements, including guidance provided during Toddy's call, speak only as of this date, and BASIS doesn't intend to update them in light of new information or future developments, nor does BASIS undertake any obligation to update the forward-looking statements. I would like now to turn the call over to Mr. Richard Blickman. Thank you.

Thank you. For today's call, we'd like to review the key highlights of our second quarter and six months ended June 30, 2024, and update you on the market, our strategy, and outlook. First, some overall thoughts on the second quarter and first half year 24. BATI reported second quarter revenue, gross margin, and operating profit at the high end of guidance, with significant order growth realized for hybrid bonding and other AI-related applications. For the quarter, revenue of euros 151.2 million and net income of 41.9 million euros increased by 3.3% and 23.2% respectively versus the first quarter. of 2024. The revenue increase was due primarily to higher shipments for photonics and two and a half D assembly applications. Order trends this first half year highlighted increased demand for basic systems used in AI and other advanced packaging applications. Bookings of 185.2 million euros in the second quarter of this year and 313 million euros in the first half 2024 represented increases of 64.5% and 22.9% respectively versus prior year periods. Moreover, we estimate that approximately 50% of our orders over the past 12 months were AI related. Sequential and year-over-year comparisons highlight contrasting growth trends for AI and mainstream assembly equipment markets in recent quarters. Since second half 2023, we have seen significant order growth for high-performance computing applications, including 2.5D, 3D, and photonics assembly solutions in support of a broad-based expansion of generative AI demand. Such growth has been partially offset by a slower recovery as expected in mainstream assembly markets and in China, particularly for high-end smartphones, automotive, and industrial applications. In general, post-pandemic inventory levels at semiconductor producers still remain elevated despite gradually increasing utilization rates. BASIC continues to navigate an extended assembly downturn at high levels of profitability as a result of increased 2.5D and 3D order momentum with gross and net margins realized of 65% and 27.7% respectively in the second quarter of 24. For the first half year 2024, gross margins improved to 66.1% versus 65% in the first half of 2023. The reduction in our net margin to 25.5% this first half year primarily reflected a 24% increase in development spending and increased share-based compensation versus the first half of 2023. Our financial position is healthy with net cash of 74.4 million euros at quarter end, equal to 13% of the latest 12-month revenue. both the capital allocation of 186.3 million euros in the form of dividends and share repurchases during the quarter and the conversion of 89.9 million euros of convertible notes into ordinary shares. On July 17, 2024, we successfully completed an offering of 350 million of 4.5% senior notes due to 2031. to further solidify our capital base and help fund anticipated growth over the next decade at attractive terms. Next, I'd like to speak a little bit about the current market environment and our strategy. It appears that the recovery of the assembly equipment market in 2024 is progressing slowly due to pockets of excess capacity still remaining in certain consumer markets including automotive, industrial and smartphones. As such, the mainstream assembly downturn, including the Chinese market, has extended to 8 to 10 quarters. As a result, Tech Insights has reduced its assembly market growth estimates for 2024 to 9% from 16% in March and 31% at the start of this year. it also increased its gross estimates for 2025 and 26, and expects a next market peak in 26 at 7.4 billion US dollars, up 80% from 2023 levels. However, it also forecasts that Bayes' addressable market, and in particular the advanced dike placement market, will grow at rates significantly above the overall assembly equipment market over the next five years due to increasing AI adoption in all end markets. We are encouraged about Basie's progress given expanded hybrid bonding adoption for both logic and HPM applications. Traction gained in the marketplace by our next generation TCB system and continued demand growth for our flip chip and multi-module die attach for 2.5D applications. During the quarter, we received orders for 29 hybrid bonding systems from two customers for estimated delivery in Q4-24 and Q1-2025, further highlighting increased market adoption of this new process technology. Substantially, all such orders were for our latest generation 100 nanometer accuracy systems to be used in 3D logic applications. We anticipate additional orders in the second half of this year as customers ramp capacity for high-volume manufacturing in 2025. In addition, we received an important second order this quarter for our TCnext system. To support our product strategy, BASIC continues to increase R&D spending for the next-generation hybrid bonding development, targeting sub-100 nanometer placement accuracy the ongoing build-out of hybrid bonding and TCV capabilities in anticipation of expanded logic and memory adoption and enhancements to our current product portfolio for the next sub-cycle. We anticipate additional share gains in the next market upturn as node sizes shrink further and placement accuracy increases. All of these trends play to the strength of Bayley's core competencies. Now a few words about our guidance. For the third quarter 24, we forecast that revenue will be flat, plus or minus 5% versus the second quarter of this year, with gross margins ranging between 64 and 66% based on our projected current product mix. The projected third quarter 24 revenue increase reflects atypical seasonal growth due primarily to a weaker smartphone capacity built this year. Due 3-24 aggregate operating expenses are forecasted to decrease by 0-5% versus the second quarter of this year. This concludes my prepared remarks. Before we begin Q&A, I would like to remind everyone to limit your questions to two at a time so all participants have an opportunity to ask questions.

Operator.