BE Semiconductor Industries

Good morning, good afternoon, ladies and gentlemen, and welcome to Bessie's quarterly conference call and audio webcast to discuss the company's 2024 fourth quarter and full year results. You can register for the conference call or log in to the audio webcast via Bessie's website at www.bessie.com. Joining us today are Mr. Richard Blickman, Chief Executive Officer, and Mrs. Andrea Kopp, Senior Vice President Finance. Currently, all participants are in a 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 a whole or in part without written permission from the company. I'd like to remind everyone that today's call management will be making forward-looking statements. All statements, other than statements of historical facts, may be forward-looking statements. Forward-looking statements reflect Bessie's current views and assumptions regarding future events, many of which are by nature inherently uncertain and beyond Bessie's control. Actual results may differ materially from those in the forward-looking statements due to various risks and uncertainties, including but not limited to factors that are discussed in the company's most recent periodic and current reports. Filed with the ASM. Such forward-looking statements, including guidance provided during today's call, speak only as of this date, and BSE does not intend to update them in light of the new information or future developments, nor does BSE undertake any obligation to update the forward-looking statements. I would now like to turn the call over to Mr. Richard Blickman.

Thank you. For today's call, we'd like to review the key highlights for our fourth quarter and year ended December 31st, 24. and update you on the market, our strategy and the outlook. First, some overall thoughts on our performance. Basie's fourth quarter results were adversely affected by ongoing weakness in mainstream assembly markets, seasonal influences and lower demands for hybrid bonding and photonics applications as customers digested capacity added in 2024. Revenue of 153.4 million euros was down 2% versus Q3 last year and 3.9% versus Q4 2023, primarily due to lower demand for automotive applications, partially offset by increased hybrid bonding shipments. Orders of 121.9 million euros decreased by 19.7% versus the third quarter last year, and 26.7% versus the fourth quarter in 23 due to lower bookings for hybrid bonding, photonics and mainstream assembly applications. Hybrid bonding and photonics orders have fluctuated on a quarterly basis due to the timing by customers of new device introductions and related capacity additions for these emerging applications. Our operating income In the fourth quarter, 24% decreased by 8.2% versus the third quarter last year, primarily due to lower revenue and a 0.7% gross margin decrease from adverse forex movements. Q424 net income of 59.3 million euros increased 26.7% versus the third quarter last year, and 8% versus fourth quarter 23 due to net tax benefits realized from an upward revaluation of deferred tax assets. Basie's business development in 24 reflected contrasting growth trends for AI and mainstream assembly equipment markets. For the year, revenue grew by approximately 5% to reach 607.5 million euros due to significantly higher demand by computing end-user markets, particularly for AI-related hybrid bonding and for tonics applications. Similarly, orders of 586.7 million euros increased by 7%. As a result, orders for AI applications grew to represent approximately 50% of our total orders in 2024. We continue to navigate an extended downturn at industry-leading levels of profitability. Basie achieved gross operating and net margins of 65.2%, 32.2%, and 30% respectively in 2024. Gross margins increased slightly versus 23 due to a more favorable advanced packaging product mix, which were partially offset by unfavorable net forex effects, particularly in the second half of the year. Net income rose 2.8% versus 23, primarily due to higher revenue and gross margins realized and a net tax benefit of 18.2 million euros. Such favorable influences were partially offset by a significant increase in R&D spending and higher share-based compensation expense. Basis revenue from computing end markets has grown significantly over the past three years due to growth of hybrid bonding, photonics, and other AI-related 2.5D, 3D assembly applications. In combination with an extended mainstream downturn, revenue from computing end markets grew to 43% in 2024 versus 24% in 2023. Shareholders were rewarded for their investment in Bezi as we distributed a total of 251.3 million euros in 24 that represented approximately 41% of total revenue. During the year, we paid a cash dividend of 171.5 million euros and initiated a new 100 million euro share repurchase program in September 24. In total, we repurchased 79.8 million euros of our shares in 24, which increased our total shares held in treasury to 1.8 million shares or 2.3% of shares outstanding. Basie ended the year with a solid liquidity base consisting of cash, cash equivalents and deposits aggregating. to 672.3 million euros and a net cash of 143.8 million euros. Increases of 62.6% and 27.3% respectively versus year end 23. Our net cash position benefited from the conversion into equity of 129.1 million euros of basis 2017 and 2020 convertible notes during the year. In July, we strengthened our liquidity position further via the offering of 350 million of 4.5% senior notes. Next, I'd like to speak a little bit about the current market environment and our strategy. The timing and trajectory of a mainstream assembly market upturn is difficult to predict at present. Leading analysts such as Tech Insights expects a strong rebound in 25 and 26 of 21% and 31% respectively. However, the assembly market still suffers from post-pandemic excess capacity, which has taken more than two years to approach equilibrium levels. Semiconductor unit growth and capacity utilization rates have improved since 2022, but at a less rapid rate than previously anticipated by analysts. That being said, we believe it likely that a mainstream assembly recovery will begin in the second half of 25. Its trajectory will depend on demand trends in each of our end markets and the ultimate course of global trade restrictions. Investments in BASIS future growth continued in 24 as reflected in higher development spending and a planned expansion of our advanced packaging production capacity in 25. We increased R&D spending by 31.7% this year to offer customers a complete portfolio of leading-edge assembly solutions for next-generation 2.5 and 3D architectures. In addition, progress continued on our hybrid bonding agenda as revenue approximately tripled versus 23 and orders more than doubled. In addition, adoption increased from 9 to 15 customers during Q4 24. Some notable hybrid bonding bookings included the first order from a Japanese semiconductor producer and from a Korean IDM for advanced logic applications. Now a few words about our guidance. We entered the year 2025 with cautious optimism based on strong momentum in our advanced type placement solution for AI applications, partially offset by ongoing weakness in mainstream automotive, smartphone, industrial, and Chinese end-user markets. We believe that the commercial viability of our hybrid bonding process technology has now been confirmed by some of the industry's leading players and research institutes. Significant incremental adoption is anticipated to occur over the next three years as the technology is increasingly used in HBM 4 and 5 memory stacks. ASIC logic devices, silicon photonics, co-packaged optics and consumer mobile computing applications. For Q1-25, we forecast that revenue will decrease between 0 and 10% versus the fourth quarter last year, and for gross margins to remain in the range between 63 and 65%. Aggregate operating expenses are forecasted to rise 10 to 20% versus Q4, levels primarily due to higher strategic consulting costs. 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.

Thank you, sir. Ladies and gentlemen, if you wish to ask a question, please signal by pressing star 1 on your telephone keypad. If you wish to cancel your request, please press star 2. And please make sure the function is switched off to allow your signal to reach our equipment. Again, it is star one to ask a question. And our first question is from Alexander Duval from Goldman Sachs. Please go ahead. The line is open.