BE Semiconductor Industries

Good morning, good afternoon, ladies and gentlemen, and welcome to Bayse's conference call and audio webcast to discuss the company's 2025 second quarter results. You can register for the conference call or log into the audio webcast via Bayse's website, www.bayse.com. Joining us today are Mr. Richard Blickman, Chief Executive Officer and Mrs. Andrea Coop, Senior Vice President Finance. Currently, all participants are in a listen-only mode. Later, we will conduct a question and answer session and discuss, 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 permission from the company. I would like to remind everyone that on 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 Bayes' current views and assumptions regarding future events, many of which are by nature inherently uncertain and beyond Bayes' 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 AFM. Such forward-looking statements, including guidance provided during today's call, speak only as of this date. and BASIE does not intend to update them in light of any new information or future development, nor does BASIE undertake any obligation to update the forward-looking statements. I would now like to turn the call over to Mr. Richard Flickman.

Thank you. Thank you all for joining us today. For today's call, we'd like to review the key highlights for our second quarter and six months ended June 30, 2025, and update you on the market, our strategy, and the outlook. First, some overall thoughts on the second quarter and the first half year 25. Basie reported the second quarter revenue, operating income, and net income of 148.1 million, 43.5 million and 32.1 million euros respectively. Revenue and operating results were at the midpoint of prior guidance in a mainstream assembly equipment market still affected by soft demand for mobile and automotive applications. Market development in Q2 this year was also affected by increased customer caution due to global trade tensions. Q2, 25 revenue and operating income grew sequentially by 2.8% and 10.7%, respectively, as we saw an increase in shipments to Asian subcontractors for AI-related data center applications, combined with a 4.3% decrease in sequential operating expenses. Orders for the quarter decreased by 3% versus the first quarter, as weakness in mainstream computing and mobile applications was partially offset by new orders for Basie's DCB-NEXT system. For the first half year, revenue of 292.2 million euros decreased by 1.8% versus the first half last year, reflecting broader assembly market trends as weakness in mobile and, to a lesser extent, automotive end markets will significantly offset by growth in hybrid bonding systems revenue, which more than doubled versus the first half last year. Orders decreased by 17% due to the timing of customer orders for hybrid bonding systems and a lack of new product introductions in high-end smartphones. The first half 25 operating and net income decreased by 8% and 16.2% respectively versus the first half last year, primarily due to lower revenue and a 2.7 point reduction in gross margin from a less favorable product mix. At first, net Forex effects from the decline of the U.S. dollar versus the Euro and increased interest expense related to basic senior note issuance in July last year. Liquidity remained strong with cash and deposits 490.2 million euros at the end of June 2025, increasing by 90.6% versus June 30, 24. The sequential decrease in cash and deposits at quarter end reflected the timing of the annual dividend payment along with the purchase of our Darwin Netherlands facility for 14.9 million euros. As of June 30, 25, 72.2 million euros of the current 100 million share repurchase authorization has been used to repurchase approximately 644,000 ordinary shares at an average price of 111.96 euros per share. As of June 30, 25, Basie held approximately 2 million shares in treasury, equivalent to 2.5% of shares outstanding. Next, I'd like to discuss the current market environment and our strategy. Tech Insights currently forecasts assembly market growth of 9% in 25, which is below last quarter's forecast of 13%. driven by a pushout of the anticipated mainstream assembly upturn to the second half of this year. Anticipated growth 25 is focused primarily on AI and data center logic and memory applications. They expect cumulative growth in the 26-29 period of 63%, based on continued advancement in AI use cases. new product introductions in 26-28 period, and a cyclical recovery of mainstream assembly applications. We expect to exceed market growth rates given our leadership position in advanced packaging. We believe the outlook for Basie's business in the second half of 2025 has improved in recent weeks based on customer feedback and order trends subsequent to quarter end. Extended CAPEX budgets for AI infrastructure have been confirmed by each of the leading industry players in recent quarters with new use cases emerging in cloud and edge computing along with co-package optics. Advanced packaging is one of the key ways to achieve AI systems differentiation, develop innovative consumer edge AI devices and provide the most energy efficient data center performance. Advanced packaging demand for AI applications remains strong given new device introductions expected 2026 to 2028 period. We believe we are well-positioned in the fastest-growing advanced packaging market segments, including data centers for Tonics AI-enhanced PCs and mobile devices and EV slash autonomous driving. As such, orders for hybrid bonding systems are expected to increase significantly in the second half 25 versus both first half 25 and second half 24. In both advanced logic and HBM4 memory applications, as customers advance their technology roadmaps for new product introductions in 26 and 27. Customer interest in our TCnext system for both memory and logic applications has also expanded significantly. TCnext cycle times have improved with shipments anticipated in Q4 this year from orders received in the second quarter this year. We also anticipate increased orders for 2.5D advanced packaging systems for AI-related data center applications from both global IDMs and Asian subcontractors. In addition, there are early signs of a recovery in our mainstream assembly markets, principally related to increased demand by Asian subcontractors for high-end mobile applications and high-performance computing applications for consumer markets. Now a few words about the guidance. For the third quarter 2025, we anticipate that revenue will decline by approximately 5 to 15% versus the second quarter of this year based on the order book at quarter end. However, orders in the third quarter 25 are expected to increase significantly on a sequential basis due to increased demand for hybrid bonding 2.5D advanced packaging applications. Basis gross margins is anticipated to decline to range between 60 and 62%, in the third quarter due to the adverse impact of a 12% decline in the value of the US dollar versus the Euro in the first half of 25. Operating expenses in the third quarter are expected to be flat, plus or minus 5% versus the second quarter, despite increased R&D spending. That ends my prepared remarks. I would like to open the call for some questions. Operator.

Ladies and gentlemen, we are now ready to take your questions. If you wish to ask a question, please press key pound five on your telephone keypad. We kindly remind you that you are limited to one question and a follow-up. If you wish to withdraw your question, please press key pound six on your telephone keypad.