BE Semiconductor Industries

Good morning, good afternoon, ladies and gentlemen, and welcome to BASI's conference call and audio webcast to discuss the company's 2025 third quarter results. You can register for the conference call or log in to the audio webcast via BASI's website, www.basi.com. Joining us today are Mr. Richard Blickman, Chief Executive Officer, and Mrs. Andrea Cook, 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 permission from the company. I will now hand the word over to Mr. Richard Blikman. Mr. Richard Blikman, go ahead.

Thank you. Thank you all for joining. I'd 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 BASI does not intend to update them in light of the new information or future developments, nor does BASI undertake any obligation to update the forward-looking statements. For today's call, we'd like to review the key highlights for our third quarter, and nine months ended September 30, 2025, and update you on the market, our strategy and outlook. First, some overall thoughts on the third quarter. Basie reported Q3 2025 revenue and operating results within prior guidance in an assembly equipment market, showing early signs of recovery. Order levels improved significantly, Q3-25 with bookings of 174.7 million euro, increasing by 36.5%, and 15.1% versus Q2-25. and Q3-24 respectively. For the quarter, revenue decreased by 10.4% and 15.3% versus Q2-25 and Q3-24 respectively, reflecting continued weakness in mainstream assembly markets, particularly mobile and automotive applications and lower hybrid bonding revenue. Operating income was at the high end of guidance, reflecting higher than anticipated gross margins and operating expense developments slightly better than forecast. The improved order outlook this quarter was principally due to a broad-based increase in dietetics bookings by Asian subcontractors for mostly 2.5D data center applications and renewed capacity purchases by leading photonics customers. We also noticed improvement in more mainstream electronics and automotive applications. A push out to Q4-25 of certain anticipated hybrid bonding bookings, limited even stronger order development during the quarter. Basis results for the first nine months of 2025 reflected similar trends experienced in Q3-25, with revenue of 425 million euros and orders of 434.6 million euros, decreasing by 6.4% and 6.5% respectively. versus the comparable period of the prior year. In general, weakness in mobile and automotive applications this year has been partially offset by significantly increased die-touch orders by Asian subcontractors for AI-related computing applications. Year-to-date 25 net income of 88.8 million euros decreased by 27.6%, versus the comparable 2024 period, primarily due to lower revenue, lower gross margins realized, principally due to adverse forex effects and higher interest expense net related to our senior note issuance in July 2024. Liquidity remained strong with cash and deposits of 518.6 million euros at September 30, increasing 28.4 million or 5.8% versus June 30 this year, due to cash flow from operations more than doubling versus the second quarter of this year. In addition, we completed our 100 million share buyback program October 25 and authorized a new 60 million euros program with an anticipated completion date of October 2026. Next, I'd like to discuss the current market environment and our strategy. Tech Insights currently forecasts assembly market growth of 1.8% in 2025. which is below last quarter's forecast of 9%, driven by a push-out of the anticipated assembly upturn to 2026. Forecast growth is focused primarily on AI and data center logic and memory applications. Tech Insights now expects cumulative growth in the period 2026-29 of 42% based on continued advancements in AI use cases, new product introductions in the 2026-28 period, and a cyclical recovery in mainstream assembly applications. We expect to exceed market growth rates given our leadership position in advanced packaging. The semiconductor market has shown signs of normalization with inventory to booking ratios improving from above 2 in 2022 to below 1.5 currently. In addition, interconnect unit growth has also rebounded, improving from a low of roughly minus 20% in October 2023 to approximately plus 7% currently. These indicators point to a more positive assembly equipment environment as we look ahead to 2026. BASIC continued to make progress in its wafer-level assembly activities in the third quarter, securing new customers and orders for both its hybrid bonding and TCnext systems. Hybrid bonding adoption expanded with the placement of orders in Q3 2025 by a new foundry customer. Progress also continues on integrated hybrid bonding production lines, with Intel now operating 6 Kinect lines with 30 hybrid bonding tools. Future hybrid bonding demand is also supported by recent announcements from AMD and Broadcom in collaboration with OpenAI. In addition, high-level discussions with major memory players are ongoing as HBM4 assembly processes start to take shape. TCnext's progress continued with a new order received from a fourth customer. The outlook for Basie's business in the second half of this year has improved based on third quarter order trends and continued order momentum to date in the fourth quarter. The improved outlook reflects increased demand for advanced packaging capacity, necessary to support the rapid expansion of data centers, software and next generation semiconductor devices required by the industry leading AI players. Advanced packaging is one of the key ways to achieve AI system differentiation, develop innovative consumer edge AI devices and provide the most energy efficient data center performance. Now a few words about our guidance. For the fourth quarter this year we anticipate that revenue will increase by approximately 15 to 25% versus the third quarter of this year due to increased bookings levels. Basis gross margin is anticipated to range between 61 and 63%. Operating expenses are expected to increase by 5 to 10% versus the third quarter due primarily to higher R&D expenses. That ends our prepared remarks. I would like to open the call for questions. Sorry, 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're limited to one question and a follow-up per round. If you wish to withdraw your question, please press key pound six on your telephone keypad. Our first question comes from BJ Skigdema from Bank of America. Please go ahead.