BE Semiconductor Industries

Good morning, good afternoon, ladies and gentlemen, and welcome to BASI's quarterly conference call and audio webcast to discuss the company's 2025 fourth quarter and full year 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 Flickman, Chief Executive Officer, and Mrs. Andrea Cobb, Senior Vice President, Finance. Currently, 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 part without written permission from the company. 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 Basie's current views and assumptions regarding future events, many of which are by nature inherently uncertain and beyond Basie's control. Actual results may vary 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 new information or future developments, nor does BASI undertake any obligation to update the forward-looking statements. I would now like to turn the call over to Mr. Richard Dickman. Please go ahead.

Thank you. For today's call, we'd like to review the key highlights for our fourth quarter and year ended December 31st, 2025 and update you on the market, our strategy and outlook. First, some overall thoughts on the fourth quarter. Basis revenue, gross margin and operating expense development in the fourth quarter 25 exceeded the favourable end of prior guidance. Revenue of €166.4 million and orders of €250.4 million increased by 25.4% and 43.3% versus the third quarter of 2025, due principally to a broad-based increase in demand by Asian subcontractors for 2.5D data center applications, renewed capacity purchases for photonics applications, and a significant increase in hybrid bonding orders. Net income of 42.8 million euros increased by 69.2% versus the third quarter of 25, due to higher revenue, increased gross margins from a more favorable product mix and lower than anticipated operating expense growth. Basie's progress in 2025 reflected the favorable influence of increased AI infrastructure spending on our business development. of 685 million euros increased by 16.8% versus 2024 due to strength in AI, related 2.5D demand for data center applications by Asian subcontractors and renewed capacity purchases for photonics applications. Growth accelerated in the second half of the year with orders increasing 63.6% versus the first half of 25. Orders for AI applications represented approximately 50% of our total orders in 25, and revenue from basis computing end-user markets grew by approximately 40% of revenue in 2024 to 50% in 2025. For the year, revenue of €591.3 million decreased by 2.7% versus 2024 due to lower shipments for mobile, automotive and industrial end-user markets as a result of ongoing weakness in overall assembly markets. We continued to maintain attractive levels of profitability with gross operating and net margins realized of 63.3%, 29.3% and 22.3% respectively. Given profits earned in 2025 and our solid liquidity position, we will propose a cash dividend of €1.58 per share for approval at basis April AGM, which represents a 95% payout ratio. Liquidity remained strong at year end with cash and deposits of 543 million euros and net cash of 36 million euros increasing by 24.4 million euros and 43.8 million euros respectively versus September 30, 2025. We distributed 254.8 million euros in the form of dividends and share repurchases in 2025, roughly equal to levels of 2024. Next, I'd like to discuss the current market environment and our strategy. Tech insights currently forecast relatively flat assembly market growth between 24 and 25, driven by a push out of the anticipated assembly upturn from 25 to 26. However, they expect growth of 74% between 25 and 2030. Based on increased AI use cases and infrastructure spending, new product introductions, new fabs coming online and a recovery in mainstream assembly applications. We expect to significantly exceed such projected growth rates given our leadership position in advanced packaging. We are pleased with our operational progress in 2025 as we completed a comprehensive strategic plan review with enhanced revenue and profit targets and organized additional production capacity and infrastructure to help support that growth. We also experienced progress on our wafer level assembly agenda, as hybrid bonding adoption expanded to 18 customers, cumulative order grew to 150 plus systems, and new use cases were identified for cold package optics, ASICs and consumer applications. six integrated hybrid-bonding production lines were installed at a leading Logic customer, incorporating 30 BASI hybrid-bonders in collaboration with Applied Materials. The first 50 nm placement accuracy prototype system was also completed and available for customer qualification. Our position in the TC market was further enhanced as BASIC's TCnext adoption expanded to five customers for logic, memory and for tonics applications. In addition, our flip-chip and multi-module die-attached systems gained significant share in the market for AI-related 2.5D assembly structures, addressing the rapid growth in demand for data center and photonics capacity. Further, we successfully introduced a variety of next-generation die-bonding and packaging systems for each of our traditional mainstream markets as we prepare for the next market upturn. We see market conditions improving in overall mainstream assembly markets based on favorable semiconductor unit growth trends and a significant reduction of excess semiconductor inventory. Green shoots are appearing after an extended downturn of nearly four years in each of our principal end-user markets. Customer roadmaps also point to expanded adoption of wafer-level assembly over the next two years, related to hybrid bonding and TCnext adoption in HBM4, 4E, co-package optics, ASICs, and new high-performance computing and mobile introductions. In addition, recent announcements of substantial AI-related infrastructure investments are expected to increase demand for advanced packaging. Increased AI investment has created capacity shortages for 2.5D packaging, which has caused producers to secure increased production for many Asian subcontractors. Further, many new advanced packaging FABs are planned globally, which should increase demand for our advanced packaging portfolio. Now a few words about our guidance. We entered 26 with increased optimism based on strong order momentum experienced in the second half of 25, which has continued to date in the first quarter of 2026. Our current optimism is based on anticipated growth in three promising Basie revenue streams. 3D wafer-level assembly, AI-related 2.5D capacity, and more traditional mainstream assembly applications. Our optimism also relates to the significant increase in demand from Chinese subcontractors, as the country builds out its AI infrastructure. For the first quarter 26, we anticipate that revenue will increase between versus the fourth quarter of last year, with gross margins ranging between 63 and 65%, aided by improved revenue and a more favourable advanced packaging product mix. Operating expenses are anticipated to increase by 10 to 15%, as we maintain discipline in overhead growth, while continuing to increase development spending to support long-term growth opportunities. That ends my prepared remarks. I would like to open the call for some questions. Operator.

Thank you very much. Ladies and gentlemen, we are now ready to take your questions. As a reminder, you are limited to two questions per person. If you have a question, please press pound key five on your telephone keypad. The first question comes from Madeline Jenkins from UBS. Please go ahead.