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 2026 second quarter and first half 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 Blickman, Chief Executive Officer, and Mrs. Andrea Kopp, Senior Vice President of Finance. Currently, all participants are in a listen-only mode, and later we will conduct a question and answer session. 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 would now like to turn the call over to Mr. Richard Blickman.

Thank you. Thank you all for joining the call today. 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 basis 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 calls speak only as of this date. 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. For today's call, we'd like to review the key highlights of our second quarter, six months ended June 30, 2026, and update you on the market, our strategy, and the outlook. First, some overall thoughts on the second quarter and first half 26. BASI reported strong second quarter and first half year 26 results as favorable order momentum continued for both our traditional and wafer-level assembly systems. Revenue of euros 249.9 million increased by 68.7%, and 35.2% versus the second quarter last year and Q1 2026 respectively. Growth versus the second quarter last year was primarily due to increased AI spending for photonics, data center and hybrid applications as well as increased demand for mobile applications. Additional hybrid orders were received in the second quarter this year two repeat customers and one new hyperscaler customer. Similarly, orders of euros 292.9 million rose by 128.8% versus the second quarter last year and 8.6% versus the first quarter of this year. Of note, basis orders for the last 12 months increased to a record of euros 987.6 million Q2 net income of €89 million increased by 177.3% versus the second quarter last year and 72.5% versus Q1 26 as gross margins improved and operating expense growth was limited despite increased spending for development and customer support activities. Similarly, net margins increased to 35.6% versus 21.6% in the second quarter last year. For the first half year, basics revenue amounted to €434.7 million and net income of €140.6 million increased by 48.8% and 121.1% respectively versus The first half of 2025, primarily due to significantly expanded AI infrastructure spending, a modest recovery in traditional mobile and industrial markets, and disciplined overhead management. Similarly, net margins increased from 21.7% in the first half of 2025 to 32.3% in the first half of 2026, aided by improved gross margins and significant operating leverage in our business model as baseline operating expenses reduced from 30% of revenue in Q2 last year to 18.9% in Q2 26. H1 orders rose to euros 562.6 million, an increase of 302.7 million euros or 116.5% versus the first half of last year due to broad-based growth across all BASI end-user markets and products. Order growth was strong for photonics and data center applications and hybrid bonding capacity expansion for both current and next generation AI devices. We also received new orders for AI power management applications in the second quarter this year for multiple customers. Overall, we estimate that system orders for AI applications rose to approximately 60% in the first half of this year versus approximately 50% in the first half of 25 last year. In addition, we saw renewed growth for high-end smartphone applications in the first half of this year versus cyclical lows reached in 2025 due primarily to incremental capacity purchases and new product introductions planned for 2026. Our net cash position at the end of the second quarter 26 increased by 58.8% versus March 31st of this year to reach 164 million euros. Growth was primarily due to the conversion into equity of basis 175 million euros of convertible notes due to 2029 and strong cash flow from operations which offset the payment of 125.4 million euros for the annual dividend paid out in the second quarter of this year. Next, I'd like to discuss the current market environment and an update on our strategy. Overall, we see favorable industry conditions this year due to the ongoing AI infrastructure build, capacity shortages, particularly in memory and in co-ops, and co-ops-like and renewed unit growth for both AI and traditional mainstream end markets. Similarly, we see ongoing improvement in assembly equipment market conditions, as the impact of AI spending and recovery in traditional mobile, Industrial Applications becomes more apparent. The latest Tech Insights forecast calls for 53% market growth between 2025 and 2028. We expect to significantly exceed such projected growth rates given our leadership position in 2.5D and 3D advanced packaging and wafer-level assembly. We continue to execute well on our strategic plan presented last year for both revenue and cost initiatives. Orders have already exceeded peak levels from the last cycle and disciplined expense management has enhanced our profit potential. We are adjusting our operating model, supply chain and service support activities accordingly. Progress also continued on our wafer-level assembly agenda this year. Hybrid bonding customers adoption increased from 15 a year and 25 to 21 at the end of Q2 26. Use cases increased for logic, memory, co-package optics, and consumer applications and orders increased material versus the first half of 25. A significant new capacity was added. In addition, there were multiple new product announcements made this year related to data center and consumer CPU applications utilizing hybrid bonding. Progress also was made on our TCnext agenda with increased revenue and customer adoption versus the first half of last year. Now a few words about our guidance. We see order momentum continuing in the third quarter. of this year due to ongoing demand strength for current and future AI applications, as well as improvement in Bayes' traditional mainstream end user markets. Customers indicate that we are in a multi-year AI CAPEX cycle, further supported by increased demand for agentic AI applications, which are driving increased demand for data center CPUs and many of our advanced packaging systems. Basie's strategy is currently focused on expanding our opportunities in wafer-level assembly, increasing our penetration of coals, co-poles, and photonics markets and ramping our supply chain and service support capabilities in alignment with market conditions. Based on our backlog and feedback from customers, we anticipate that Basie's third quarter 26 revenue will increase by 10 to 15% versus the second quarter of this year. In addition, gross margins are anticipated to increase to a range between 63 and 65% due to a less favorable product mix than we had in the second quarter of 26. Operating expenses are anticipated to be flat to up 5% due primarily to increased development spending. That ends My prepared remarks. I would like to open the call for questions. Operator.

Ladies and gentlemen, we're now ready to take your questions. We kindly request that you limit your questions to one question and a follow-up. Our first question comes from Vijay Samama from Bank of America. Please go ahead.