Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kulicke & Soffa Industries Inc (KLIC, Financial) achieved their guidance midpoint and generated slightly more non-GAAP EPS than anticipated due to operational focus.
- The company observed ongoing utilization improvement across several key end markets, including general semiconductor, LED, automotive, and industrial sectors.
- Kulicke & Soffa Industries Inc (KLIC) has seen significant growth in their thermo-compression bonding (TCB) business, growing by 10 times over the past four years.
- The company is part of the US-Joint semiconductor consortium, which aims to establish a US-based R&D facility with advanced packaging capabilities.
- Kulicke & Soffa Industries Inc (KLIC) continues to support an industry-leading dividend program and has increased their share repurchase activity sequentially.
Negative Points
- Despite improvements, the high-volume solutions are still well below the normal demand levels considered sustainable for the broader industry.
- Automotive and industrial sectors faced headwinds earlier in the year, reducing wedge demand.
- The company experienced offsets due to well-known automotive and industrial headwinds, which impacted their overall performance.
- Gross margins were affected by product and customer mix, and the company anticipates an effective tax rate above 20% through the remainder of fiscal year 2024.
- The qualification process for new technologies, such as Fluxless thermo-compression, is lengthy and requires significant patience, impacting the speed of market adoption.
Q & A Highlights
Q: As you look at the gives and takes for the fiscal first quarter with the broad-based or coordinated recovery, how do you think about the impact of improving end markets versus relatively low utilization levels in most of the industry?
A: Last quarter, we expected a gradual recovery with slight improvement into September. Utilization rates went up but are still not high enough to trigger a broader recovery. At this moment, we see Q4 as flat compared to Q3. (Fusen Chen, CEO)
Q: Can you talk about how you envision the slope of recovery playing out, given uneven demand dynamics across end markets?
A: Over the past six quarters, our revenue has been quite flat. We see multiple end markets improving in coordination. For example, automotive and memory are picking up. We expect growth into Q1 of 2025, but it’s also possible to see flat or minor negative shifts in Q1 and Q2, with stronger recovery in Q3 and Q4 of 2025. (Fusen Chen, CEO)
Q: When you said December quarter flat versus September, was it for revenues or utilization rate?
A: It was for revenue. We guided $180 million for Q4, similar to Q3's $181 million. Utilization rates are inching up, with some areas already over 80%. We expect Q4 utilization rates to be in the high-70% range. (Fusen Chen, CEO)
Q: Historically, OSAT had an appetite to add capacity at around 90% utilization. Do you think recovery will be later next year until we get to 90%?
A: We believe 80% utilization triggers additional buys. We see OSAT starting to contribute, with memory OSATs also beginning to buy. (Fusen Chen, CEO)
Q: Can you talk about the status of the TCB qualification at the Taiwan foundry?
A: We have multiple projects in qualification, focusing on high-end products with Fluxless technology. Qualification takes time, but we expect early production for the first customer in the first half of 2025. (Fusen Chen, CEO)
Q: Are you still sticking with the forecast of $200 million in advanced packaging revenue for FY25?
A: Yes, our forecast includes TCB, vertical wire, and system-in-packaging, totaling close to $200 million. We will provide updates in the next couple of quarters. (Fusen Chen, CEO)
Q: Is there any shift between end markets or products for the next quarter, or will it be similar to this quarter?
A: It will be quite similar compared to Q3. (Fusen Chen, CEO)
Q: Are the five-year average segment numbers good on a go-forward basis, or are they over/understated?
A: We believe those numbers are good going forward on a five-year basis, with potential upside. (Lester Wong, CFO)
Q: What was the cost associated with Project W that was canceled last quarter, and have those expenses been reallocated?
A: There were minimal costs associated with Project W in Q3 and Q4. We have reallocated those resources efficiently to in-demand projects. (Lester Wong, CFO)
Q: What type of applications or end markets are people most excited about for a recovery in 2025?
A: We are looking at advanced packaging, wedge bonders for automotive and industrial, and ball bonders for general semiconductor, automotive, and AI. The application is broad, and we expect a broader recovery. (Fusen Chen, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
