Greetings, and welcome to the Q3 2025 Quarter Results. [Operator Instructions] As reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joe Elgindy. Thank you. You may begin. Joseph E

Welcome, everyone to Kulicke & Soffa's Fiscal Third Quarter 2025 Conference Call. Fusen Chen, President and Chief Executive Officer; and Lester Wong, Chief Financial Officer, are also joining on today's call. Non-GAAP financial measures referenced today should be considered in addition to, not as a substitute for or in isolation from our GAAP financial information. GAAP to non-GAAP reconciliation tables are included within the latest earnings release and earnings presentation, both are available at investor.kns.com along with prepared remarks for today's call. In addition to historical statements, today's remarks will contain statements relating to future events and our future results. These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that may cause our actual results and financial condition to differ materially from the statements made today. For a complete discussion of the risks associated with Kulicke & Soffa that could affect our future results and financial condition, please refer to our latest Form 10-K and upcoming SEC filings for additional information. With that said, I'd now like to turn the call over to Fusen Chen for the business overview. Please go ahead, Fusen.

Thank you, Joe. Good morning, everyone. Over the coming quarters, we remain focused on extending our market access through ongoing technology transition, and we continue to be encouraged by greater core market improvements. As discussed last quarter, uncertainty beyond global trade has clouded near-term industry visibility although we continued to see steady core market improvement as expected. We do not expect near-term trade dynamic to materially affect our global business operation, although they do create additional uncertainty in customers and near-term capacity planning decisions. Despite this near-term headwind, we continue to remain cautiously optimistic as we continue to see more utilization improve in key regions. We also continue to work very closely with customers to support technology transition within advanced expense, vertical wire and thermal compression bonding or TCB, which I will provide an update on shortly. Working quarters, we generated revenue of $148.4 million, a loss per share of $0.06 and a non-GAAP earnings per share of $0.07. Our focus on efficiency, customer engagement and the execution has allowed us to exit expectations. Lester will provide an update on financial performance and the outlook shortly. As expected, the sequential revenue reduction into the third in quarter was largely driven by order hesitation within the automotive and the industrial market. We mentioned last quarter, this was a focus uniquely with a certain customer production facility in Southeast Asia, and we anticipate it will persist through the September quarters. We anticipate this softness is largely driven by trade uncertainty, is broadly affecting global automotive and the industrial supply chain and will create a slight headwind over the coming quarters. Regardless, this key market is supported by ongoing technology transition and above average growth rate. Despite the near terms, automotive-driven technology transition provides a long-term set of growing opportunity. For example, EV charging infrastructure is driving new equipment opportunity, and we anticipate charging-related infrastructures well exceeded a 20% CAGR over the next 5 years. Additionally, this ongoing growth is also driving the need for smarter and more efficient power semiconductor applications, which we are addressing with our growing base of pin-welding, Advance Dispense and clip-attach. Similar automotive and industrial, but less pronounced. Order hesitation was also apparent within the general conductor end market during the June quarters. More recently, we are encouraged by seasonal and the cyclical dynamic which are improving more with evaluation improvement within core region, and we anticipate both living and high volume market to improve through the September quarters. We remain very focused on both core market recovery and also new product momentum. We also experienced strong sequential demand increase in memory and are encouraged by improving conditions, recent price dynamics and emerging packaging format. We continue to be focused on driving share gain and expanding our reach into DRAM applications by enabling new packaging capabilities in high volume with our vertical wire solution and we indeed in edge application in future margin of HBM. Next, I would like to provide a brief status update on broader technology transition we are addressing through our Advanced Dispense, vertical wires, and the TCV portfolio. First, with Advanced Dispense we are continuing to see opportunity across key customers and end markets, while maintaining an aggressive product development pipeline. We have reached initial POs from end automotive OEM, several IDM and multiple offsets, which highlight the broader diversity of our solutions. The need for higher depreciation and more capable dispense system is broadening across end market. We look forward to expanding our portfolio to support this need, and we plan to introduce new Advance dispense capabilities in September at SEMICON Taiwan. Next, within vertical wire, market expectations remain on track. We continue to plan for initial higher volume production to begin in fiscal 2026 driven initially by an exciting technology transition within the memory market. Emerging on-device AI applications are demanding higher bandwidth. This market need is driving demand for transistor vertically stack, low-power dynamic memories. We have observed market reference such as mobile HBM, energy efficient HBM or low power wide or DRAM applications, which describe this new opportunity. This new format of low-power HBM is anticipated to increase bandwidth by 3 to 4x over existing low power demand. Vertical wire interconnect enabling and alternative, more cost-effective production process follows lower power HBM application. As a reminder, higher power data center HBM utilizes more cost through silicon via and thermal compression-based assemblies. We anticipate this new vertical wire based HBM will be adopt in broader driven application and eventually support higher transistor density requirement across broader general semiconductor applications. Finally, within [ TVD ] we continue to focus on many different applications for both larger end memory. Our Fluxless Thermo- Compression or FTC solution continue to be best in class and is increasingly positions to seamlessly integrate into a variety of applications and the customers' production flow. We have recently demonstrated new physical and chemical-based in-line material preparation capabilities, which further extend our leading FTC process. We are very good on how our existing chemical-based solutions have performed, which have enabled us to lead the initial market transition to Fluxless. This solution has allowed us to be first to high volume production, and we are currently supporting multiple large customers in mass production. We we are not pleased to offer a mix of physical and chemical based process within one solution to best shoot the widest variety of customer process flow and the market applications by adding in [indiscernible] wafer preparation capabilities to our leading chemical base process. Initial customer feedback has been positive, and we expect this new capability to be a market enabler, which lower barrier to entries as customer initial new production or expand their FTC capabilities. In addition to this new FTC solutions, we have also made progress within the high-power HBM market. We now expect to ship an initial FTC system by the end of calendar year 2025 to support the anticipated Fluxless transition within the HBM space. As we increase focus on emerging memory opportunity, we are confident our proven leadership in driving FTC adoption within leading a logic application provides a unique advantage to support leading memory application as it lays transition to final FTC based assembly. We are confident, we have the most robust and capable solution for leading-edge Thermo-Compression application and remain positive on our engagement, recent progress and long-term road map of this highly capable technology. We expect FTC solutions will outpace overall TCV growth, allowing us to extend our market shares over the coming years within both memory and the larger market. In summary, we continue to expand our market presence on multiple fronts and remain cautiously optimistic as key regions and the end market show size of cyclical improvement. While automotive headwinds are anticipated to linger into the September quarter, general semiconductor capacity transition and expansion, driven by China and Taiwan as well as the memory technology transition and price improvement are increasing our confidence in that outlook. It's continued to be a unique time in semiconductor assembly with a wide set of opportunity to be addressed. I look forward to updating our progress over the coming quarters, and I will now turn the call over to Lester to discuss the financial and outlook. Lester?

Thank you, Fusen. My remarks today will refer to GAAP results unless noted. Despite uncertainty regarding macro dynamics, we delivered revenue above guidance, continue to execute on those customer engagements and maintain an ongoing focus on cost control. Gross margin came in at 46.7%, and we delivered $0.07 of non-GAAP earnings per share. Total operating expense came in at $75.3 million on a GAAP basis and $68 million on a non-GAAP basis. Tax expense came in at $3.2 million, and we continue to anticipate our effective tax rate will remain above 20% over the near term. We are also positive on recent U.S. tax law changes and are in the process of evaluating the future impact on our tax rate. We have continued to opportunistically reduce shares outstanding by repurchasing approximately 668,000 shares equivalent to 1.3% of diluted shares during the June quarter. Since the first fiscal quarter of 2024, we have taken a more aggressive approach to delivering shareholder value directly. Over this 7-quarter period, we deployed over $270 million in dividend payments and open market repurchase activities. This has allowed us to repurchase over 5 million shares, nearly 10% of shares outstanding and currently offer a best-in-class dividend yield above 2%. Looking ahead, as Fusen mentioned, we are more positive on key end market improvements in general semiconductor and memory supported by renal utilization and pricing improvements. Automotive and industrial headwinds will likely persist over the coming months, although, we anticipate this softness to be short term. For the September quarter, revenue is expected to increase by approximately 15% sequentially to $170 million, with gross margins at 47%. Non-GAAP operating expenses are expected to be $68 million with GAAP earnings per share targeted to be $0.08 and non-GAAP earnings per share of $0.22. We are very focused to exit from this extended period a leaner and more growth-oriented organization. Today, we are either an incumbent leader or are aggressively taking significant market share in every key market served. We continue to ensure our highest potential opportunities are adequately resourced and our customer development efforts are on a positive trajectory. Although we remain cautiously optimistic as we look into fiscal 2026, end market visibility remains unclear. We continue to anticipate gradual recovery, with some potential minor seasonality anticipated in the December quarter. We look forward to demonstrating progress on Vertical Wire, Advanced Dispense and Thermo-Compression opportunities as we prepare for the broader core market recovery. K&S is very focused on executing our strategic priorities. We are confident with our capabilities and technology leadership, and we remain well prepared to navigate the near-term macro environment. This concludes our prepared comments. Operator, please open the call for questions.

[Operator Instructions] Our first question comes from the line of Krish Sankar with TD Cowen.

Nice to see sequential revenue improvement. I had 3 questions, Fusen or Lester Number one, I think you kind of mentioned about FY '26 gradual recovery, minus seasonality. So is it fair to assume, December quarter revenues have to be down sequentially? And then they grow from there, but are we going to be bouncing around these $170 million level for a few quarters or how to think about it?

You asked 3 questions, so we do it one by one. So first question is, I think at this moment, the industry utilization rate is quite healthy. Actually, it's a benefit improvement the general semiconductor. And the memory, I think it's also quite strong. But we're still facing the ongoing headwind in the automotive. The Q3 revenue we just published and we got $170 million for Q4. And in our review, we do believe probably Q1 of '26 first half always is weaker. But because we have high integration, right now, we fear, Q1 of '26 will be flat, I hope I answer your questions. And for the '26, again, '26, we do believe it's in a better cyclical position with a potential significant improvement in the industry iteration rate and affordable. We also have new product -- 3 new product, for example, clip-attach we wonder, this is for the [indiscernible] family for semiconductor. We also have improvement of Advanced Dispense vertical wire and TV growth, our TCV growth was due to industry future technology transition and potential in HBM. So we do believe probably first half of '26 will be flat to Q4 of our '25. And this industry already have a downtime facing our third quarter. So we do believe Q3 and Q4 will be up. So I hope I answer your questions.

Yes. That was very helpful, Fusen. So around $170 million for the next couple of quarters. I had some other quick questions. The second one is, I'm just kind of curious how to think about the impact of Intel CapEx cuts because you do have some pretty good Fluxless position there, some of the copper to copper, et cetera. So I'm just wondering, is that a headwind? Or have you seen any progress there? Or do you think that potential opportunity in the future for FTC is probably minimized with Intel? And then I have one last follow-up.

Okay. I think the engagements are still quite healthy, but I can only answer of course, the revenue compared to previous year will be down. So that's all I can say.

Got it. And the last final question, you said you're going to be shipping TCB or HBM end of this calendar year. Is this for HBM whole or is this one customer or how to think about it?

Okay. We do believe the next version of HBM is going to be [indiscernible] now. So currently, I think we have 2 customers. We are working with, but one of the customers, I think we will intend to system in calendar year, '25.

Our next question comes from the line of Tom Diffely with D.A. Davidson.

Yes. Curious, what are the utilization rates this quarter at your kind of core customers. And then what are the areas that's driving this incremental quarter-over-quarter here in the fiscal fourth quarter?

Tom, it's Lester. So utilization rate overall is about 81%. I think in the end markets, General Semi is around 83%. Memory is around 80%. We see growth in utilization in all the major end markets. Even although even though auto is still quite soft, utilization is below 70% there. But as far as what's driving it, it's basically general semi as well as memory. They've shown some -- they're the highest rising utilization rate. So I think that's basically is driving a particular general semi our sequential growth in the revenues.

Great. And then, Fusen, I was hoping you could just dig a little deeper into the Thermo Compression business. How big was it historically with fluxless and going into memory going forward, how big could it be a year or 2 down the road?

Okay. So actually, I will repeat 3 times already this year, previous quarter, we target a '25 as shipping. We are talking about $60 million to $70 million and next year, I think originally, we target $100 million. But with a fluctuate transition, and we real hard on actually and we believe we will have some upside -- but as the market grows, our target, actually, the memory market actually is higher, bigger than not right now. We intend 2028, we think the market will reach about $1 billion. We actually plan -- we have a plan and target about $250 million to $300 million in 2028. We believe at that time, the market will have size of about $900 to $1 billion.

Okay. And is the main advantage here on the cost side? You mentioned that obviously, you don't do too [indiscernible] deals with this technology. So is it really for lower-cost applications where you are benefiting the customer? Or is there a technology advantage as well?

I think it's really technology. we actually start with chemical base, they are 2 technology. And we are the leader. Actually, we can tell you -- at this moment, all the high-volume production production, high volume, actually, we are the only technology in high volume production. So -- and as you mentioned -- as I mentioned in my script, we are adding more capability. So we are quite positive about the transition to our Fluxfless. We are #1, and we intend to capture big market and after focus in larger, we will focus on it all as well as the HBM from here.

Our next question comes from the line of Charles Shi with Needham & Company.

Fusen, Lester, first one, I want to get buses, your soft guidance December quarter, meaning you don't have an official guide, but you did provide the direction. So the December quarter, how do I think about that the confidence level you have? Like is it -- you're basically guiding December maybe flattish. Is it the base stock orders on hand? Or how should I -- is it based on forecast, maybe you don't have all the orders on hand, but that may be coming along nicely. I want to gauge a little bit of confidence there.

Charles, this is Lester. So it's a combination of the things you mentioned, right? I mean, Fusen and I already mentioned earlier about the utilization rates being quite high, right? And I think over the last couple of quarters, we've seen utilization rate at a healthy level and it's increasing. Obviously, in normalized times, there would have been a ramped. But again, as we have mentioned several times, the tariffs are kind of creating a little bit of hesitation in our customer supply chain. As far as our confidence on why we think that again, we're not guiding. But as Fusen said, we think December quarter will be flat to our Q4, which is the time quarter. The reason is, yes, we do see higher order intake coming in. We do see a lot more increase from customers, and we're seeing, again, recovery in both end markets as well as regions that were a little slow over the last couple of quarters, right? So I think a combination of all those things makes us think that even with, again, usually December quarter, we have a little bit of seasonality, but we believe that all these factors, it should be, again, relatively flat from the September quarter.

Maybe a second question. I want to ask a little bit more about TCB, maybe this is more about technology. So Fusen, I think you mentioned about preparation, physical or chemical preparation. But kind of want to ask you what that means? Is it to preparation or it's a separate tool. And I think related to that, there has been a debate on TCB, the 2 approaches, the chemical approach, which is the approach you guys have on the plasma approach. So are you by saying physical preparation, are you talking more about the plasma approach you're developing? Or what is that? And on HBM high bandwidth memory, which technology you're proposing or you're going to evaluate with customers?

So Charles, as I mentioned, the industry, we have customers, and they are all in production. And the whole industry, the only technology in high-volume production actually is a chemical base. So actually, we are very proud in all the customer side, we have the mix production actually is a chemical. So the -- to answer your question actually is -- we also developed a physical [indiscernible] technology. This is really very old technology. Partner prior art in a semiconductor fab. But actually, both technology actually have a may. I'll give you an example. I think for the physical you need to think like soda AXA actually have a faster rate. But for the chemical, we are very confident. I think for the surface preparation especially interface. Interface integrity quality is the most important for the year. We are strongly confident. I think the chemical line is the best -- so right now, to answer your question, we have capability. Actually, we have done it and demonstrated and get the feedback is positive. It's actually we do in situ altogether. Integrate all this capability together in the system. So we're doing that actually our customer is so convenient to easily enter their integration and enable us to actually fight for the market shares in very of on wafer, home substrate and also maybe in the future are also HBM.

[Operator Instructions] Our next question comes from the line of Christian Schwab with Craig-Hallum.

Great on, at the end of the prepared comments, you talked about being well positioned taking market share. Can you elaborate on what products that you plan on gaining market share, auto, industrial, memory, et cetera, just give a clear answer to that, please?

So first one, I mentioned actually it's called clip page a tech and also ping weather. This is in our wishbone our family. This is especially for high-power semiconductor products, this will be very important, higher power semiconductor will be very, very important to show the significant growth in the next many, many years. So the second one is advanced discipline solution. expense actually is quite a big market. It's like $1 billion to $2 billion. And we are focused on precision dispense actually, 3 years ago, we acquired a company, and we do believe technology is differentiated and has a micro dispensing capability with the in-night inspection and also have a good availability, right? And we put this one actually is in the government platform of our company common platform. So we do believe our cost is very competitive and have differentiated products. And we will show actually the growth next year over here. And then vertical wire, I think when we talk about bottle actually probably close to 5, 6 quarters. I think finally, this will take off. When I mentioned -- I mentioned this product will be implemented into DDR5, as beginning -- but when people do this and a lot of people is encouraged because it's a stick DRAM die. And the bandwidth actually not like a high-power HBM and have a much wider man width. But this one can actually provide 3 to 4x of bandwidth increase compared to current a -- and the last 1 I mentioned, I think the TCB, I see a lot of discussion, and we are quite focused and we believe we can make traction on TCP.

Thank you, and we have reached the end of the question-and-answer session. And therefore, I'll turn the floor back to Joe Elgindy and for closing remarks. .

Thank you, Shmail, and thank you all for joining today's call. Over the coming quarter. We'll be presenting at several conferences -- as always, please feel free to follow up directly with any additional questions. This concludes today's call. Have a great day, everyone. .