Kulicke and Soffa Industries, Inc. (KLIC) Q1 2026 Earnings Call Transcript
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Overview
The earnings call revealed strong financial performance, with a 27% increase in semiconductor revenue and improved gross margins. Despite a high tax rate, operational efficiency and cost control are evident. The company has optimistic guidance with expected growth in the second half of FY '26, driven by advanced packaging and memory market advancements. The Q&A session highlighted promising technological developments and strong utilization rates, although some uncertainties remain. Given the market cap, the stock is likely to react positively, with a prediction of a 2% to 8% increase.
Key Financial Performance
General Semiconductor Revenue Increased by 27% sequentially and over 90% from the same period last year, driven by both technology and capacity needs of customers.
Memory Market Utilization Rates Ball bonding utilization rates exceeded 85%, up from the mid-70% range last year, indicating a healthy capacity environment for NAND assembly solutions.
Automotive and Industrial Revenue Experienced a 15% sequential revenue improvement in the December quarter, despite ongoing industry headwinds.
Aftermarket Products and Services Revenue Increased by 14% from the same period last year, reflecting increased production activity and improved utilization across the high-volume installed base.
Gross Margins Came in at 49.6%, improved sequentially due to customer and product mix as well as revenue recognized from systems previously expensed.
GAAP Earnings Delivered $0.32 of GAAP earnings, driven by improved gross margins and cost control.
Non-GAAP Earnings Delivered $0.44 of non-GAAP earnings, supported by operational efficiency and revenue growth.
Operating Expenses Total operating expense was $81.1 million on a GAAP basis and $74.2 million on a non-GAAP basis, reflecting a focus on operational efficiency.
Tax Expense Came in at $5.7 million, with an anticipated effective tax rate above 20% over the near term.
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Operating Highlights
Advanced Packaging Solutions: Demand for advanced packaging solutions, including Fluxless thermocompression bonding tools, remains robust. Strong growth is anticipated in this segment for fiscal 2026.
HBM System: Shipped the first HBM system to a large memory customer during the December quarter. Fluxless thermocompression is positioned as a strong alternative to hybrid bonding for next-generation HBM needs.
ACELON Dispense System: Introduced the latest ACELON dispense system in November at Productronica. Received positive customer feedback and multiple customer engagements.
General Semiconductor Market: Revenue increased by 27% sequentially and over 90% year-over-year, driven by technology and capacity needs. Utilization levels remain over 80%.
Memory Market: Demand declined sequentially after a 60% increase last quarter. Ball bonding utilization rates exceed 85%, indicating a healthy capacity environment for NAND assembly solutions.
Automotive and Industrial Markets: Revenue improved by 15% sequentially in the December quarter. Long-term trends remain positive despite near-term headwinds.
Operational Efficiency: Gross margins improved to 49.6% due to customer and product mix, as well as revenue from previously expensed systems. Focus remains on cost control and operational efficiency.
Market Positioning: Kulicke and Soffa is either a dominant incumbent leader or aggressively taking market share in all key markets.
Growth Strategies: Focused on ramping production and executing multiple growth strategies across key markets, including advanced packaging, advanced dispense, and power semiconductor opportunities.
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Risk or Challenges
Automotive Market Headwinds: Residual headwinds in the automotive market may persist near term, and industry headwinds are anticipated to linger through fiscal 2026.
Memory Market Demand Variability: Demand sequentially declined due to product and customer mix, and the concentration of memory customers creates demand variability quarter-to-quarter.
Tax Expense and Effective Tax Rate: Tax expense came in at $5.7 million, and the effective tax rate is anticipated to remain above 20% over the near term, which could impact financial performance.
Operational Efficiency and Cost Control: The company remains focused on operational efficiency while supporting a growing set of opportunities, which could strain resources and impact execution.
Advanced Packaging and Technological Transitions: The company is driving parallel technological transitions within advanced packaging, advanced dispense, and power semiconductor, which could pose execution risks.
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Guidance & Outlook
Demand and Utilization Trends: Demand is improving faster and stronger than expected, with favorable utilization trends in general semiconductor and memory markets. Automotive market headwinds may persist near term, but long-term trends are positive.
Revenue and Growth Projections: Revenue for the March quarter is expected to increase by 15% sequentially to $230 million, with gross margin of 49%. Non-GAAP operating expenses are projected at $73 million, with GAAP EPS targeted at $0.53 and non-GAAP EPS at $0.67.
Advanced Packaging Growth: Strong growth anticipated in advanced packaging opportunities, including thermocompression bonding (TCB) and vertical wire solutions, driven by demand for high-bandwidth memory (HBM) and AI-related workloads.
Automotive and Industrial Outlook: Industry headwinds expected to persist through fiscal 2026, but long-term growth is anticipated due to increasing semiconductor content per vehicle and growth in battery and plug-in hybrid markets.
Power Semiconductor Opportunities: Market-leading solutions are expanding to meet growing power efficiency requirements in automotive, mobility, and data centers. Transition to more efficient materials and complex assembly techniques is driving demand.
Advanced Dispense Systems: Positive customer feedback on the new ACELON dispense system, with multiple customers engaged and preparations underway to support initial interest.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What is the outlook for the remainder of the fiscal or calendar year in terms of overall demand and top-line growth?
A:The company expects Q3 to be sequentially better than Q2, with the second half of FY '26 projected to be 15% to 20% better than the first half.
Q:Can you elaborate on high-bandwidth flash (HBF) and its potential benefits for K&S?
A:HBF is a TCB play designed to merge NAND-level capacity with HBM-class performance, targeting to match HBM bandwidth to 8 to 16x capacity. It is in early stages, and K&S is exploring this technology with a few customers, likely using their TCB tool, APTURA.
Q:What is the next milestone for high-bandwidth flash (HBF)?
A:The next milestone is likely shipping a qualification system before receiving a purchase order (PO).
Q:Is the 15% to 20% growth projection for the second half of FY '26 conservative?
A:The projection is based on current visibility, with high utilization rates (85%-90% in China). While there is potential upside, the company is cautious due to macroeconomic uncertainties.
Q:What are the revenue expectations for TCB and FTC for this fiscal year?
A:TCB revenues are expected to exceed $100 million. The plasma solution for FTC is still under qualification, while the formic acid solution has been qualified and is in high-volume production.
Q:What is the commercialization timeline for high-bandwidth flash (HBF)?
A:HBF is expected to commercialize around CY '27, as it is still in early stages and requires standardization through JEDEC.
Q:What is the timeline for high-bandwidth memory (HBM) to move from evaluation to volume production?
A:Volume production for HBM is expected in FY '27, with potential purchase orders in FY '26.
Q:What is the adoption timeline for vertical wire technology?
A:Vertical wire technology is expected to gain traction in the latter half of FY '26, with significant expansion in FY '27.
Q:What is driving the recovery in the data center segment despite weak PC and handset outlooks?
A:The data center segment is driven by strong AP portfolio for chiplet and heterogeneous logic applications, increased use of enterprise SSDs in data centers, and high-volume traditional assembly technologies like ball bonders.
Q:What are the utilization rates in key regions?
A:China is over 90%, the rest of Asia is around 80%, Southeast Asia is in the 70% range but improving, and North America and Europe are about 80%.
Q:What are the gross margin expectations for FY '26?
A:Gross margins are expected to be around 49% to 50%, driven by demand for high-performance ball bonders, increased volume absorption, and cost control measures.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the plasma solution qualification timeline for FTC and used vague language regarding potential upside to the 15%-20% growth projection for the second half of FY '26.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Conference Wong
Form SEC
Greetings Instructions
Instructions reminder
Interim Chief
Non measure
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Strategic Planning
Wong Interim
Wong market
addition statement
condition Form
discussion statement
filing information
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KLIC Transcript
Kulicke and Soffa Industries, Inc. (KLIC) Q1 2026 Earnings Call Transcript
Positive2-5
The earnings call revealed strong financial performance, with a 27% increase in semiconductor revenue and improved gross margins. Despite a high tax rate, operational efficiency and cost control are evident. The company has optimistic guidance with expected growth in the second half of FY '26, driven by advanced packaging and memory market advancements. The Q&A session highlighted promising technological developments and strong utilization rates, although some uncertainties remain. Given the market cap, the stock is likely to react positively, with a prediction of a 2% to 8% increase.
Kulicke and Soffa Industries, Inc. (KLIC) Q4 2025 Earnings Call Transcript
Positive11-20
The earnings call summary and Q&A highlight strong financial performance with EPS and share repurchases, robust memory market recovery, and high utilization rates. Despite challenges in automotive and industrial sectors, improvements are expected. The company's FTC and vertical wire technologies show promise, and management provides optimistic guidance for FY '26. Analysts' sentiment is generally positive, with concerns addressed effectively. Given the market cap and overall positive outlook, a 2% to 8% stock price increase is likely.
Kulicke and Soffa Industries, Inc. (KLIC) Q3 2025 Earnings Call Transcript
Unknown8-6
The earnings call summary shows mixed signals: revenue decline and EPS loss indicate challenges, but share repurchase and optimistic guidance on new products suggest potential growth. Q&A insights reveal industry headwinds, especially in automotive, but also highlight technological advantages and strategic product launches. The market cap suggests moderate reaction. Overall, the data supports a neutral sentiment, with minor positive and negative factors balancing each other.
Kulicke and Soffa Industries, Inc. (KLIC) Q2 2025 Earnings Conference Call Transcript
Unknown5-7
The earnings call reveals significant financial challenges, including restructuring costs, a GAAP EPS loss, and decreased revenue and margins. Market uncertainties, particularly in Southeast Asia, and reduced NAND demand further exacerbate the situation. While there are some positive developments, such as a share repurchase program and future growth in power semi, the immediate outlook remains uncertain. The Q&A section highlights management's lack of clarity on future improvements and capacity constraints, contributing to a negative sentiment. Given the company's market cap, a negative stock price reaction of -2% to -8% is expected.
KLIC Slides
Kulicke & Soffa Q4 2025 slides: Revenue jumps 19.6%, technology transitions fuel outlook2025-11-19
Kulicke & Soffa Q3F25 slides reveal path to recovery with improved margins despite revenue challenges2025-08-06
Kulicke & Soffa Q2 2025 slides: $84.5M loss on EA Equipment exit, tech transitions ahead2025-05-06
KLIC Report
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