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

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 transitions, 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 dynamics to materially affect our global business operations, although they do create additional uncertainty in customer and near-term capacity planning decisions. Despite this near-term headwind, we continue to remain cautiously optimistic as we continue to see utilization improve in key regions. We also continue to work very closely with customers to support technology transition within advanced dispense, 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 execution has allowed us to exceed expectations. Lester will provide an update on financial performance and the outlook shortly. As expected, the sequential revenue reduction into the third quarter was largely driven by order hesitation within the automotive and industrial markets. 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, which is broadly affecting the global automotive and 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 rates. Despite the near-term automotive-driven technology transition, it provides a long-term set of growing opportunities. For example, EV charging infrastructure is driving new equipment opportunities, and we anticipate charging-related infrastructures well exceed a 20% CAGR over the next five 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 to 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 cyclical dynamics which are improving with evaluation improvements within core regions, and we anticipate both living and high-volume markets to improve through the September quarters. We remain very focused on both core market recovery and also new product momentum. We also experienced a strong sequential demand increase in memory and are encouraged by improving conditions, recent price dynamics, and emerging packaging formats. 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 solutions and we indeed in edge applications in the future margin of HBM. Next, I would like to provide a brief status update on the 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 opportunities across key customers and end markets while maintaining an aggressive product development pipeline. We have reached initial purchase orders from end automotive OEM, several IDMs, and multiple offsets, which highlight the broader diversity of our solutions. The need for higher depreciation and more capable dispense systems is broadening across the 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 stacked, low-power dynamic memories. We have observed market references such as mobile HBM, energy-efficient HBM, or low-power wide 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 an alternative, more cost-effective production process follows lower power HBM applications. As a reminder, higher power data center HBM utilizes more costs through silicon via and thermal compression-based assemblies. We anticipate this new vertical wire-based HBM will be adopted in broader driven applications and eventually support higher transistor density requirements across broader general semiconductor applications. Finally, within TCV, we continue to focus on many different applications for both larger end memory. Our Fluxless Thermo-Compression or FTC solution continues to be best in class and is increasingly positioned 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 pleased with 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 are pleased to offer a mix of physical and chemical-based processes within one solution to best suit the widest variety of customer process flows and market applications by adding wafer preparation capabilities to our leading chemical-based process. Initial customer feedback has been positive, and we expect this new capability to be a market enabler, which lowers barriers to entry as customers initiate new production or expand their FTC capabilities. In addition to this new FTC solution, 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 our focus on emerging memory opportunities, we are confident our proven leadership in driving FTC adoption within leading logic applications provides a unique advantage to support leading memory applications as it transitions to final FTC-based assembly. We are confident we have the most robust and capable solution for leading-edge Thermo-Compression applications and remain positive on our engagement, recent progress, and long-term roadmap 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 end markets show signs 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 continues to be a unique time in semiconductor assembly with a wide set of opportunities 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 outlook.

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 expenses 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 seven-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 on exiting from this extended period as 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 that 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 in 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.

Our first question comes from Krish Sankar with TD Cowen.

Nice to see sequential revenue improvement. I had three questions, Fusen or Lester. Number one, I think you 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 this $170 million level for a few quarters or how to think about it?

You asked three questions, so we will 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 in 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 is $170 million for Q4. In our review, we do believe probably Q1 of '26 will be weaker. But because we have high integration, right now, we fear Q1 of '26 will be flat. I hope I answer your question. And for '26, again, we believe it's in a better cyclical position with a potential significant improvement in the industry integration rate and affordability. We also have three new products, for example, clip-attach, which is for the semiconductor family. We also have improvement in Advanced Dispense, vertical wire, and TCB growth, our TCV growth was due to the industry's future technology transition and potential in HBM. So we do believe probably the first half of '26 will be flat to Q4 of '25. And this industry already has a downtime facing our third quarter. So we do believe Q3 and Q4 will be up. So I hope I answered your question.

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 the 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 by the end of this calendar year. Is this for HBM as a 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 transformative. Currently, I think we have two 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 the overall utilization rate 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 though the automotive market is still quite soft with utilization below 70%. But as far as what's driving it, it's basically general semi as well as memory which have shown some of the highest rising utilization rates. So I think that is basically driving our particular general semi sequential growth in 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 two down the road?

I will repeat that this year we targeted shipping for 2025, aiming for $60 million to $70 million, and initially set a target of $100 million for next year. However, due to fluctuations in the transition, we are working hard and believe there will be some upside. As the market grows, particularly the memory market, our target is expected to be higher than it is currently. We plan to reach approximately $1 billion by 2028, with a target of around $250 million to $300 million in 2028. At that point, we anticipate the market will be valued at about $900 million to $1 billion.

Okay. And is the main advantage here on the cost side? You mentioned that obviously, you don't do too many 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; there are two technologies. And we are the leader. Actually, we can say, at this moment, all the high-volume production production, high volume, we actually are the only technology in high volume production. 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 Fluxless. We are number one, and we intend to capture a big market and then focus on larger applications as well as the HBM from here.

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

Lester, I would like to know your guidance for the December quarter. You mentioned you don't have an official forecast, but you've provided some direction. Can you elaborate on your confidence level for December? Are you suggesting it will be relatively flat based on stock orders you currently have, or how should I assess your confidence?

Charles, this is Lester. So it's a combination of the things you mentioned. Fusen and I have already mentioned earlier about the utilization rates being quite high. I think over the last couple of quarters, we've seen utilization rates at a healthy level, and it's increasing. Obviously, in normalized times, there would have been a ramp. 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 the December quarter will be flat to our Q4, which is the prior 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. So I think a combination of all those things makes us think that even with, again, usually Q4, we have a little bit of seasonality, but we believe that all these factors should keep it 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 I kind of want to ask you what that means? Is it preparation or is it a separate tool? And I think related to that, there has been a debate on TCB, the two approaches, the chemical approach, which 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 are you 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. Actually, the whole industry, the only technology in high-volume production is chemical base. So actually, we are very proud that on all the customer sides, we have the mixed production actually being done with chemical. To answer your question, we also developed a physical preparation technology. This is really a very old technology that has been seen prior in semiconductor fabs. But actually, both technologies have their merits. I'll give you an example. I think for the physical, you need to think like soda AXA actually having a faster rate. But for the chemical, we are very confident. I think for the surface preparation, especially interface integrity quality is the most important. We are strongly confident the chemical line is the best. So right now, to answer your question, we have capabilities. Actually, we have demonstrated and received positive feedback. We are integrating all these capabilities together in the system. So what we're doing is making it convenient for customers to easily enter their integrations and enable us to actually fight for market shares in various applications like wafer, home substrate, and potentially also HBM in the future.

Our next question comes from Christian Schwab with Craig-Hallum.

Great. At the end of the prepared comments, you talked about being well positioned to take market share. Can you elaborate on what products that you plan on gaining market share, auto, industrial, memory, etcetera? Just give a clear answer to that, please.

So first one, I mentioned actually it's called clip-attach and also pin-welding. This is in our wishbone family. This is especially for high-power semiconductor products, and these will be very important as higher power semiconductors will show significant growth over the next many years. So the second one is the advanced dispense solution. Dispense actually is a quite large market, around $1 billion to $2 billion. We are focused on precision dispense. Actually, three years ago, we acquired a company, and we do believe our technology is differentiated and has micro-dispensing capability with inline inspection and also buyability. We believe our costs are competitive and have differentiated products. We will show growth next year here. And then vertical wire, I think when we talk about bottle, it's probably close to five or six quarters. I think finally, it will take off. When I mention, I mentioned this product will be implemented into DDR5 as a beginning, but when people do this, a lot of people have been encouraged because it's a stick DRAM die. The bandwidth may not be as high as high-power HBM, but it will provide 3 to 4x of bandwidth increase compared to the current technology. And the last one I mentioned, I think the TCB— I see a lot of discussion, and we are quite focused. We believe we can make traction on TCB.

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