Good morning, and welcome to the CUNITY first quarter 2026 conference and webcast call. Currently, all callers have been placed in a listen-only mode, and following management's prepared remarks, the call will be open for your questions. I will now turn the call over to Meg Miller, Vice President of Global Communications. You may begin.

Thank you, and welcome to our first quarter 2026 earnings call. I'm joined by John Kemp, Unity's Chief Executive Officer, and Mike Goss, Unity's Interim Chief Financial Officer. Earlier today, we issued our earnings release, along with the supplemental slide presentation, which can be found on our Investor Relations website. Before we begin, I'd like to remind you that today's discussion will include some forward-looking statements. These statements represent our best view of predictions and expectations for the future, but numerous risks and uncertainties make our actual results to differ. Please refer to our earnings release and SEC filing for a discussion of these risks.

We'll also be discussing certain non-GAAP financial measures, and I encourage you to read our earnings materials for information regarding our non-GAAP financial measures and reconciliation to the most directly comparable exact measure and now it's my pleasure to turn it over to john thank you for joining this morning our strong performance this quarter demonstrates how community creates value first through a powerful integrated portfolio second a differentiated ability to innovate alongside our customers roadmaps and third leadership in advanced materials that are foundational to the exponential growth in AI and emerging technologies. For decades, Moore's Law has been the driving force behind technological advancement in the semiconductor industry. Innovation meant shrink, smaller transistors and higher density to improve performance and power. Now those gains are increasingly constrained by physical limits. Shrink built the last era. Stack will define the next. That means even while shrink remains important, we're moving from 2D designs to 3D architectures, stacking chips to unlock the next frontier of computing. That shift from flat to vertical elevates the importance of materials, integration, and reliability, and ultimately redefines where value and leadership are created. This inflection plays directly to CUNITY's strengths and how our business segments work together to power the stack. In semiconductor technologies, customers rely on our materials to smooth, shape, and precisely engineer surfaces at the wafer and device level. This is the foundation of performance, yield, and reliability. As AI investments accelerate, stacking creates increasingly complex advanced packages and systems with a multiplier in both process steps and material intensity for every additional layer. And the challenge shifts from individual steps at the chip level to managing integration at scale. That's where our Interconnect Solutions business segment builds on Semi's work, addressing system-level constraints like power efficiency, heat management, signal integrity, and long-term reliability, all while capturing more content as stacks grow taller. Together, CUNITY brings these strengths into one differentiated platform, helping customers build, scale, and operate next-generation computing platforms. With these unique capabilities, supported by our local-for-local model that keeps us closely connected to customers around the world, CUNITY is well-positioned as the partner of choice for many of the industry's leading fabricators and OEMs pioneering next generation technologies. This advantaged position reinforces our confidence in delivering sustainable long-term value for our shareholders. That long-term confidence is reflected in our near-term execution. Let's turn to our first quarter results where we delivered our eighth consecutive quarter of strong, profitable organic growth. Organic sales increased by 17 percent versus 2025, with double-digit growth across both segments. Adjusted operating EBITDA increased by 22 percent, and adjusted earnings per share grew by 33 percent. These results clearly reflect the ongoing momentum from AI exposed end markets and next generation technologies, along with our ability to drive strong operating leverage. In SEMI, we grew organic sales 12% year over year, driven mostly by advanced nodes, led by advanced logic and high bandwidth memory. We also benefited from ongoing improvements in mature nodes and NAND. Across the board, FAB utilization rates continue to improve in line with our expectations. As wafer mix continues to shift toward the leading edge with more advanced nodes, we're well positioned for continued growth, driven primarily by increasing content per wafer. Higher node complexity brings more CMP process depth, incremental demand for our most advanced clean, and requires increasingly intricate lithography patterning. Volumes at 3 nanometer continue to scale, and we're starting to see meaningful activity at 2 nanometer. beyond this we're increasingly excited about angstrom era nodes like 16 14 and 10 which is the primary focus of our r&d engagement with customers and keeps us tightly aligned to their road maps in ics we had an exceptional quarter with organic sales growing 22 percent year over a year driven by content and share gains in advanced packaging and interconnects and thermal management advanced packaging is expected to be a core growth driver for years to come as the move from shrink to stack accelerates as i mentioned earlier more sophisticated architectures means larger package sizes higher layer counts and more acunity content in every device in advanced interconnects we're winning new business with ai pcb fabs for the leading hyperscalers and premium smartphone oem where signal integrity and reliability requirements continue to rise as data center demand accelerates managing heat is a critical objective our industry-leading thermal management portfolio is designed to remove heat across the entire system supporting increasing content and higher device performance. Our growth momentum is a testament to the depth of our customer relationships and the strength of our innovation engine. We're in a strong process of record, or POR, position across both segments due to the investments we're making in R&D and innovation, giving us visibility into our growth potential over the next few years. Built on decades of partnership, we've earned our customers' trust, and with it comes a clear mandate to innovate and to move fast, because in this industry, that's what it takes to win. During the quarter, we underscored that trust through several key announcements, including a new collaboration with NVIDIA focused on advancing materials research and development for next-gen AI, high-performance computing, and advanced packaging. By combining our materials expertise with NVIDIA's modeling and simulation capabilities, we're working to accelerate development and improve manufacturing capabilities. That same commitment to collaboration and execution is reflected in our inclusion in Apple's American manufacturing program, recognizing our role as a long-term trusted partner. To support customer roadmaps and supply ramps for the most advanced chips, we continue to execute our capital allocation strategy to further bolster manufacturing capacity and strengthen our local-for-local operating model. In the U.S., we expanded our footprint with the March opening of a 385,000-square-foot facility in Delaware. And in In Taiwan, we announced a new state-of-the-art site with advanced production, clean rooms, warehousing, and R&D labs scheduled to be fully operational in early 2027. These investments significantly expand our manufacturing capacity for critical C&P materials, strengthen our operational agility, ensure global and regional capacity, and advance collaborative innovation with customers. Before I hand things over to Mike, I want to touch on end market demand and the broader macro environment. Customers remain highly focused on supply chain resilience at a time when wafer capacity remains tight. As customers allocate capacity to the highest value applications, our portfolio mix is increasingly moving beyond consumer electronics to attractive, high-value applications like data centers, autonomous driving, and aerospace and defense. And while there's been a considerable attention on the impact of memory pricing on demand for devices like smartphones and PCs, our results this quarter demonstrate we aren't seeing a material impact for two important reasons. First, our exposure is primarily to premium devices, which tend to be more resilient. And second, AI-led infrastructure growth is more than offsetting any softness in consumer electronics. Whether chips are going to data centers, satellites, or smartphones, we're well-positioned to pick up that demand given the depth and breadth of our portfolio. With that, I'll turn it over to our interim CFO, Mike Scott, to discuss our financial results and provide an update on our full-year guidance.

Thanks, John, and good morning, everyone. We had an excellent start to the year with first quarter net sales of $1.3 billion, up 18% year-over-year and 11% sequentially. On an organic basis, sales improved 17% versus the same period last year. Adjusted operating EBITDA was $411 million, up 22% year-over-year. Adjusted operating EBITDA margin expanded more than 125 basis points versus the same period last year to 31.3%. Adjusted EPS for the quarter increased 33%, $1.08. This was a record quarter opportunity, driven by continued momentum in our AI-linked businesses and strong execution by our team. We're very pleased with the performance, which requests a combination of strong volumes, operating leverage, and favorable mix. Then we provide a bit more detail on how each business segment performs during the quarter. Semiconductor technologies perform in line with our expectations, with net sales of $722 million, with year-over-year organic sales growth of 12%, led by demand for advanced logic and HBM chips. We saw fraud-based strength across several product lines, with particularly strong gains in CMC consumables. The first quarter was strengthened by $20 million of inventory restocking, particularly in mature nodes, following customers' careful inventory management in the fourth quarter. This pattern was similar to what we observed in the first quarter of 2025. Our adjusted operating EBITDA margin in the segment was 36.4%, up 130 basis points sequentially from the fourth quarter, driven by improved manufacturing efficiencies and favorable product mix. In interconnect solutions, impressive execution delivered net sales of $593 million with organic growth of 22%, led again by advanced packaging and interconnects and thermal management. Sales in these core areas grew more than 50% year-over-year as we capitalized on demand tailwinds from data centers and benefited from ramps on shorter cycle POR winds from last year. Adjusted operating EBITDA margin for ICS was 28.5%, an improvement of 280 basis points sequentially. This was driven by strong operating leverage on higher volumes and favorable mix. In line with our expectations for the quarter, we generated adjusted free cash flow of $28 This reflects strong operating cash flow, partially offset by annual variable compensation. Capital expenditures were reflective of our capacity expansion efforts, which included about one-third of our $61.5 million investment in the new Taiwan facility. Overall, balance sheet remained strong, and we're committed to maintaining a returns-focused capital allocation framework. As a reminder, our first priority is to reinvest organically in the business to sustain above-market growth. We continue to anticipate elevated capbacks investment for the full year at approximately 9% of sales. driven by investments to strengthen our local-for-local footprint and key geographies and support our transformation initiatives. Over the longer term, we expect CapEx to be in the 6% of net sales range. We also remain committed to returning capital to our shareholders through our quarterly dividend, and during the quarter, we repurchased $25 million worth of shares to offset normal equity solutions. We're well-positioned from a liquidity perspective with approximately $850 million in cash and short-term investments at the end of the first quarter. Total debt outstanding is $4 billion with a net debt leverage of 2.2 times. We maintain balance sheet flexibility to focus on the areas that add value in the long term. Our transformation plan announced last quarter is underway in tracking the plan. We have work streams dedicated to three focus areas, driving productivity and quality improvements, strengthening commercial and innovation excellence and advancing our local-to-local operating model. We continue to expect these actions to deliver approximately 100 million dollars of either run-made benefit by the end of 2028. Separately, our transformation is further supported by continued progress on IT separation. This parallel effort is well underway as we continue to make steady progress on PSA exits across our digital infrastructure. Turning to guidance, building on our strong first quarter results we expect a normal seasonal increase in the second quarter the sequential net sales growth in the mid single digits supported by strong demand trends including continued momentum for ai driven applications high performance computing and advanced connectivity more specifically in semiconductor technologies we expect sequential net sales to be roughly flat with a margin profile in the mid 30s for ics we expect sequential net sales growth in the high single digits range with margins in the mid to high 20s from a mixed perspective across both segments we continue to see end market strength similar to the first quarter combined with a normal seasonal increase in consumer electronics in addition we're also making incremental investments to support strong customer ramps or seeing additionally considering the ongoing conflict in middle east we're taking a prudent approach to planning while continuing to and strengthen our portfolio positions to meet customers' needs. We're seeing modest upward pressure with certain raw materials, energy, and logistics costs. To mitigate these impacts, we're leveraging our local-to-local operating model, working closely with a diversified supplier base across regions, and adjusting inventory levels for critical materials. Based on what we see today, we don't expect any near-term operational disruption. Where we are seeing incremental increases in input or logistics costs we're taking targeted pricing actions to pass those through in a disciplined manner the external environment remains dynamic and we are continuing to monitor how things evolve today overall demand signals remain strong and customer conversations are constructive with this in mind we're raising our full-year guidance to reflect the strength we realized in the first quarter and our forecast for the remainder of 2026. Our guide incorporates our expectations of MSI labor start growth to the single digits to high single digits, increasing from our previous expectations of mid-single digits. This underscores our confidence in the underlying demand signals we're seeing. Net sales is now expected to be $5.225 billion to $5.375 billion, a 5 percent increase at the midpoint. We assume geopolitical inflation headwinds, or some raw materials, and logistics costs have approximately $20 million for the remainder of 2026 based on current conditions, but expect to largely offset these through pricing actions with some timing variability. Adjusted operating EBITDA is now expected to be $1.535 billion to $1.625 billion, a 4% increase at the midpoint. Adjusted earnings per share is now expected to be $3.80 to $4.14, a 6% increase at the midpoint. And finally, adjusted free cash flow is now expected to be $500 to $600 million, a 10% increase at the midpoint. Overall, we expect double-digit net sales and EBITDA growth year over year.

As we move through the year, we're maintaining a disciplined and measured approach in the second half balancing execution with visibility customer alignment and flexibility to support long-term value creation john back to you thanks mike before we open the call for q a i want to underscore a few things as we mark six months as an independent company first we're pleased with our progress executing our growth strategy delivering meaningful innovation to solve our customers toughest challenges scaling our platforms in step with their growth and allocating capital to the highest return opportunities we're excited by the traction we're seeing as our strategy translates into differentiated offerings increasing demand and solid performance strategy points the way forward but culture is what drives results CUNITY's team is aligned on the goal, focused on getting things done, and committed to the outcomes. We're looking forward to executing against this path with discipline and focus, driving durable growth and long-term value for our investors. That wraps up my remarks. Operator, let's open the call for Q&A.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you need to remove yourself from the queue, press star 2. At any time, if you should need operator assistance, press star 0. Please be advised that today's call is being recorded. In the interest of time, please limit to one question and one follow-up. We'll take our first question from Chris Parkinson with Wolf Research. Please go ahead. Your line is open.

Thank you so much. When we think about the trajectory for the balance of the year, obviously there have been a lot of moving parts, even within the last few weeks. Could you speak to your assumptions in terms of what appears to be an accelerating mainstream recovery and how that should affect your second half numbers as well as the trajectory in 27? And then also, John, I think most of us are aware you've been investing in a lot of new products and those seem to be ramping on a preliminary basis. If we could just get the framework for those as well.

Thank you so much.

Thanks, Chris. I appreciate the questions. Maybe starting with the first question on mainstream demand. You know, we're excited by the progress that we're seeing from some of our mainstream customers. Obviously, it's been kind of a slow recovery in that part of the market, but we're seeing very constructive signs and signals. I think the commentary in the most recent earnings seasons has been positive, and we see utilization rates continue to increase on the mainstream logic side, really kind of from the mid-70s last year into the high 70s, maybe even a little bit into the low 80s, kind of in the first quarter, and we expect to see continued sequential improvement as we move through the remainder of the year. Obviously, there is a bit of an impact from memory market on demand in some of these areas. But what we're really excited about is the increasing positive demand that we're seeing from AI applications starting to extend in the mainstream realm. We've heard lots of customers talking about edge computing and physical AI over the last few weeks and the growth that they're anticipating from that. We think that that's going to power kind of the next wave of AI-led infrastructure demand, and we're excited to see that progress on the recovery on the mainstream side. Maybe moving to your second question around, you know, new product introductions. We're really excited by the continued progress that our innovation and R&D and commercial teams are having on securing new process of record, or POR wins. 2025 was a record year for us, and we saw POR wins in every line of business. That momentum has continued into the early part of this year where we continue to see wins across the most advanced technologies in both segments. To give you a couple that I'm really excited about, you know, obviously we launched some new CMP materials across both pads and advanced cleans, targeting, you know, the most advanced semi-nodes, two nanometer, and even starting to get into some of the Angstrom-era nodes of 16, 14 and forward. We've seen some nice wins in our lithography space in both ARF as well as some EUV sublayers to help facilitate the continued growth of the most advanced lithography. And then on the interconnect side, we continue to see new wins in AI PCB boards with fine lines and interconnect, copper solder and interconnect products, as well as continue to see progress advancing our thermal management portfolio across thermal pads, liquid gap fillers, and phase change materials. So a lot more to come on innovation, but it's really powering the strong momentum that we're seeing in both segments.

Great.

And just as a quick follow, just switching over to the ICS side of it, I mean, I think it's a lot of what we hear out of the data centers, hyperscalers and, you know, GPUs seems to be pretty much heading in the right direction. Can you just speak to, it seems like kind of the content which you can, in terms of your tangible addressable market, it seems to be further evolving, even since what you put out at the CMD last year. Can you just speak to further kind of the broader opportunity, how you see kind of the run rate growth, you know, over the next few years, and whether that actually differs and it's higher than it was even, you know, six to nine months ago?

Thank you so much.

Yeah, thanks. Obviously, the ICS business continues to outperform significantly and really driven by the strong alignment that it has to AI-led demand. And that's really fueled by the exposure that we have to kind of the three highest growth areas in the interconnect segment, advanced packaging, thermal management, and AI PCBs. And in the first quarter, we saw those three areas collectively grew by more than 50% in the quarter year over year, benefiting from those tend to be a little bit shorter cycle wins. And so as we win new business, they tend to scale up a little bit faster. And so what you're seeing is the results of some of the wins that we had last year starting to scale and really contribute to growth. We expect advanced packaging and thermal in this part of the market to remain the fastest growing parts of our portfolio. We're investing in line with our customers to meet their capacity as they put more capacity in the ground, especially for things like advanced packaging, and they continue to build out more advanced print and circle board architectures to be able to meet the rising demand. and we're investing in line with that to be able to meet that demand. I don't think we're at the point where I want to update guidance on the ICS segment, but we're excited by the continued momentum that we're seeing and we think it'll be a strong contributor to our growth going forward.

Much appreciated.

Thank you. We will move next with Melissa Leathers with Deutsche Bank.

Please go ahead hi thank you so much and congrats on the really nice start to the year and I really like this narrative of shrink versus stack I think that's an interesting way to frame it I guess to that point and kind of following up on the last question the AI PCB design ones that you talked about it seems like those PCBs need to be upgraded significantly as we look at like the architectures of some of these new processes coming out so is there any other color you can give on like what the direction of travel is in that market? What kind of visibility do you have? How deep are your customer engagements on that PCB side? And then I noticed it kind of seems like maybe it's the third fastest grower behind advanced packaging and thermals. Is that the right way to think about it? Or I guess any other color on the AI PCBs I think would be helpful.

Sure, Melissa, and thank you. You know, I think the progress that we're seeing on the AI PCBs is maybe an underappreciated part of the growth story, So what we're seeing is as the OEMs are looking to drive performance reliability in their system-level designs, they need the capability to get all of that computing power effectively distributed throughout the data center. And what that requires is an increase in the number of layers so that you can get all of that data rapidly transmitted into the system and so the increase in the layer count as well as trying to it's very similar to what you're what we're what we've seen on the semiconductor side in terms of increasing density they're trying to do the same things on the circle board and the way to increase density on the circle board is a combination of both shrink and stack so you're putting smaller lines and called finer lines and spaces on the circle board while you're also adding more layers to the architecture. In both dimensions, both of those trends require more advanced technology to allow the overall board to meet the performance requirements of the application. And in both situations, both finer lines as well as in higher layer counts, that plays into the strengths of the CUNITY portfolio and really where our metallization business has been positioning itself for several years. We put a concerted effort on this part of the market going all the way back to the downturn in 2023, where we shifted our R&D portfolio significantly to focus on this part of the market. And it's paying dividends today. And we're continue to be excited by the roadmaps that we have with our leading PCB customers as we help them to scale kind of the next generation formats for printed circle boards as well as the next generation formats for advanced packaging.

Perfect. Thanks for that. And then as we look at your growth over this year and maybe next year, you talked about some of your capacity plans in your prepared remarks, but at a high level, how do we think about your ability to supply at this point?

Are there any areas where you may be constrained or accelerating capacity build outs and i guess is there any like kind of revenue framework that we should be thinking about for how much you can supply um and where your limits are yeah thanks melissa so when we think about our our supply and demand planning you know we do that in lockstep with our conversations with customers on what their demand ramps are expected to be over the over the next few years and Typically, we can invest inside of the investments of our customers, so that gives us good, and usually after we've already had POR wins. So these tend to be very high-return projects that we have confidence because we've already won a lot of the business that will then be used in these facilities. Our local-for-local operating model has been a strategic advantage for us where we continue to invest to build out capacity and capabilities in all of the key geographies that are important to our customers. If you look at the last few years, we've added capacity in every single one of our semiconductor product lines to make sure that we had capacity not only to meet demand as it returned to the record 2022 levels, but even beyond. And that's kind of underscored by the announcements that we made in the first quarter with the new capacity in the U.S. and Taiwan. You know, both of those are bringing kind of state-of-the-art production capabilities, especially for the fastest-growing part of our semi-segment, which is C&P consumables. It gives us access to cleanroom space, to production capacity, to R&D labs. And we're excited. What I would say about the scale-up is in Delaware, we've got our first line already operational and in customer qualifications. Obviously, in Taiwan, we'll complete the equipment installation in the Fed out this year and expect that site to be fully operational in early 2027. On the interconnect side of the house, we typically, you know, The capacity investments there are typically relatively small and quick to scale up. So we can do those in fairly modular incremental investments that are kind of well inside the capital allocation framework that Mike talked about in the prepared remarks.

Thank you. Thank you. We will move next with Bhavesh Modaya with BMO Capital Markets. Please go ahead.

Hi. Good morning, John. question on your agreement signed with NVIDIA and Apple recently. If you could talk a bit more about around the scope and longevity of these agreements, and I'm curious how this plays in your relationship with DSMC, and does it make it easier to win qualification for the next set nodes? Is it a part to potentially getting more market share over time? Happy to hear your thoughts on that.

Yeah, thanks, Bhavesh. Good question. When I think about these agreements, to me, what I think it underscores is really the attention that materials providers are starting to see from across the technology and the semiconductor ecosystem. Whereas in the past, you know, a lot of the conversations would be just directly with our manufacturing partners and the folks who are buying the transactional customers. What you're seeing is that when you get to things like signal reliability, power efficiency, thermal management, that the technology and the process complexity are so great that the materials innovation angle is starting to kind of emerge as one of the important drivers of system level performance. And so you're starting to see, we're starting to see OEMs get involved in material selection and design, and they're looking for capable materials innovation partners to help them advance what they're great at, which is the application engineering. So CUNITY brings that materials innovation expertise that can complement the fantastic application engineering capabilities of many of our OEM partners. And that partnership allows us to speed up the pace of innovation and to make sure that that we're keeping pace with the technology roadmaps in the industry. It reinforces the partnership that we have with customers, but it's more an extension of those partnerships, because now we're involving the rest of the value chain in those holistic system-level design decisions, which creates great opportunities for us, because our portfolio is fairly uniquely positioned to be able to solve the problem at a system-level design.

Got it. And maybe as a follow-up, a separate question. There are reports of multiple Chinese players trying to scale up their memory production to benefit from the ongoing shortage in the industry. Just given your presence there, could you talk about if you are seeing that impact, and are you exposed to this dynamic in the second half?

Yeah, good question, Babesh. So on the memory market, look, I think a lot of folks are trying to allocate capacity to the highest return opportunities. We're certainly seeing that on the utilization trends for both DRAM as well as NANDs. Just to give you a couple of data points there, on DRAM, you know, we kind of finished 2025 in the mid-80s and have been kind of trending up into the high 80s, and we continue to expect to be in the high 80s, maybe even reaching above 90% as we get into the second half of the year. And nice progression in NAND as well from kind of the mid to high 70s last year, kind of in the high 70s and progressing quickly, maybe even into the low 80s as we get into the second half of the year and start to see continued recovery in that part of the market. As it relates to the memory market in China, you know, we don't have most of our China semiconductor exposure is really on the mature logic side because memory usually converts more quickly to the most advanced technologies. And, you know, in China, you know, we're not selling into the most advanced technologies in China. So we don't have a lot of in-depth conversations with the memory part of the market in China.

Thank you.

We're almost next. with john roberts with misuho please go ahead hi john mike this is sort of from uh in case of john um my sequence is uplifting evita margins um as we think about q2 i know there are moving parts on from trade inflation but how are you thinking about uh margins in q2 and then i have a follow-up as well good question we had a little bit of feedback on your line but i think i think i you asked about even a margin heading into second quarter so uh you know at a headline level we're really excited about the first quarter performance and even margins were above 31 driven really uh

by continued momentum as we said in our prepared remarks across across those segments uh we see that you can see that trend continuing as we head into second quarter uh you know specifically around second quarter to the couple pieces that i would highlight we we do expect the volume benefits to continue with a little bit of slight headwind from product mix especially on the icf piece of the business as that transitions into the consumer electronics uh time of the year and that's a normal seasonal shift that we see additionally you're coming out of the spin we did have a lot of planned uh hiring post spin that that took a little longer than we originally expected but it did ramp up nicely and we got good traction in that hiring in the back part of first quarter and obviously that'll that'll carry forward into second quarter additionally with all the growth that we are seeing we're continuing to make additional hiring investments to support that growth and so you know if i click up a notch overall i do expect you know semi to continue to be in the mid-30s uh from a market perspective and ics continues to perform nicely in the mid to high 20s uh on an even larger basis and all of it's continuing to support that continued growth that we're seeing thank you and um can you provide an update on um hiring of the head of semiconductor and permanent cfo sure i'll go ahead and take that one what i would say is we're making great

progress for uh both of those roles we've got a really strong pipeline of qualified candidates that we're actively engaging and evaluating. We're obviously working with as much speed and urgency as we can, and we're fortunate to have a couple of really qualified executives who are doing a terrific job helping to run the business as we work through this process. And I look forward to sharing more about those appointments as we get here into the future.

Thank you.

Thank you. we will move next with edward yang with oppenheimer please go ahead hi john mike uh congrats on a nice quarter uh first question is on interconnect solutions uh you know ebitda margin there was a record by a wide margin it sounds like that's sustainable but just wondering where that ceiling can go um and on the flip side why was semiconductor ebitda margin down year over year?

Maybe I'll go ahead and start and then ask Mike to chime in on the interconnect margins. I think what we're seeing there is a continued benefit of really strong volumes and nice operating leverage, fixed cost absorption, combined with a really favorable product mix. I think as we've talked about in the past, the fastest growing parts of that segment, advanced packaging, the AI PCBs and thermal management, also happen to be the highest value parts of the business. So as that growth continues to scale and comprise a larger percentage of the overall total, you're seeing some natural mix benefits, and that's kind of flowing through. And we talked about before, you know, ICS continuing to have the most opportunity for kind of ongoing margin an increase. You're seeing it in the first quarter as we go from kind of our prior constructive in the mid-20s to start to get to the mid to high 20s, and we expect that trend to continue going forward.

Mike, maybe I'll turn it over to you. Yeah, thanks, Don. You know, on the semi-margin, as we said in our prepared remarks, the semi-business performed nicely and in line with our expectations in the quarter. From a margin perspective, we saw a little bit of mature and early stocking in the first quarter, and that product mix can always impact margins in any space. But from a broader, maybe give you a little bit of color more broadly, from a geographic perspective, we continue to see nice performance across the broader part of Asia with a couple highlights from Taiwan in 25% year-over-year on a top-line basis, and Korea up 17% year-over-year. America's performed nicely as well. So looking ahead to next quarter, I continue to expect to see nice performance out of semi from a good perspective. And as we talked about before, their margins should be needed to be in the mid-30s spaces.

And maybe I would just add there, as we think about that, the mid-30s is a really healthy place to be for the semi margin, given the increased level of investment that the most advanced technology requires to go from the innovation side as well as to scale up the level of quality and performance necessary to support the high-volume manufacturing in our customers.

Okay, that's very helpful, Collard. And follow-up question is just, you know, obviously the memory market is working out very well for you right now, but there is some labor unrest at one of your Korean memory and foundry customers, and just wondering what you're hearing from that partner, and do you have any contingency plans in place if there are any walkouts or disruptions there? Thank you.

Yeah, good question. I think we're all watching the news over in Asia closely on that front, and I don't know that I have anything new or different to share than what's already kind of out there in the public sphere. You know, I would say our conversations with kind of all of our customers, particularly those in Asia, are happening on a daily or sometimes even multiple times a day where we're working with them on kind of what they're seeing and what the needs are. You know, we're always, you know, one of the things that we have as part of our normal ongoing process is a constant practice of doing kind of rigorous scenario planning so that we can be agile and resilient in any type of environment. And certainly if the last couple of years have taught us anything, it's to be prepared for unexpected shock that can happen at a moment's notice. And I think our teams have done a really nice job of adapting and responding to kind of whatever the markets and the external environment has thrown at them. And we'll continue to use that discipline around scenario planning and rapid response and agility in the environment here as we go forward. Okay.

Thank you.

Thank you. Once again, if you would like to ask a question, please press star and one on your keypad now. We will move next with Frank Mitch with Firmium Research. Please go ahead.

Thanks so much, and a nice start to the year. You know, you guys had your conference call on Feb 26. Obviously, the world changed on Feb 28, but I'm not sure that that would be a huge impact for your business. You know, you offered kind of a soft guide on 1Q and obviously came in materially better than that. What may have surprised you in March, if that is indeed true? And if so, you know, does that continue in April and beyond?

So I think as we think about the first quarter and the guide for the second quarter, I think at a high level, Frank, I would say that SEMI largely performed in line with our expectations. The one part of the SEMI market that did a bit better than we were expecting was really kind of in the mature logic space where we saw some restocking and some other more constructive comments than maybe that we were expecting before. And then really most of the outperformance in the first quarter was really driven by the strong growth from the interconnect solution segment and the continued strength in advanced packaging, thermal management, and AIPPB. But even the broader interconnect space was relatively healthy. So the magnitude of the strength there compared to what I would call kind of historic seasonal patterns was remarkable. And we see that momentum continuing in the second quarter, and Mike gave a little bit of color there on what we expect in each of the segments going into the second quarter with kind of roughly flat revenue for the semiconductor segment and another high single digit sequential increase from the interconnect segment with the start of some of a build in some of the consumer electronics applications in our portfolio. Mike, anything else you'd add there?

Yeah, I think the thing that I would add to that, John, is that there's a couple points. Sitting here in second quarter, what we do see is, you know, continued strong order books, which is always great to be able to say. Union positive demand signals from our customers and the continuation of the node transitions that John mentioned earlier along with continued POR wins. You know, from a perspective of the second half, you know, we might prepare very much. We talked about the guidance of the issue today, having, you know, taking a very prudent view on that from an inflation perspective. And so as we monitor that closely and proceed to the second half, if conditions, I'll say, improve, we have a chance to do even better.

Gotcha. Understood. And, listen, I appreciate the increase in the free cash flow guide for the year. Obviously, your rebata guide also went up, and so it was kind of in lockstep with that. How do you think about working capital use throughout the year? Obviously, a bit of a use queue. How do you think about that playing through the year?

Yeah, thanks for the question. Yeah, free cash flow in the quarter was right in line with our expectations. As you know, we always prioritize high-return capital investments to make sure we're continuing to have the leading edge capacity to match the strong demand that we continue to see from our customers. And you saw that in our recent announcement that John mentioned earlier in Taiwan and here in Delaware. For a third of that, Taiwan expansion in the first quarter of CapEx, which is just a timing of when that will close. And working capital specifically, you know, yeah, it's an area that we're obviously focused on every day, every week. Inventory remains healthy. IDF sits a little over 100 days, and DSO and DPO are nicely in line with where we'd expect them to be. And more broadly, inventory turns are sitting right around six times, which is right where we like it. So from a patient through the year, as sales grow, obviously, you know, I would expect AR to go with that a little bit. but it's something that we're watching, and I think we're in good shape and a working capital perspective.

Thank you so much.

Thank you. We will move next with Arun Fasible Mouth Fund with RPC Capital Markets. Please go ahead.

Great. Thanks for taking my question. I hope you guys are well. Congrats on the very strong results here to start the year. So my first question is really, you know, in the past, I think you've indicated that MSI would be a good metric to track to kind of gauge your performance, and you'll perform above market growth. Clearly, you're well above that, especially in ICS. Do you still figure that to be the best kind of metric to use? And along those lines, are you still thinking about, you know, stronger than mid-single-digit growth in MSI this year? And if that is the case, how does that kind of change your mix? Would AI, HPC, and data center maybe be more like 20% to 20% of your business mix, up from 15%, you know, maybe just even a year ago? How should we think about that?

Yeah, thanks, Aron. Good question. So, look, I think that, you know, MSI continues to be a really good metric for CUNITY, particularly as it relates to the semiconductor segment. We have increased our expectations for MSI for the year, as Mike alluded to in their prepared remarks, going from our prior expectations of mid-single digit to now in that mid-single digit to high single digit. And I think there's room to do even better than that as we move through the second half of the year and watch how things evolve. But as we mentioned, you know, the order books remain strong and our customer conversation remain constructive. When you think about other metrics, obviously, Interconnect has been growing much, much faster over the last several quarters. You know, we've tried to look for different kind of external benchmarks and metrics to be able to correlate that to historically, you know, we've looked at kind of the one that's probably the best has been the PCB area metric. That kind of fits in, you know, last year it was kind of in the low double-digit range. This year it's kind of in that mid-single-digit to high single-digit in a very similar spot to where MSI is. So not a lot of spread between kind of the published PCB metrics versus the MSI metrics. Outperformance in ICS continues to be led by, you know, those three growth areas that I talked about before. And I think that will increasingly shift our end market mix in a favorable direction. What we're seeing is obviously the strong growth in data centers. I think we're, as you correctly presumed in your question, I think we're approaching to where that's probably 20% of the portfolio here. We typically will rack and stack that at the end of the year. But I think we're certainly approaching that, and we're seeing kind of an increase from other parts of the industrial economy, whether that's automotive with nice, strong increases in autonomous driving trends, with communication infrastructure, aerospace, and defense, as we see nice diversification throughout the industrial economy. and we expect that to accelerate as AI demand starts to penetrate into those other end markets. And obviously the offset there is probably a little bit of slower growth more broadly in the consumer electronics space, although we continue to do pretty well for us because our exposure is really connected to the premium side of that market, which has been much more resilient.

And thanks for that. And then you mentioned the growth and the move towards 2 or 3 nanometer as well as 12, 14, and 16 angstrom technologies. Maybe you can just give us some brief details there. Are you well positioned? Would you have to make more investments on that side? And what is the timing on some of those developments kind of starting to contribute to profitability at CUNITY?

Yeah, thanks, Arun. And look, we're really excited by the technology roadmaps in both of our segments, the semi-roadmap. We're really excited. Obviously, we're seeing a lot of benefit from the 3-nanometer volumes that continue to scale. We're hearing great things and excited by the start of 2-nanometer technologies as we get to the second half of the year. Similarly, on the memory side with HBM4, you know, a lot of very positive commentary in the first quarter and in the months that have followed around the progress that our customers are making with HBM4. And we're excited to see those continue to progress in coming years. I'll leave the exact commercialization timing to kind of the announcements of what some of our customers have said. The investments that we've made over the last couple of years, the investments that we're making this year, give us a tremendous amount of confidence that we'll have sufficient capacity to scale up those next-generation technologies with our customer. In particular, I think it's a real benefit for both the polishing and patterning parts of our business. So whether it's CMP or lithography, we're well-positioned from a capacity point of view. We continue to see nice wins on POR positions for those Angstrom-era nodes. and as those commercialize over the next few years, you know, we'll have sufficient capacity to meet the growth of our customers.

Thanks.

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