KULICKE & SOFFA INDUSTRIES INC

Previous wording

In addition to historical information, this filing contains statements relating to future events or our future results. These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are subject to the safe harbor provisions created by statute. Such forward-looking statements include, but are not limited to, statements with respect to our future revenue increasing, continuing or strengthening, or decreasing or weakening; our capital allocation strategies, including any share repurchases; demand for our products, including replacement demand; our research and development effort; our ability to identify and realize new growth opportunities; our ability to control costs; and our operational flexibility as a result of (among other factors):

Current wording

In addition to historical information, this filing contains statements relating to future events or our future results. These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are subject to the safe harbor provisions created by statute. Such forward-looking statements include, but are not limited to, statements with respect to our future revenue increasing, continuing or strengthening, or decreasing or weakening; our capital allocation strategies, including any share repurchases; demand for our products, including replacement demand; our research and development effort; our ability to identify and realize new growth opportunities; our ability to control costs; our expectations regarding our wind down activities related to Project W and the impact of the cancellation of Project W on our results of operations and financial condition; and our operational flexibility as a result of (among other factors):

Previous wording

From time to time, our customers may request that we deliver our products to countries where they own or operate production facilities or to countries where they utilize third-party subcontractors or warehouses as part of their supply chain. For example, customers headquartered in the U.S. may require us to deliver our products to their back-end production facilities in China. Our customer base in the Asia/Pacific region has become more geographically concentrated over time as a result of general economic and industry conditions and trends. Approximately 89.9% and 89.1% of our net revenue for the three months ended December 30, 2023 and December 31, 2022, respectively, were for shipments to customer locations outside of the U.S., primarily in the Asia/Pacific region. Approximately 46.2% and 32.8% of our net revenue for the three months ended December 30, 2023 and December 31, 2022, respectively, were for shipments to customers headquartered in China.

Current wording

From time to time, our customers may request that we deliver our products to countries where they own or operate production facilities or to countries where they utilize third-party subcontractors or warehouses as part of their supply chain. For example, customers headquartered in the U.S. may require us to deliver our products to their back-end production facilities in China. Our customer base in the Asia/Pacific region has become more geographically concentrated over time as a result of general economic and industry conditions and trends. Approximately 86.2% and 92.5% of our net revenue for the three months ended March 30, 2024 and April 1, 2023, respectively, were for shipments to customer locations outside of the U.S., primarily in the Asia/Pacific region. Approximately 48.6% and 32.1% of our net revenue for the three months ended March 30, 2024 and April 1, 2023, respectively, were for shipments to customers headquartered in China.

Previous wording

To limit potential adverse cyclical, seasonal and macroeconomic effects on our financial position, we have continued our efforts to maintain a strong balance sheet. As of December 30, 2023, our total cash, cash equivalents and short-term investments were $709.7 million, a $49.7 million decrease from the prior fiscal year end. We believe our strong cash position allows us to continue investing in product development, pursuing non-organic opportunities and returning capital to investors through our share repurchase and dividend programs. Please see “Liquidity and Capital Resources” for more information.

Current wording

To limit potential adverse cyclical, seasonal and macroeconomic effects on our financial position, we have continued our efforts to maintain a strong balance sheet. As of March 30, 2024, our total cash, cash equivalents and short-term investments were $634.7 million, a $124.7 million decrease from the prior fiscal year end. We believe our strong cash position allows us to continue investing in product development, pursuing non-organic opportunities and returning capital to investors through our share repurchase and dividend programs. Please see “Liquidity and Capital Resources” for more information.

Previous wording

As discussed in Note 1: Basis of Presentation of the Notes to the Consolidated Condensed Financial Statements, the segment-related information within Management's Discussion and Analysis of Financial Condition and Results of Operations for the three months ended December 31, 2022 has been revised to correct certain erroneous conclusions about the Company’s operating and reportable segments during prior periods. Accordingly, the following discussion and related tables on Net Revenue, Gross Profit Margin and Income/(Loss) from Operations will reflect the four reportable segments of (1) Ball Bonding Equipment, (2) Wedge Bonding Equipment, (3) Advanced Solutions, and (4) Aftermarket Product and Services (“APS”) and a separate “All Others” category.

Current wording

As discussed in Note 1: Basis of Presentation of the Notes to the Consolidated Condensed Financial Statements, the segment-related information within Management's Discussion and Analysis of Financial Condition and Results of Operations for the three and six months ended April 1, 2023 has been revised to correct certain erroneous conclusions about the Company’s operating and reportable segments during prior periods. Accordingly, the following discussion and related tables on Net Revenue, Gross Profit Margin and Income/(Loss) from Operations will reflect the four reportable segments of (1) Ball Bonding Equipment, (2) Wedge Bonding Equipment, (3) Advanced Solutions, and (4) Aftermarket Product and Services (“APS”) and a separate “All Others” category.

Previous wording

The following tables reflect our income from operations for the three months ended December 30, 2023 and December 31, 2022:

Current wording

The following tables reflect our income/(loss) from operations for the three and six months ended March 30, 2024 and April 1, 2023:

Previous wording

Our net revenue for the three months ended December 30, 2023 decreased as compared to our net revenue for the three months ended December 31, 2022. The decrease in net revenue is primarily due to lower volume in Wedge Bonding Equipment, Advanced Solutions and All Others and partially offset by the higher volume in Ball Bonding Equipment, as further outlined in the following tables presented immediately below.

Current wording

Our net revenue for the three and six months ended March 30, 2024 decreased as compared to our net revenue for the three and six months ended April 1, 2023. The decrease in net revenue is primarily due to lower volume in Wedge Bonding Equipment, Advanced Solutions and All Others and partially offset by the higher volume in Ball Bonding Equipment and APS, as further outlined in the following tables presented immediately below.

Previous wording

The following tables reflect net revenue for the three months ended December 30, 2023 and December 31, 2022:

Current wording

The following tables reflect net revenue for the three and six months ended March 30, 2024 and April 1, 2023:

Previous wording

For the three months ended December 30, 2023, the increase in Ball Bonding Equipment net revenue as compared to the prior year period was primarily due to higher volumes of customer purchases related to technology transitions and improving market conditions in general semiconductor and memory end markets. This has resulted in the reduction in semiconductor supply chain inventory levels and improved factory utilization levels.

Current wording

For the three and six months ended March 30, 2024, the increase in Ball Bonding Equipment net revenue as compared to the prior year period was primarily due to higher volumes of customer purchases related to technology transitions and improving market conditions in general semiconductor and memory end markets. This has resulted in the reduction in semiconductor supply chain inventory levels and improved factory utilization levels.

Previous wording

For the three months ended December 30, 2023, the decrease in Wedge Bonding Equipment net revenue as compared to the prior year period was primarily due to lower volume of customer purchases primarily in the General Semiconductor market due to the lower power discrete devices demand, as well as in the automotive and renewable energy market.

Current wording

For the three and six months ended March 30, 2024, the decrease in Wedge Bonding Equipment net revenue as compared to the prior year period was primarily due to lower volume of customer purchases primarily in the General Semiconductor market due to the lower power discrete devices demand, as well as in the automotive and renewable energy market.

Previous wording

For the three months ended December 30, 2023, the decrease in Advanced Solutions net revenue as compared to the prior year period was primarily due to timing of revenue recognition for certain customer contracts.

Current wording

For the six months ended March 30, 2024, the decrease in Advanced Solutions net revenue as compared to the prior year period was primarily due to the lower volume as a result of changes in the product mix and timing of revenue recognition for certain customer contracts.

Previous wording

For the three months ended December 30, 2023, the decrease in All Others net revenue as compared to the prior year period was primarily due to lower volume of customer purchases in mini LED transfer solutions from softness in the advanced display market.

Current wording

For the six months ended March 30, 2024, the decrease in All Others net revenue as compared to the prior year period was primarily due to lower volume of customer purchases in mini LED transfer solutions from softness in the advanced display market. The lower volume was partially offset by the additional revenue from Advanced Dispensing Solution, which was acquired in March 2023.

Previous wording

The following tables reflect gross profit margin as a percentage of net revenue by reportable segments for the three months ended December 30, 2023 and December 31, 2022:

Current wording

The following tables reflect gross profit margin as a percentage of net revenue by reportable segments for the three and six months ended March 30, 2024 and April 1, 2023:

Previous wording

For the three months ended December 30, 2023, the decrease in Ball Bonding Equipment gross profit margin as compared to the prior year period was primarily driven by a shift in customer mix, including higher sales to customers where we achieve lower average margins.

Current wording

For the three and six months ended March 30, 2024, the decrease in Ball Bonding Equipment gross profit margin as compared to the prior year period was primarily driven by a shift in customer mix, including higher sales to customers where we achieve lower average margins.

Previous wording

For the three months ended December 30, 2023, the increase in Wedge Bonding Equipment gross profit margin as compared to the prior year period was primarily driven by favorable product mix, including higher sales of higher margin products.

Current wording

For the three months ended March 30, 2024, the decrease in Wedge Bonding Equipment gross profit margin as compared to the prior year period was primarily driven by a shift in product mix, including higher sales of lower margin products.

Previous wording

For the three months ended December 30, 2023, the decrease in Advanced Solutions gross profit margin as compared to the prior year period was primarily driven by less favorable product mix, including higher sales of lower margin products.

Current wording

For the three and six months ended March 30, 2024, the decrease in Advanced Solutions gross profit margin as compared to the prior year period was primarily driven by the inventory write-down charges we incurred as a result of the cancellation of Project W and less favorable product mix, including higher sales of lower margin products.

Previous wording

For the three months ended December 30, 2023, the decrease in gross profit margin for the “All Others” category as compared to the prior year period was primarily driven by less favorable product mix, including lower sales of higher margin products.

Current wording

For the six months ended March 30, 2024, the decrease in gross profit margin for the “All Others” category as compared to the prior year period was primarily driven by the provision of excess and obsolete materials and less favorable product mix, including lower sales of higher margin products.

Previous wording

The following tables reflect operating expenses for the three months ended December 30, 2023 and December 31, 2022:

Current wording

The following tables reflect operating expenses for the three and six months ended March 30, 2024 and April 1, 2023:

Previous wording

For the three months ended December 30, 2023, the lower SG&A expenses as compared to the prior year period were primarily due to $5.1 million net favorable variance in foreign exchange. This was partially offset by $2.9 million higher staff costs due to an increase in headcount and equity compensation, $0.7 million higher sales representative commissions and $0.4 million higher professional services.

Current wording

For the six months ended March 30, 2024, the higher SG&A expenses as compared to the prior year period was primarily due to $3.3 million higher staff cost, $2.9 million restructuring costs, $1.5 million higher sales representative commissions, $1.1 million higher miscellaneous expenses and $0.4 million higher professional services. This was partially offset by $6.2 million net favorable variance in foreign exchange.

Previous wording

For the three months ended December 30, 2023, the higher R&D expenses as compared to the prior year period was primarily due to $2.3 million higher staff costs related to an increase in headcount and equity compensation.

Current wording

For the six months ended March 30, 2024, the higher R&D expenses as compared to the prior year period was primarily due to $4.0 million higher staff costs related to an increase in headcount and equity compensation.

Previous wording

The following tables reflect income/(loss) from operations by reportable segments for the three months ended December 30, 2023 and December 31, 2022:

Current wording

The following tables reflect income/(loss) from operations by reportable segments for the three and six months ended March 30, 2024 and April 1, 2023:

Previous wording

For the three months ended December 30, 2023, the higher Advanced Solutions and All Others loss from operations as compared to the prior year period was primarily due to the decrease in revenue and changes in operating expenses as explained under “Net Revenue” and “Operating Expenses” above.

Current wording

For the three and six months ended March 30, 2024, the higher All Others loss from operations as compared to the prior year period was primarily due to the decrease in gross profit and changes in operating expenses as explained under “Gross Profit” and “Operating Expenses” above.

Previous wording

For the three months ended December 30, 2023, the lower Wedge Bonding Equipment income from operations as compared to the prior year period was primarily due to the decrease in revenue and changes in operating expenses as explained under “Net Revenue” and “Operating Expenses” above.

Current wording

For the three and six months ended March 30, 2024, the lower Wedge Bonding Equipment income from operations as compared to the prior year period was primarily due to the decrease in revenue and changes in operating expenses as explained under “Net Revenue” and “Operating Expenses” above.

Previous wording

For the three months ended December 30, 2023, the higher Ball Bonding Equipment and APS income from operations as compared to the prior year period was primarily due to the increase in revenue and changes in operating expenses as explained under “Net Revenue” and “Operating Expenses” above.

Current wording

For the three and six months ended March 30, 2024, the higher Ball Bonding Equipment and APS income from operations as compared to the prior year period was primarily due to the increase in revenue and changes in operating expenses as explained under “Net Revenue” and “Operating Expenses” above.

Previous wording

The following tables reflect interest income and interest expense for the three months ended December 30, 2023 and December 31, 2022:

Current wording

The following tables reflect interest income and interest expense for the three and six months ended March 30, 2024 and April 1, 2023:

Previous wording

For the three months ended December 30, 2023, interest income increased as compared to the prior year period primarily due to a higher average balance in short-term investments and higher weighted average interest rate on cash, cash equivalents and short-term investments.

Current wording

For the three and six months ended March 30, 2024, interest income increased as compared to the prior year period primarily due to a higher weighted average interest rate on cash, cash equivalents and short-term investments.

Previous wording

The following table reflects the provision for income taxes and the effective tax rate for the three months ended December 30, 2023 and December 31, 2022:

Current wording

The following table reflects the provision for income taxes and the effective tax rate for the three and six months ended March 30, 2024 and April 1, 2023:

Previous wording

The following table reflects a summary of the Consolidated Condensed Statements of Cash Flow information for the three months ended December 30, 2023 and December 31, 2022:

Current wording

The following table reflects a summary of the Consolidated Condensed Statements of Cash Flow information for the six months ended March 30, 2024 and April 1, 2023:

Previous wording

Net cash used in operating activities was primarily due to net income of $9.3 million, non-cash adjustments to net income of $20.4 million and a net unfavourable change in operating assets and liabilities of $37.0 million. The net change in operating assets and liabilities was primarily driven by a increase in accounts and other receivable of $25.6 million, an increase in inventories of $22.1 million and a decrease in accounts payable and accrued expenses and other current liabilities of $0.8 million. This was partially offset by an decrease in prepaid expenses and other current assets of $7.5 million and an increase income tax payable of $2.4 million.

Current wording

The increase in net cash used in operating activities was primarily due to a net loss of $93.4 million and a net unfavourable change in operating assets and liabilities of $87.2 million, partially offset by non-cash adjustments to net income of $153.1 million. The non-cash adjustments were primarily due to impairment charges of $44.5 million and inventory write-down of $57.3 million as a result of the cancellation of the Project. The net change in operating assets and liabilities was primarily driven by an increase in accounts and other receivable of $36.5 million, an increase in inventories of $28.6 million after excluding the impact of the inventory write-down as shown above, a decrease in income tax payable of $21.7 million and a decrease in accounts payable and accrued expenses and other current liabilities of $7.8 million. This was partially offset by a decrease in prepaid expenses and other current assets of $13.4 million.

Previous wording

The increase in accounts and other receivable in the three months ended December 30, 2023 was mainly due to the timing of payments due. The increase in inventories was due to the buildup of long lead time materials to fulfill certain customer purchase orders. The decrease in accounts payable and accrued expenses and other current liabilities was primarily due to lower accrued employee compensation that was paid out in the period, partially offset by higher material purchases during the period. The decrease in prepaid expenses was mainly due the transfer of contract assets to net account receivables.

Current wording

The increase in accounts and other receivable in the six months ended March 30, 2024 was mainly due to the timing of payments due. The increase in inventories was due to the buildup of long lead time materials to fulfill certain customer purchase orders. The decrease in income tax payable was primarily due to lower profitability. The decrease in accounts payable and accrued expenses and other current liabilities was primarily due to the payment of back loaded purchases, partially offset by higher accrued employee compensation and accrued purchase order cancellation charges arising from the cancellation of the Project. The decrease in prepaid expenses was mainly due the transfer of contract assets to net account receivables.

Previous wording

Net cash used in investing activities was due to net purchase of short-term investments of $55.0 million, capital expenditures of $4.4 million and investment in private equity fund of $1.1 million.

Current wording

Net cash used in investing activities was due to net purchase of short-term investments of $45.0 million, capital expenditures of $11.0 million and investment in a private equity fund of $1.1 million.

Previous wording

Net cash used in financing activities was primarily due to common stock repurchases of $27.2 million and dividend payments of $10.7 million.

Current wording

Net cash used in financing activities was primarily due to common stock repurchases of $63.5 million and dividend payments of $22.0 million.

Previous wording

Net cash provided by operating activities was primarily due to net income of $14.6 million, non-cash adjustments to net income of $13.5 million and a net favorable change in operating assets and liabilities of $57.0 million. The net change in operating assets and liabilities was primarily driven by a decrease in accounts and other receivable of $108.8 million, prepaid expenses and other current assets of $0.3 million, and income tax payable of $5.7 million. This was partially offset by an increase in inventories of $27.2 million and a decrease in accounts payable and accrued expenses and other current liabilities of $32.8 million.

Current wording

Net cash provided by operating activities was primarily due to net income of $29.6 million, non-cash adjustments to net income of $21.9 million and a net favorable change in operating assets and liabilities of $35.4 million. The net change in operating assets and liabilities was primarily driven by a decrease in accounts and other receivable of $141.6 million, prepaid expenses and other current assets of $2.1 million. This was partially offset by an increase in inventories of $39.1 million, a decrease in accounts payable and accrued expenses and other current liabilities of $41.3 million and income tax payable of $30.7 million.

Previous wording

The decrease in accounts and other receivable in the three months ended December 31, 2022 was mainly due to lower sales in the period. The decrease in accounts payable and accrued expenses and other current liabilities was primarily due to higher payments to suppliers and lower accrued employee compensation that was paid out in the period. The increase in inventories was due to slower utilization in the period.

Current wording

The decrease in accounts and other receivable in the six months ended April 1, 2023 was mainly due to lower sales in the period. The decrease in income tax payable was primarily due to lower profitability. The decrease in accounts payable and accrued expenses and other current liabilities was primarily due to higher payments to suppliers, lower material purchases and lower accrued employee compensation that was paid out in the period. The increase in inventories was due to slower utilization in the period and buildup of long lead time materials to fulfill certain customer purchase orders.

Previous wording

Net cash used in investing activities was due to net purchase of short-term investments of $25.0 million and capital expenditures of $13.9 million.

Current wording

Net cash used in investing activities was due to net purchase of short-term investments of $125.0 million, cash outflow for the AJA acquisition of $36.9 million and capital expenditures of $24.5 million.

Previous wording

Net cash used in financing activities was primarily due to common stock repurchases of $46.3 million and dividend payments of $9.7 million.

Current wording

Net cash used in financing activities was primarily due to common stock repurchases of $52.0 million and dividend payments of $20.5 million.

Previous wording

We expect our aggregate fiscal 2024 capital expenditures to be between approximately $23.0 million and $27.0 million, of which approximately $3.5 million has been incurred through the first quarter. Expenditures are anticipated to be primarily for research and development projects, enhancements to our manufacturing operations, improvements to our information technology security, implementation of an enterprise resource planning system and leasehold improvements for our facilities. Our ability to make these expenditures will depend, in part, on our future cash flows, which are determined by our future operating performance and, therefore, subject to prevailing macroeconomic conditions, including actual or potential inflationary pressures, supply chain challenges, geopolitical tensions including the ongoing Israel-Hamas war and the prolonged Ukraine/Russia conflict and other factors, some of which are beyond our control.

Current wording

We expect our aggregate fiscal 2024 capital expenditures to be between approximately $16.0 million and $20.0 million, of which approximately $7.4 million has been incurred through the second quarter. The actual amounts for 2024 will vary depending on market conditions. Expenditures are anticipated to be primarily for research and development projects, enhancements to our manufacturing operations, improvements to our information technology security, implementation of an enterprise resource planning system and leasehold improvements for our facilities. Our ability to make these expenditures will depend, in part, on our future cash flows, which are determined by our future operating performance and, therefore, subject to prevailing macroeconomic conditions, including actual or potential inflationary pressures, supply chain challenges, geopolitical tensions including the ongoing Israel-Hamas war and the prolonged Ukraine/Russia conflict and other factors, some of which are beyond our control.

Previous wording

As of December 30, 2023 and September 30, 2023, approximately $558.7 million and $576.9 million of cash, cash equivalents, and short-term investments, respectively, were held by the Company’s foreign subsidiaries, with a large portion of the cash amounts expected to be available for use in the U.S. without incurring additional U.S. income tax.

Current wording

As of March 30, 2024 and September 30, 2023, approximately $257.1 million and $576.9 million of cash, cash equivalents, and short-term investments, respectively, were held by the Company’s foreign subsidiaries, with a large portion of the cash amounts expected to be available for use in the U.S. without incurring additional U.S. income tax. The decrease is primarily due to the repatriation of cash held by the Company's foreign subsidiaries to the U.S.

Previous wording

During the three months ended December 30, 2023, the Company repurchased a total of approximately 555.6 thousand shares of common stock under the Program at a cost of approximately $26.8 million. The stock repurchases were recorded in the periods in which the shares were delivered and accounted for as treasury stock in the Company’s Consolidated Condensed Balance Sheets. The Company records treasury stock purchases under the cost method using the first-in, first-out (FIFO) method. Upon re-issuance of treasury stock, amounts in excess of the acquisition cost are credited to additional paid-in capital.

Current wording

During the three and six months ended March 30, 2024, the Company repurchased a total of approximately 754.6 thousand and 1,310.2 thousand shares of common stock under the Program at a cost of approximately $37.3 million and $64.1 million, respectively. The stock repurchases were recorded in the periods in which the shares were delivered and accounted for as treasury stock in the Company’s Consolidated Condensed Balance Sheets. The Company records treasury stock purchases under the cost method using the first-in, first-out (FIFO) method. Upon re-issuance of treasury stock, amounts in excess of the acquisition cost are credited to additional paid-in capital.

Previous wording

As of December 30, 2023, our remaining stock repurchase authorization under the Program was approximately $154.2 million.

Current wording

As of March 30, 2024, our remaining stock repurchase authorization under the Program was approximately $116.9 million.

Previous wording

On November 15, 2023, the Board of Directors declared a quarterly dividend of $0.20 per share of common stock. Dividends paid during the three months ended December 30, 2023 totaled $10.7 million. The declaration of any future cash dividend is at the discretion of the Board of Directors and will depend on the Company’s financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination that such dividends are in the best interests of the Company’s shareholders.

Current wording

On November 15, 2023, the Board of Directors declared a quarterly dividend of $0.20 per share of common stock. Dividends paid during the three and six months ended March 30, 2024 totaled $11.3 million and $22.0 million, respectively. The declaration of any future cash dividend is at the discretion of the Board of Directors and will depend on the Company’s financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination that such dividends are in the best interests of the Company’s shareholders.