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; 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):

Current wording

In addition to historical information, this Quarterly Report 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 successfully execute our business; 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

Forward-looking statements are based on current expectations and involve risks and uncertainties. Our future results could differ significantly from those expressed or implied by our forward-looking statements. These risks and uncertainties include, without limitation, those described below and in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 (our “2023 Annual Report”) and our other reports filed from time to time with the Securities and Exchange Commission. This discussion should be read in conjunction with the Consolidated Condensed Financial Statements and Notes included in this report, as well as our audited financial statements included in our 2023 Annual Report.

Current wording

Forward-looking statements are based on current expectations and involve risks and uncertainties. Our future results could differ significantly from those expressed or implied by our forward-looking statements. These risks and uncertainties include, without limitation, those described below and in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 (our “2023 Annual Report”) and our other reports filed from time to time with the Securities and Exchange Commission. This discussion should be read in conjunction with the Consolidated Condensed Financial Statements and Notes included in this Quarterly Report, as well as our audited financial statements included in our 2023 Annual Report.

Previous wording

Our Ball Bonding Equipment, Wedge Bonding Equipment and Advanced Solutions reportable segments engage in the design, development, manufacture and sale of ball bonding equipment, wafer level bonding equipment, wedge bonding equipment, certain advanced display, die-attach and thermocompression systems and solutions to IDMs, OSATs, foundry service providers, and other electronics manufacturers and automotive electronics suppliers.

Current wording

Our Ball Bonding Equipment, Wedge Bonding Equipment and Advanced Solutions reportable segments engage in the design, development, manufacture and sale of ball bonding equipment, wafer level bonding equipment, wedge and wedge-related bonding equipment, certain advanced display, die-attach and thermocompression systems and solutions to IDMs, OSATs, foundry service providers, and other electronics manufacturers and automotive electronics suppliers.

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 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.

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 92.3% and 89.7% of our net revenue for the three months ended June 29, 2024 and July 1, 2023, respectively, were for shipments to customer locations outside of the U.S., primarily in the Asia/Pacific region. Approximately 54.7% and 46.8% of our net revenue for the three months ended June 29, 2024 and July 1, 2023, respectively, were for shipments to customers headquartered in China.

Previous wording

Similarly, approximately 88.1% and 90.8% of our net revenue for the six 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 47.4% and 32.5% of our net revenue for the six months ended March 30, 2024 and April 1, 2023, respectively, were for shipments to customers headquartered in China.

Current wording

Similarly, approximately 89.5% and 90.4% of our net revenue for the nine months ended June 29, 2024 and July 1, 2023, respectively, were for shipments to customer locations outside of the U.S., primarily in the Asia/Pacific region. Approximately 49.9% and 37.6% of our net revenue for the nine months ended June 29, 2024 and July 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 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.

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 June 29, 2024, our total cash, cash equivalents and short-term investments were $601.9 million, a $157.5 million decrease from the prior fiscal year end. We believe our 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

Previously referred to as Project W, the Company has been engaged with one of its strategic customers (the "Customer") to support the Customer with the development and future mass production of certain technologies relating to advanced display (the "Project"). In connection with the Customer's strategic review of its business, the Customer has informed the Company that it has cancelled the Project. In connection with the foregoing, on March 11, 2024, the Company committed to a plan to cease operational activities and commence wind down activities concerning various aspects of Project W. The wind down activities are ongoing and are expected to be substantially completed by the end of fiscal year 2024. The Company anticipates that the cancellation of Project W will reduce its fiscal year 2024 revenue by approximately $15 million. As a result of the cancellation of Project W, the Company also incurred certain charges during the fiscal period ended March 30, 2024 and expects to incur additional related charges through fiscal year 2024. Please see Note 16: Restructuring and Cancellation of Project to the Consolidated Condensed Financial Statements for more information.

Current wording

Previously referred to as Project W, the Company has been engaged with one of its strategic customers (the "Customer") to support the Customer with the development and future mass production of certain technologies relating to advanced display (the "Project"). In connection with the Customer's strategic review of its business, the Customer informed the Company that it cancelled the Project. In connection with the foregoing, on March 11, 2024, the Company committed to a plan to cease operational activities and commence wind down activities concerning various aspects of the Project. The wind down activities are ongoing and are expected to be substantially completed by the end of fiscal year 2024. The Company anticipates that the cancellation of the Project will reduce its fiscal year 2024 revenue by approximately $15 million. As a result of the cancellation of the Project, the Company also incurred certain charges during the fiscal period ended March 30, 2024 and expects to incur additional related charges through fiscal year 2024. No material cost relating to the restructuring and cancellation of the Project was incurred during the three month period ended June 29, 2024.

Previous wording

Supply chain disruptions and global shortages in electronic components are generally abating in many jurisdictions. However, the cost of logistics remains high as a result of macroeconomic conditions, and labor shortages persist across layers of the supply chain. Additionally, management is continuing to monitor the ongoing Israel-Hamas war and the prolonged Ukraine/Russia conflict, especially regarding the availability and cost of raw materials that are produced in Middle East and Europe in general. Management is also monitoring for signs of any expansion of economic or supply chain disruptions or broader supply chain inflationary and logistical costs resulting either directly or indirectly from the tensions in the Middle East and between Ukraine and Russia.

Current wording

Supply chain disruptions and global shortages in electronic components are generally abating in many jurisdictions. However, the cost of logistics remains high as a result of macroeconomic conditions, and labor shortages persist across layers of the supply chain. Additionally, management is continuing to monitor the ongoing Israel-Hamas war and the prolonged Ukraine/Russia conflict, especially regarding the availability and cost of raw materials that are produced in Middle East and Europe in general. Management is also monitoring for signs of any expansion of economic or supply chain disruptions or broader supply chain inflationary and logistical costs resulting either directly or indirectly from the tensions in the Middle East and between Ukraine and Russia, as well as Houthi rebel attacks on marine vessels in the Red Sea, which have contributed to rising ocean freight rates.

Previous wording

The ongoing Israel-Hamas war and the prolonged Ukraine/Russia conflict have had no material impact on our financial condition and operating results in fiscal 2024 to date. We believe that our existing cash, cash equivalents, short-term investments, existing Facility Agreements, and anticipated cash flows from operations will be sufficient to meet our liquidity and capital requirements, notwithstanding the ongoing Israel-Hamas war and the prolonged Ukraine/Russia conflict and other macroeconomic factors, for at least the next twelve months from the date of filing. However, this is a highly dynamic situation. As the macroeconomic situation remains highly volatile and the geopolitical situation remains uncertain, there is uncertainty surrounding the operations of our manufacturing locations, our business, our expectations regarding future demand or supply conditions, our near- and long-term liquidity and our financial condition. Consequentially, our operating results could deteriorate.

Current wording

The ongoing Israel-Hamas war and the prolonged Ukraine/Russia conflict have had no material impact on our financial condition and operating results in fiscal 2024 to date. We believe that our existing cash, cash equivalents, short-term investments, existing Facility Agreements, and anticipated cash flows from operations will be sufficient to meet our liquidity and capital requirements, notwithstanding the ongoing Israel-Hamas war and the prolonged Ukraine/Russia conflict and other macroeconomic factors, for at least the next twelve months from the date of this Quarterly Report. However, this is a highly dynamic situation. As the macroeconomic situation remains highly volatile and the geopolitical situation remains uncertain, there is uncertainty surrounding the operations of our manufacturing locations, our business, our expectations regarding future demand or supply conditions, our near- and long-term liquidity and our financial condition. Consequentially, our operating results could deteriorate.

Previous wording

Due to general inflationary pressures, declining consumer sentiment, and an economic downturn caused, directly or indirectly, by various macroeconomic factors, including the ongoing Israel-Hamas war and the prolonged Ukraine/Russia conflict, the sector is seeing short-term volatility and disruption. However, we believe that the semiconductor industry macroeconomics have not changed and we anticipate that the industry’s long-term growth projections will normalize.

Current wording

Due to general inflationary pressures, declining consumer sentiment, and an economic downturn caused, directly or indirectly, by various macroeconomic factors, the sector is seeing short-term volatility and disruption. However, we believe that the semiconductor industry macroeconomics have not changed and we anticipate that the industry’s long-term growth projections will normalize.

Previous wording

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

Current wording

The following tables reflect our income/(loss) from operations for the three and nine months ended June 29, 2024 and July 1, 2023:

Previous 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.

Current wording

Our net revenue for the three and nine months ended June 29, 2024 decreased as compared to our net revenue for the three and nine months ended July 1, 2023. The decrease in net revenue is primarily due to lower volume in Wedge Bonding Equipment, Advanced Solutions, APS and All Others and partially offset by the higher volume in Ball Bonding Equipment, as further outlined in the following tables presented immediately below.

Previous wording

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

Current wording

The following tables reflect net revenue for the three and nine months ended June 29, 2024 and July 1, 2023:

Previous 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.

Current wording

For the three and nine months ended June 29, 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 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.

Current wording

For the three and nine months ended June 29, 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 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.

Current wording

For the three and nine months ended June 29, 2024, the decrease in Advanced Solutions net revenue as compared to the prior year period was primarily due to lower volume as a result of changes in product mix and timing of revenue recognition for certain customer contracts.

Previous wording

For the three and six months ended March 30, 2024, the increase in APS net revenue as compared to the prior year period was due to higher volume of customer purchases primarily in spares and services.

Current wording

For the three months ended June 29, 2024, the decrease in APS net revenue as compared to the prior year period was due to lower volume of customer purchases primarily in bonding tools.

Previous wording

For the three months ended March 30, 2024, the increase in All Others net revenue as compared to the prior year period was primarily due to favorable product mix, and additional revenue from Advanced Dispensing Solution, which was acquired in March 2023.

Current wording

For the three months ended June 29, 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 the general semiconductor market.

Previous 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.

Current wording

For the nine months ended June 29, 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 the general semiconductor market and mini LED transfer solutions from softness in the advanced display market.

Previous 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:

Current wording

The following tables reflect gross profit margin as a percentage of net revenue by reportable segments for the three and nine months ended June 29, 2024 and July 1, 2023:

Previous 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.

Current wording

For the three and nine months ended June 29, 2024, the increase in Ball Bonding Equipment gross profit margin as compared to the prior year period was primarily driven by a favorable product mix, including higher sales of higher margin products.

Previous 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.

Current wording

For the three and nine months ended June 29, 2024, the decrease in Wedge 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 and six months ended March 30, 2024, the decrease in APS gross profit margin as compared to the prior year period was primarily driven by less favorable product mix among bonding tools, spares and services.

Current wording

For the three months ended June 29, 2024, the decrease in Advanced Solutions gross profit margin as compared to the prior year period was primarily driven by less favorable product mix, including lower sales of higher margin products.

Previous 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.

Current wording

For the nine months ended June 29, 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 lower sales of lower margin products.

Previous wording

For the three 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 provision of excess and obsolete materials.

Current wording

For the three months ended June 29, 2024, 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.

Previous 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.

Current wording

For the nine months ended June 29, 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 and six months ended March 30, 2024 and April 1, 2023:

Current wording

The following tables reflect operating expenses for the three and nine months ended June 29, 2024 and July 1, 2023:

Previous wording

For the three months ended March 30, 2024, the higher SG&A expenses as compared to the prior year period were primarily due to $2.9 million of restructuring costs, $0.7 million higher sales representative commissions and $0.4 million higher staff cost.

Current wording

For the three months ended June 29, 2024, the higher SG&A expenses as compared to the prior year period were primarily due to a $1.1 million increase in sales representative commissions, a $0.8 million increase in miscellaneous expenses and a $0.4 million increase in professional services.

Previous 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.

Current wording

For the nine months ended June 29, 2024, the higher SG&A expenses as compared to the prior year period were primarily due to a $3.3 million increase in staff cost, a $3.1 million increase in miscellaneous expenses, a $2.6 million increase in sales representative commissions, a $1.9 million increase in restructuring costs and a $0.7 million increase in professional services. This was partially offset by $6.3 million net favorable variance in foreign exchange.

Previous 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.

Current wording

For the three months ended June 29, 2024, the higher R&D expenses as compared to the prior year period were primarily due to an increase in staff cost related to an increase in headcount.

Previous wording

For the three months ended March 30, 2024, the higher R&D expenses as compared to the prior year period were primarily due to $2.1 million higher staff costs related to an increase in headcount and equity compensation. This was partially offset by $0.8 million lower professional services.

Current wording

For the nine months ended June 29, 2024, the higher R&D expenses as compared to the prior year period were primarily due to a $5.7 million increase in staff cost related to an increase in headcount and equity compensation and a $4.2 million increase in prototype materials. This was partially offset by a $5.3 million decrease in professional services.

Previous wording

For the three and six months ended March 30, 2024, the higher impairment charges as compared to the prior year period were due to $44.5 million impairment charges on long-lived assets related to the cancellation of Project W.

Current wording

For the nine months ended June 29, 2024, the higher impairment charges as compared to the prior year period were due to a non-cash impairment charge of $44.5 million on long-lived assets related to the cancellation of Project W. The impairment charge in the prior year period relates to a non-cash impairment charge of $21.5 million related to goodwill and intangible assets in the lithography reporting unit, as well as on the investment in the non-marketable equity security.

Previous 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:

Current wording

The following tables reflect income/(loss) from operations by reportable segments for the three and nine months ended June 29, 2024 and July 1, 2023:

Previous 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.

Current wording

For the three and nine months ended June 29, 2024, the higher Ball Bonding Equipment income from operations as compared to the prior year period was primarily due to the increase in revenue, gross margin and changes in operating expenses as explained under “Net Revenue”, "Gross Profit" and “Operating Expenses” above.

Previous 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.

Current wording

For the three and nine months ended June 29, 2024, the lower Wedge Bonding Equipment income from operations as compared to the prior year period was primarily due to the decrease in revenue, gross margin and changes in operating expenses as explained under “Net Revenue”, "Gross Profit" and “Operating Expenses” above.

Previous wording

For the three and six months ended March 30, 2024, the higher Advanced Solutions loss from operations as compared to the prior year period was primarily due to the decrease in revenue, inventory write-down and impairment charges as explained under “Net Revenue”, “Gross Profit” and “Operating Expenses” above.

Current wording

For the three and nine months ended June 29, 2024, the higher Advanced Solutions loss from operations as compared to the prior year period was primarily due to the decrease in revenue, inventory write-down and impairment charges as explained under “Net Revenue”, “Gross Profit” and “Operating Expenses” above.

Previous 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.

Current wording

For the three and nine months ended June 29, 2024, the lower All Others loss from operations as compared to the prior year period was primarily due to the changes in operating expenses as explained under “Operating Expenses” above.

Previous wording

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

Current wording

The following tables reflect interest income and interest expense for the three and nine months ended June 29, 2024 and July 1, 2023:

Previous 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.

Current wording

For the nine months ended June 29, 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 and six months ended March 30, 2024 and April 1, 2023:

Current wording

The following table reflects the provision for income taxes and the effective tax rate for the three and nine months ended June 29, 2024 and July 1, 2023: