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KULICKE & SOFFA INDUSTRIES INC (KLIC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $162.0M, GAAP EPS $(1.59) and non-GAAP EPS $(0.52), reflecting ~$86.6M pre-tax charges from the planned cessation of the Electronics Assembly equipment business; cash from operations was strong at $79.9M and adjusted FCF $78.0M .
  • Sequentially weaker orders were concentrated in Southeast Asia (auto/industrial exposure) amid tariff uncertainty, while utilization improved in China and Taiwan; management guided Q3 revenue to $145M ± $10M and non-GAAP EPS to ~$0.05, signaling near-term caution despite stronger utilization data .
  • Gross margin fell to 24.9% (from 52.4% in Q1), driven by EA-related inventory/supply-chain charges of $38.6M; non-GAAP OpEx would have been $68.0M in Q3 guidance, and management expects through-cycle margin improvement as the EA exit completes .
  • Strategic focus remains on Fluxless Thermo-Compression (TCB/FTC), Vertical Wire, Advanced Dispense, and Power Semiconductor solutions; TCB is capacity constrained and fully booked for FY25, with management citing ~$70M FY25 TCB revenue and >$100M in FY26 as HBM and logic ramps intensify .
  • Capital return remains active: the Board approved a $0.205 quarterly dividend payable Jul 8, 2025, and the company repurchased ~0.5M shares for $21.3M in Q2 .

What Went Well and What Went Wrong

What Went Well

  • Strong liquidity and cash generation despite the EA wind-down: Q2 cash from operations $79.9M and adjusted FCF $78.0M; total cash, cash equivalents, and short-term investments $581.5M as of Mar 29, 2025 .
  • Strategic clarity: decisive EA exit to align with long-term technology transitions and enhance margins/through-cycle performance; management emphasized focus on Vertical Wire, Power Semiconductor, Advanced Dispense, and Thermo-Compression .
  • Advanced packaging momentum: TCB fully booked for FY25, capacity constrained; pipeline includes HBM opportunities with a leading memory customer and dual‑head tool to improve throughput .

What Went Wrong

  • Material near-term profitability headwinds: GAAP gross margin 24.9% in Q2 as EA-related inventory/supply-chain charges of $38.6M weighed; GAAP operating loss $(84.7)M and non-GAAP operating loss $(27.4)M .
  • Demand hesitation in Southeast Asia—particularly auto/industrial—linked to tariff uncertainty, producing a larger-than-expected sequential slowdown into Q3 guidance (revenue $145M ± $10M) .
  • Non-GAAP EPS miss vs prior quarter’s guidance for Q2 (guided ~$0.19 vs actual $(0.52)), reflecting gross margin pressure from EA-related charges and cautious orders despite improving utilization in other regions .

Financial Results

Consolidated Performance vs Prior Year and Prior Quarters

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Net Revenue ($M)$172.1 $181.3 $166.1 $162.0
Gross Margin %~9.6% (Gross Profit $16.5 ÷ Rev $172.1) 48.3% 52.4% 24.9%
Operating Margin % (GAAP)(61.1)% 1.5% 52.2% (52.3)%
Net Income (Loss) GAAP ($M)$(102.7) $12.1 $81.6 $(84.5)
Diluted EPS GAAP ($)$(1.83) $0.22 $1.51 $(1.59)
Net Income (Loss) Non-GAAP ($M)$(53.2) $18.5 $20.2 $(27.9)
Diluted EPS Non-GAAP ($)$(0.95) $0.34 $0.37 $(0.52)
Cash from Operations ($M)$(20.1) $31.6 $18.9 $79.9
Adjusted Free Cash Flow ($M)$(26.7) $29.2 $8.7 $78.0

Notes:

  • Q2 2025 included ~$86.6M pre-tax charges tied to EA business cessation; GAAP gross margin also included $38.6M EA-related inventory/supply chain charges .
  • Non-GAAP excludes impairment, restructuring, amortization, equity comp, and specified tax effects; see reconciliation tables in press release/8‑K .

KPIs and Balance Sheet

KPIQ4 2024Q1 2025Q2 2025
Cash & Cash Equivalents ($M)$227.1 $278.3 $286.5
Short-term Investments ($M)$350.0 $260.0 $295.0
Total Cash + STI ($M)$577.1 $538.3 $581.5
Share Repurchases (QTD, $M)$42.7 $36.9 $21.3
Employees (period-end)2,746 2,702 2,677

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Revenue ($M)Q2 2025$165 ± $10 N/AN/A
GAAP Diluted EPS ($)Q2 2025~$0.03 ± 10% N/AN/A
Non-GAAP Diluted EPS ($)Q2 2025~$0.19 ± 10% N/AN/A
Net Revenue ($M)Q3 2025N/A$145 ± $10 New
GAAP Diluted EPS ($)Q3 2025N/A$(0.09) ± 10% New
Non-GAAP Diluted EPS ($)Q3 2025N/A$0.05 ± 10% New
Gross Margin %Q3 2025N/A~46.5% (company call) New
OpEx ($M, GAAP)Q3 2025N/A$76.0 ± 2% New
OpEx ($M, Non-GAAP)Q3 2025N/A$68.0 ± 2% New
Effective Tax RateFY 2025 (general)>20% expected >20% expected Maintained
Dividend per share ($)Q2/Q3 2025$0.205 declared $0.205 payable Jul 8, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 and Q1’25)Current Period (Q2’25)Trend
TCB/FTC momentum and capacityFY25 AP revenue target $275–$300M; FTC dual-head shipped for pilot; expanding customer base (IDM, foundry, OSAT); TCB market ~$300M with K&S targeting ~30% share .TCB capacity constrained and fully booked for FY25; ~$70M FY25 TCB revenue, >$100M in FY26; pursuing HBM engagements; expanding capacity in Asia .Improving demand; capacity-limited near term.
Vertical Wire for DRAM/logicInitial production revenue in 2025 (<$20M), ~$50M in 2026 potential; broad engagements across KR/US/CN memory customers .Product launch updates and continued momentum; management highlights broader logic/memory applicability and 2026 ramp expectations .Building toward 2026 ramp.
Regional utilization and ordersExpect late-stage downturn with second-half strengthening; China leading mature-node expansion .Utilization mid-80s in China and ~80% in Taiwan; sequential order weakness concentrated in Southeast Asia (auto/industrial) amid tariff uncertainty .Mixed: utilization strong, orders cautious.
EA business (exit)No exit; prior quarter included claim/proceeds tied to “Project W” favorably impacting GAAP EPS .EA exit plan approved; ~$86.6M Q2 pre-tax charges; residual < $15M expected through 1H FY26; winding down by 1H FY26 .Exit progressing; cost tail reducing.
Power Semiconductor/HPICopper interconnect leadership; expanding wedge/heavy wire; EV/energy storage tailwinds .New systems launched (Asterion®-PW, etc.); expect contribution in 2026; strong share and alignment with SiC/copper materials .Product pipeline advancing.
Advanced DispenseGrowing customer base; orders from US-based IDM; solid-state battery ramp potential .Continued portfolio build and new customer orders; anticipated production ramp over coming quarters .Expanding engagements.
Tariffs/macroLate-cycle recovery anticipated; cautious customer capex timing around holidays and macro .Tariff uncertainty driving hesitation, especially European auto/industrial in Southeast Asia; manufacturing reallocation across sites mitigates trade dynamics .Macro headwinds near term.

Management Commentary

  • CEO: “We recently experienced more cautious order activity unique to certain Southeast Asia markets… we remain well prepared to accelerate growth through Vertical Wire, Power-Semiconductor, Advanced Dispense and Thermo-Compression technology transitions.” .
  • CFO: “Gross margins of 24.9%, which included EA-related inventory and supply chain charges of $38.6M… Looking into the June quarter, we announced a revenue outlook of $145M ± $10M… non-GAAP OpEx $68M ± 2%, GAAP EPS loss of $0.09 and non-GAAP EPS gain of $0.05.” .
  • CEO on TCB: “We are capacity constrained right now… this year our TCB only we expect about $70M. Next year… $100M or above.” .
  • CEO on HBM: “We expect to ship additional systems to a leading memory customer toward the end of the fiscal year… HBM4 would be the target point to incorporate.” .

Q&A Highlights

  • Regional dynamics: Q3 slowdown concentrated in Southeast Asia due to auto/industrial tariff uncertainty; utilization in China mid‑80% and Taiwan ~80% suggests capacity additions would normally follow absent macro caution .
  • TCB capacity and growth: Fully booked FY25, constrained capacity being expanded; revenue outlook ~$70M in FY25 and >$100M in FY26; dual-head throughput positioning for HBM wins .
  • EA exit specifics: EA revenue ~$25–$30M/year with GP ~$7–$11M and OpEx $20–$25M; residual shutdown charges < $15M through 1H FY26, then largely complete .
  • Power Semi outlook: Strong share; two new products expected to contribute revenue in 2026; alignment with EV/sustainable energy and materials transitions (SiC/copper) .
  • Tariff impact: No direct manufacturing tariff impact shipping from Singapore to China; indirect effects via cautious customer supply chains and deferred capex .

Estimates Context

  • S&P Global consensus for Q2 2025 EPS and revenue was unavailable via the tool; comparisons to Street estimates for Q2 cannot be made at this time. As a proxy, management’s prior Q2 guidance ($165M ± $10 revenue; non‑GAAP EPS ~$0.19) contrasts with actuals ($162.0M revenue; non‑GAAP EPS $(0.52)), indicating a significant non‑GAAP EPS miss driven by EA-related charges pressuring gross margin .
  • Q3 2025 consensus also returned errors; near-term models likely need to reflect lower revenue ($145M ± $10) and non‑GAAP EPS (~$0.05) alongside a guided ~46.5% GM, and non-GAAP OpEx ~$68M .
  • Latest available S&P Global consensus (not for Q2): Q4 2025 Revenue $169.84M* (actual $177.56M*) and EPS $0.222* (actual $0.28*); Q1 2026 Revenue $166.76M* and EPS $0.232* (S&P Global).
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Near-term revenue and earnings are pressured by Southeast Asia order hesitation tied to tariff uncertainty; however, utilization in China/Taiwan is strong and could support capacity additions once macro clarity improves .
  • The EA exit front-loads charges (Q2) but should enhance gross margins and through‑cycle performance post wind-down; residual charges (<$15M) are expected through 1H FY26 .
  • Advanced packaging is the growth engine: TCB fully booked in FY25 and constrained by capacity; HBM/logic opportunity pipeline strengthens FY26 visibility, with dual‑head throughput differentiation .
  • Vertical Wire is on track for initial revenue in 2025 and larger ramps in 2026; broad memory customer engagement suggests meaningful medium‑term contribution .
  • Power Semiconductor and Advanced Dispense broaden multi‑year growth drivers; new products support EV and energy transitions—revenue impact expected to begin in 2026 .
  • Q3 guide ($145M ± $10; ~46.5% GM; non‑GAAP EPS ~$0.05) implies near-term caution; investors should watch updates on tariffs/trade clarity and the pace of capacity adds in China/Taiwan .
  • Balance sheet strength (total cash + STI $581.5M) and ongoing capital return ($0.205 dividend; buybacks) provide downside support amid cyclical recovery prospects .