K&
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
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
Guidance Changes
Earnings Call Themes & Trends
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 .