Semiconductor production equipment company Kulicke & Soffa (NASDAQ: KLIC) reported Q2 CY2024 results topping analysts' expectations, with revenue down 4.9% year on year to $181.7 million. On the other hand, next quarter's revenue guidance of $180 million was less impressive, coming in 12.5% below analysts' estimates. It made a non-GAAP profit of $0.35 per share, down from its profit of $0.55 per share in the same quarter last year.
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Kulicke and Soffa (KLIC) Q2 CY2024 Highlights:
- Revenue: $181.7 million vs analyst estimates of $180.1 million (small beat)
- Adjusted Operating Income: $15.89 million vs analyst estimates of $12.24 million (29.8% beat)
- EPS (non-GAAP): $0.35 vs analyst estimates of $0.30 (16.7% beat)
- Revenue Guidance for Q3 CY2024 is $180 million at the midpoint, below analyst estimates of $205.7 million
- Gross Margin (GAAP): 46.6%, in line with the same quarter last year
- Inventory Days Outstanding: 165, down from 172 in the previous quarter
- Free Cash Flow of $24.21 million is up from -$26.72 million in the previous quarter
- Market Capitalization: $2.28 billion
Fusen Chen, Kulicke & Soffa's President and Chief Executive Officer, stated, "While the recovery remains gradual, improving utilization rates combined with continued near-term industry growth provide optimism for coordinated capacity and technology expansion across multiple end-markets. Additionally, we continue to drive industry adoption of our leading Fluxless Thermo-Compression (FTC), Vertical-Fan-Out (VFO), and High-Power-Interconnect (HPI) solutions through industry collaborations, customer development programs and recent market wins."
Headquartered in Singapore, Kulicke & Soffa (NASDAQ: KLIC) is a provider of production equipment and tools used to assemble semiconductor devices
Semiconductor Manufacturing
The semiconductor industry is driven by demand for advanced electronic products like smartphones, PCs, servers, and data storage. The need for technologies like artificial intelligence, 5G networks, and smart cars is also creating the next wave of growth for the industry. Keeping up with this dynamism requires new tools that can design, fabricate, and test chips at ever smaller sizes and more complex architectures, creating a dire need for semiconductor capital manufacturing equipment.
Sales Growth
Kulicke and Soffa's revenue growth over the last three years has been unimpressive, averaging 0.2% annually. This quarter, its revenue declined from $190.9 million in the same quarter last year to $181.7 million. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
This was a slow quarter for the company as its revenue dropped 4.9% year on year, in line with analysts' estimates. This could mean that the current downcycle is deepening.
Kulicke and Soffa may be headed for an upturn. Although the company is guiding for a year-on-year revenue decline of 11% next quarter, analysts are expecting revenue to grow 16.9% over the next 12 months.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Kulicke and Soffa's DIO came in at 165, which is 32 days above its five-year average. These numbers suggest that despite the recent decrease, the company's inventory levels are higher than what we've seen in the past.
Key Takeaways from Kulicke and Soffa's Q2 Results
We were impressed by how significantly Kulicke and Soffa blew past analysts' EPS expectations this quarter. We were also glad its inventory levels shrunk. On the other hand, its revenue guidance for next quarter missed analysts' expectations and its operating margin shrunk. This quarter featured some positives but overall could have been better. The stock remained flat at $39.38 immediately after reporting.
Kulicke and Soffa may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.