Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) Q3 2016 Earnings Conference Call - Final Transcript

Aug 03, 2016 • 08:00 am ET

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Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) Q3 2016 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

Greetings and welcome to the Kulicke and Soffa Third Fiscal Quarter 2016 Results Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Joseph Elgindy, Director of IR and Strategic Initiatives for Kulicke and Soffa. Mr. Elgindy, you may begin.

Executive
Joseph Elgindy

Thank you, Melissa. Welcome, everyone, to Kulicke and Soffa's third quarter FY16 conference call. Joining us on the call today is Jonathan Chou, Interim CEO, CFO. As in prior quarterly calls, I will assist with the financial and Q&A portion of this call. For those of you who have not received a copy of today's results, the release, as well as the latest investor presentation are both available in the IR section of our website at kns.com.

(Forward-Looking Cautionary Statements) I would now like to turn the call over to Jonathan Chou for the business overview. Please go ahead, Jonathan.

Executive
Jonathan Chou

Thanks, Joe. As we announced earlier this morning, we are very pleased to have once again exceeded the high end of our guidance with $216.4 million of revenue for the third fiscal quarter. This steep 38% sequential revenue improvement marked the second consecutive quarterly ramp. As a reminder, our topline increased steeply by 44% during the March quarter. This solid performance was largely due to continued demand of our core ball and wedge solutions, as well as consistent strength within our advanced packaging business supporting system and package opportunities.

The June quarter's topline revenue of $216.4 million generated $100 million of gross profit, a 46.2% gross margin and $38.6 million of operating profit. Our 38% sequential topline improvement drove a 230% operating profit improvement and highlights our excellent fall-through performance during higher volume quarters.

Our ball bonding sales increased 64% sequentially with broad-based pick-up in demand from global OSATs, which accounted for 93% of our total ball bonding sales this quarter. As OSATs effectively provide the industry with buffer capacity, such a high percentage of OSAT sales implies a very healthy wire bonding utilization throughout the install base.

Utility and premium smartphones, as well as NAND flash applications drove our wire bonding strength. While the smartphone market is more sizable and is fairly well understood, NAND flash also represents a very interesting and attractive application for our wire bonding solution. The lower price of solid state storage is accelerating consumer and business adoption of NAND-based solid state drive. Both 2D and 3D NAND production heavily relies on stacks of die connected using wire bonding technology.

While we have historically served this space, the emerging trends within memory market related to thinner die, taller die stacks, and complex stacking arrangements have demanded new wire bonding features and process capabilities. We directly address this market opportunity with a recent released and feature-rich memory bonder, that is well-positioned to meet the growing demand of NAND and also DRAM applications into the future. Since its release,