Kulicke and Soffa (NASDAQ:KLIC) Reports Weak Q1
Semiconductor production equipment company Kulicke & Soffa (NASDAQ: KLIC) fell short of analysts' expectations in Q1 CY2024, with revenue flat year on year at $172.1 million. Next quarter's revenue guidance of $180 million also underwhelmed, coming in 11% below analysts' estimates. It made a non-GAAP loss of $0.95 per share, down from its profit of $0.38 per share in the same quarter last year.
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Kulicke and Soffa (KLIC) Q1 CY2024 Highlights:
- Revenue: $172.1 million vs analyst estimates of $174.2 million (1.2% miss)
- EPS (non-GAAP): -$0.95 vs analyst estimates of $0.24 (-$1.19 miss)
- Revenue Guidance for Q2 CY2024 is $180 million at the midpoint, below analyst estimates of $202.3 million
- Gross Margin (GAAP): 9.6%, down from 48.6% in the same quarter last year
- Inventory Days Outstanding: 106, down from 236 in the previous quarter
- Free Cash Flow was -$26.72 million compared to -$11.76 million in the previous quarter
- Market Capitalization: $2.61 billion
Fusen Chen, Kulicke & Soffa's President and Chief Executive Officer, stated, "Despite a shifting Advanced Display market, we remain nimble and efficiency focused. We are preparing for broader Ball Bonder demand recovery and have reallocated Advanced Display resources to support growing demand and activity within Thermocompression and Advanced Dispense. We look forward to achieve new customer and market adoption milestones over the coming quarters."
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 mediocre, averaging 15.7% annually. But as you can see below, its revenue declined from $173 million in the same quarter last year to $172.1 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).
Kulicke and Soffa had a difficult quarter as revenue dropped 0.5% year on year, missing analysts' estimates by 1.2%. 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 5.7% next quarter, analysts are expecting revenue to grow 19.5% 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 106, which is 23 days below its five-year average. At the moment, these numbers show no indication of an excessive inventory buildup.
Key Takeaways from Kulicke and Soffa's Q1 Results
We were impressed by Kulicke and Soffa's strong improvement in inventory levels. On the other hand, its revenue guidance for next quarter missed analysts' expectations and its revenue missed Wall Street's estimates. Overall, this was a mediocre quarter for Kulicke and Soffa. The company is down 4% on the results and currently trades at $42.5 per share.
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.
