BESI Be Semiconductor Industries NV

BE Semiconductor Industries N.V. (the “Company" or "Besi") (Euronext Amsterdam: BESI; OTC markets: BESIY), a leading manufacturer of assembly equipment for the semiconductor industry, today announced its results for the first quarter ended March 31, 2024.

Key Highlights

• Revenue of € 146.3 million, above midpoint of guidance. Down 8.3% vs. Q4-23 due primarily to lower shipments for high-performance computing and automotive end-user markets, partially offset by higher shipments for high-end mobile applications. Up 9.7% vs. Q1-23 due to higher shipments for 2.5D and 3D applications partially offset by weakness in smartphone end user markets
• Orders of € 127.7 million down 23.3% vs. Q4-23 principally due to a pause in demand for 2.5D and 3D applications following strong H2-23 and ongoing softness in mainstream assembly markets. Vs. Q1-23, orders decreased 10.1% due primarily to weakness in high-end mobile and automotive markets
• Gross margin of 67.2% rose by 2.1 points vs. Q4-23 and by 3.0 points vs. Q1-23 due primarily to a more favorable product mix
• Net income of € 34.0 million decreased 38.1% vs. Q4-23 and 1.4% vs. Q1-23 primarily due to higher share-based incentive compensation and, to a lesser extent, increased R&D spending. Besi’s net margin declined to 23.2% vs. 34.4% in Q4-23 and 25.9% in Q1-23
• Ex share-based incentive compensation, Besi’s adjusted net income (net margin) was € 49.5 million (33.8%) vs. € 57.7 million (36.2%) in Q4-23 and € 43.0 million (32.2%) in Q1-23
• Net cash of € 180.9 million increased € 67.9 million, or 60.1%, vs. Q4-23 due to strong cash flow from operations and the conversion into equity of Convertible Notes

Outlook   

• Revenue expected to be flat (plus or minus 5%) vs. € 146.3 million reported in Q1-24
• Gross margin expected to range between 63-65% vs. 67.2% realized in Q1-24 due to the anticipated product mix
• Operating expenses expected to decrease 15%-20% vs. € 57.6 million in Q1-24 due to a reduction in share-based compensation expense

(€ millions, except EPS)	Q1-2024	Q4-2023	Δ	Q1-2023	Δ
Revenue	146.3	159.6	-8.3%	133.4	+9.7%
Orders	127.7	166.4	-23.3%	142.0	-10.1%
Gross Margin	67.2%	65.1%	+2.1	64.2%	+3.0
Operating Income	40.7	66.1	-38.4%	41.7	-2.4%
Net Income*	34.0	54.9	-38.1%	34.5	-1.4%
Net Margin*	23.2%	34.4%	-11.2	25.9%	-2.7
EPS (basic)	0.44	0.71	-38.0%	0.44	-
EPS (diluted)	0.44	0.68	-35.3%	0.44	-
Net Cash and Deposits	180.9	113.0	+60.1%	325.8	-44.5%

* Excluding share-based compensation expense, Besi’s adjusted net income (net margin) would have been € 49.5 million (33.8%), € 57.7 million (36.2%) and € 43.0 million (32.2%) in Q1-24, Q4-23 and Q1-23, respectively.

Richard W. Blickman, President and Chief Executive Officer of Besi, commented:“Besi delivered solid first quarter results in an extended assembly market downturn. Revenue of € 146.3 million was above the midpoint of prior guidance and represented a 9.7% increase versus Q1-23. Year over year revenue growth reflected strength in both 2.5D and 3D AI related applications partially offset by continued weakness in mobile and automotive markets. Similarly, net income adjusted for share-based compensation rose to € 49.5 million, an increase of 15.1% versus Q1-23, with adjusted net margins increasing to 33.8% versus 32.2%. Profit growth was primarily attributable to increased revenue combined with a 3.0 point increase in gross margins to 67.2% associated with a more favorable product mix and net forex benefits. Our financial position also improved with net cash increasing by 60.1% from year end to reach € 180.9 million due to strong cash flow generation and the conversion into equity of Convertible Notes.

Order trends in Q1-24 reflected a number of cross currents affecting assembly equipment markets currently. For the quarter, orders decreased by 10.1% versus Q1-23 and by 23.3% sequentially. Mainstream assembly markets continue to be soft, particularly for smartphone and automotive applications, despite increasing utilization rates generally. For smartphone applications, it reflects both ongoing weakness in Chinese markets and limited new product innovation this year. For automotive applications, it reflects excess assembly capacity after a period of strong growth over the past two years. We also noted a pause in advanced packaging order development this quarter, particularly for 2.5D and 3D applications, after a strong ramp in H2-23 as customers install new incremental capacity. We expect these orders to revive in Q2-24. Orders for photonics applications continued to be strong in Q1-24. In addition, we received a follow on order for our new, in-line flip chip system for CoWoS applications, shipped a TCB Next system for evaluation to a second customer and received indications of interest for additional systems from multiple customers.

It appears that the recovery of the assembly equipment market in 2024 is progressing more slowly than previously anticipated due to continued excess capacity conditions in a number of our end-user markets. Many industry analysts now expect the upturn in mainstream assembly applications to be more H2-24 focused. However, our advanced packaging prospects continue to be favorable based on customer investment plans for 2.5D and 3D AI applications, particularly in the areas of hybrid bonding, CoWoS and photonics assembly. We anticipate orders for 25-35 hybrid bonding systems in Q2-24 from multiple customers, substantially all of which are for Besi’s most advanced 100nm accuracy generation. As such, we are increasing our R&D investment in each of these assembly processes to take advantage of growth anticipated in 2025-2027. We have also expanded our resource commitment to next generation TCB systems. We see a parallel path pursued by leading memory customers for the adoption of both hybrid bonding and next generation TCB assembly processes in order to meet the significant demand for high bandwidth memory necessary to support AI related capacity growth.

For Q2-24, we forecast that revenue will be flat plus or minus 5% versus Q1-24 with gross margins of 63%-65% based on our projected product mix. Aggregate operating expenses are forecast to decrease by 15-20% versus Q1-24 due to a reduction in share-based compensation expense.”

Share Repurchase ActivityDuring the quarter, Besi repurchased approximately 100,000 of its ordinary shares at an average price of € 146.11 per share for a total of € 14.8 million. Cumulatively, as of March 31, 2024, a total of € 24.4 million has been purchased under the current € 60 million share repurchase plan at an average price of € 136.47 per share. As of March 31, 2024, Besi held approximately 3.4 million shares in treasury equal to 4.2% of its shares outstanding.

Convertible NotesAt March, 31, 2024, Besi’s total principal amount of its Convertible Notes outstanding equaled € 290.0 million. During the quarter, € 38.2 million of Convertible Notes due 2024 and 2027 were converted into approximately 0.8 million shares. Subsequent to quarter end, an additional € 89.5 million of Convertible Notes due 2027 were converted into approximately 1.8 million shares. As a result, Besi’s total principal amount of Convertible Notes outstanding decreased to € 200.5 million at April 25, 2024.

Investor and media conference callA conference call and webcast for investors and media will be held today at 4:00 pm CET (10:00 am EDT). To register for the conference call and/or to access the audio webcast and webinar slides, please visit www.besi.com.
Important Dates Annual General Meeting of Shareholders Investor Day Publication Q2/Semi-annual results Publication Q3/Nine-month results Publication Q4/Full year results	April 25, 2024June 6, 2024July 25, 2024October 24, 2024February 2025
Dividend Information* Proposed ex-dividend date Proposed record date Proposed payment of 2023 dividend *Subject to approval at Besi’s AGM on April 25, 2024	April 29, 2024April 30, 2024Starting May 3, 2024

Basis of PresentationThe accompanying condensed Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union. Reference is made to the Summary of Significant Accounting Policies to the Notes to the Consolidated Financial Statements as included in our 2023 Annual Report, which is available on www.besi.com.

Contacts:Richard W. Blickman, President & CEO        Leon Verweijen, SVP FinanceClaudia Vissers, Executive Secretary/IR coordinatorEdmond Franco, VP Corporate Development/US IR coordinatorTel. (31) 26 319 4500                investor.relations@besi.com   

About BesiBesi is a leading supplier of semiconductor assembly equipment for the global semiconductor and electronics industries offering high levels of accuracy, productivity and reliability at a low cost of ownership. The Company develops leading edge assembly processes and equipment for leadframe, substrate and wafer level packaging applications in a wide range of end-user markets including electronics, mobile internet, cloud server, computing, automotive, industrial, LED and solar energy. Customers are primarily leading semiconductor manufacturers, assembly subcontractors and electronics and industrial companies. Besi’s ordinary shares are listed on Euronext Amsterdam (symbol: BESI). Its Level 1 ADRs are listed on the OTC markets (symbol: BESIY) and its headquarters are located in Duiven, the Netherlands. For more information, please visit our website at www.besi.com.

Caution Concerning Forward Looking StatementsThis press release contains statements about management's future expectations, plans and prospects of our business that constitute forward-looking statements, which are found in various places throughout the press release, including, but not limited to, statements relating to expectations of orders, net sales, product shipments, expenses, timing of purchases of assembly equipment by customers, gross margins, operating results and capital expenditures. The use of words such as “anticipate”, “estimate”, “expect”, “can”, “intend”, “believes”, “may”, “plan”, “predict”, “project”, “forecast”, “will”, “would”, and similar expressions are intended to identify forward looking statements, although not all forward looking statements contain these identifying words. The financial guidance set forth under the heading “Outlook” contains such forward looking statements. While these forward looking statements represent our judgments and expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from those contained in forward looking statements, including any inability to maintain continued demand for our products; failure of anticipated orders to materialize or postponement or cancellation of orders, generally without charges; the volatility in the demand for semiconductors and our products and services; the extent and duration of the COVID-19 and other global pandemics and the associated adverse impacts on the global economy, financial markets, global supply chains and our operations as well as those of our customers and suppliers; failure to develop new and enhanced products and introduce them at competitive price levels; failure to adequately decrease costs and expenses as revenues decline; loss of significant customers, including through industry consolidation or the emergence of industry alliances; lengthening of the sales cycle; acts of terrorism and violence; disruption or failure of our information technology systems; consolidation activity and industry alliances in the semiconductor industry that may result in further increased customer concentration, inability to forecast demand and inventory levels for our products; the integrity of product pricing and protection of our intellectual property in foreign jurisdictions; risks, such as changes in trade regulations, conflict minerals regulations, currency fluctuations, political instability and war, associated with substantial foreign customers, suppliers and foreign manufacturing operations, particularly to the extent occurring in the Asia Pacific region where we have a substantial portion of our production facilities; potential instability in foreign capital markets; the risk of failure to successfully manage our diverse operations; any inability to attract and retain skilled personnel, including as a result of restrictions on immigration, travel or the availability of visas for skilled technology workers; those additional risk factors set forth in Besi's annual report for the year ended December 31, 2023 and other key factors that could adversely affect our businesses and financial performance contained in our filings and reports, including our statutory consolidated statements. We expressly disclaim any obligation to update or alter our forward-looking statements whether as a result of new information, future events or otherwise.   

Consolidated Statements of Operations
(€ thousands, except share and per share data)	Three Months EndedMarch 31,(unaudited)
	2024	2023
Revenue	146,314	133,406
Cost of sales	48,043	47,718
Gross profit	98,271	85,688
Selling, general and administrative expenses	39,641	28,982
Research and development expenses	17,919	14,995
Total operating expenses	57,560	43,977
Operating income	40,711	41,711
Financial expense, net	589	1,545
Income before taxes	40,122	40,166
Income tax expense	6,143	5,618
Net income	33,979	34,548
Net income per share – basic	0.44	0.44
Net income per share – diluted	0.44	0.44
Number of shares used in computing per share amounts:- basic- diluted 1	77,181,32682,106,146	77,946,87383,777,673

Consolidated Balance Sheets
(€ thousands)			March31, 2024(unaudited)	December 31, 2023(audited)
ASSETS
Cash and cash equivalents			232,053	188,477
Deposits			215,000	225,000
Trade receivables			150,192	143,218
Inventories			99,384	92,505
Other current assets			34,756	39,092
Total current assets			731,385	688,292
Property, plant and equipment			41,328	37,516
Right of use assets			16,901	18,242
Goodwill			45,613	45,402
Other intangible assets			90,241	93,668
Deferred tax assets			11,444	12,217
Other non-current assets			1,252	1,216
Total non-current assets			206,779	208,261
Total assets			938,164	896,553
Current portion of long-term debt			984	3,144
Trade payables			52,382	46,889
Other current liabilities			100,606	87,200
Total current liabilities			153,972	137,233
Long-term debt			265,142	297,353
Lease liabilities			13,625	14,924
Deferred tax liabilities			12,136	12,959
Other non-current liabilities			12,914	12,671
Total non-current liabilities			303,817	337,907
Total equity			480,375	421,413
Total liabilities and equity			938,164	896,553

Consolidated Cash Flow Statements
(€ thousands)	Three Months Ended March 31,(unaudited)
	2024	2023
Cash flows from operating activities:
Income before income tax	40,122	40,166
Depreciation and amortization	6,813	6,493
Share based payment expense	16,900	9,273
Financial expense, net	589	1,545
Changes in working capital	(3,251)	4,454
Interest (paid) received	1,169	849
Income tax paid	(2,089)	(1,387)
Net cash provided by operating activities	60,253	61,393
Cash flows from investing activities:
Capital expenditures	(5,650)	(1,135)
Capitalized development expenses	(4,663)	(5,390)
Repayments of (investments in) deposits	10,000	25,000
Net cash provided by (used in) investing activities	(313)	18,475
Cash flows from financing activities:
Payments of lease liabilities	(1,043)	(1,100)
Purchase of treasury shares	(14,779)	(77,779)
Net cash used in financing activities	(15,822)	(78,879)
Net increase (decrease) in cash and cash equivalents	44,118	989
Effect of changes in exchange rates on cash and cash equivalents	(542)	(2,748)
Cash and cash equivalents at beginning of the period	188,477	491,686
Cash and cash equivalents at end of the period	232,053	489,927

Supplemental Information (unaudited) (€ millions, unless stated otherwise)
REVENUE	Q1-2024				Q4-2023				Q3-2023				Q2-2023				Q1-2023
Per geography:
China	58.5		40	%	62.0		39	%	40.8		33	%	64.9		40	%	37.6		28	%
Asia Pacific (excl. China)	43.6		30	%	57.9		36	%	42.3		34	%	59.2		36	%	58.2		44	%
EU / USA / Other	44.2		30	%	39.7		25	%	40.2		33	%	38.4		24	%	37.6		28	%
Total	146.3		100	%	159.6		100	%	123.3		100	%	162.5		100	%	133.4		100	%
ORDERS	Q1-2024				Q4-2023				Q3-2023				Q2-2023				Q1-2023
Per geography:
China	51.1		40	%	71.1		43	%	46.0		36	%	51.4		46	%	35.5		25	%
Asia Pacific (excl. China)	45.0		35	%	36.6		22	%	40.9		32	%	33.2		29	%	71.3		50	%
EU / USA / Other	31.6		25	%	58.7		35	%	40.4		32	%	28.0		25	%	35.2		25	%
Total	127.7		100	%	166.4		100	%	127.3		100	%	112.6		100	%	142.0		100	%
Per customer type:
IDM	53.5		42	%	82.7		50	%	70.5		55	%	60.5		54	%	74.0		52	%
Subcontractors	74.2		58	%	83.7		50	%	56.8		45	%	52.1		46	%	68.0		48	%
Total	127.7		100	%	166.4		100	%	127.3		100	%	112.6		100	%	142.0		100	%
HEADCOUNT	Mar 31, 2024				Dec 31, 2023				Sep 30, 2023				Jun 30, 2023				Mar 31, 2023
Fixed staff (FTE)	1,760		88	%	1,736		93	%	1,725		87	%	1,689		86	%	1,682		84	%
Temporary staff (FTE)	236		12	%	134		7	%	248		13	%	279		14	%	312		16	%
Total	1,996		100	%	1,870		100	%	1,973		100	%	1,968		100	%	1,994		100	%
OTHER FINANCIAL DATA	Q1-2024				Q4-2023				Q3-2023				Q2-2023				Q1-2023
Gross profit	98.3		67.2	%	103.9		65.1	%	79.6		64.6	%	106.6		65.6	%	85.7		64.2	%
Selling, general and admin expenses:
As reported	39.6		27.1	%	24.3		15.2	%	23.3		18.9	%	29.4		18.1	%	29.0		21.7	%
Share-based compensation expense	(16.9	)	-11.6	%	(2.8	)	-1.7	%	(1.6	)	-1.3	%	(5.5	)	-3.4	%	(9.3	)	-7.0	%
SG&A expenses as adjusted	22.7		15.5	%	21.5		13.5	%	21.7		17.6	%	23.9		14.7	%	19.7		14.8	%
Research and development expenses:
As reported	17.9		12.2	%	13.5		8.5	%	13.6		11.0	%	14.3		8.8	%	15.0		11.2	%
Capitalization of R&D charges	4.7		3.2	%	5.7		3.6	%	4.7		3.8	%	5.3		3.3	%	5.4		4.0	%
Amortization of intangibles	(3.6	)	-2.4	%	(3.3	)	-2.1	%	(3.3	)	-2.6	%	(3.5	)	-2.2	%	(3.5	)	-2.6	%
R&D expenses as adjusted	19.0		13.0	%	15.9		10.0	%	15.0		12.2	%	16.1		9.9	%	16.9		12.7	%
Financial expense (income), net:
Interest income	(4.0	)			(3.6	)			(2.9	)			(3.1	)			(2.6	)
Interest expense	2.8				3.0				2.8				2.9				2.9
Net cost of hedging	1.6				1.7				1.7				2.0				1.6
Foreign exchange effects, net	0.2				(0.4	)			0.2				(0.1	)			(0.4	)
Total	0.6				0.7				1.8				1.7				1.5
Gross cash	447.1				413.5				391.2				378.3				644.9
Operating income (as % of net sales)	40.7		27.8	%	66.1		41.4	%	42.7		34.6	%	62.9		38.7	%	41.7		31.3	%
EBITDA (as % of net sales)	47.5		32.5	%	72.7		45.6	%	48.9		39.7	%	69.3		42.6	%	48.2		36.1	%
Net income (as % of net sales)	34.0		23.2	%	54.9		34.4	%	35.0		28.4	%	52.6		32.4	%	34.5		25.9	%
Effective tax rate	15.3	%			16.1	%			14.4	%			14.0	%			14.0	%
Income per share
Basic	0.44				0.71				0.45				0.68				0.44
Diluted	0.44				0.68				0.45				0.66				0.44
Average shares outstanding	77,181,326				77,070,082				77,374,933				77,634,197				77,946,873
Shares repurchased
Amount	14.8				23.1				45.5				66.9				77.7
Number of shares	101,049				226,572				447,829				761,937				1,120,327

______________________________1) The calculation of diluted income per share assumes the exercise of equity settled share based payments and the conversion of all Convertible Notes outstanding