Source: Motley Fool transcript (published 05/07/2026); call date Thursday, May 7, 2026 at 8:00 a.m. ET. Participants: Lester Wong (CFO/acting principal), Joseph Elgindy (IR Director). NOTE: KLIC reports Q2 FY26 (March 2026 quarter); revenue grew 21.5% QoQ (~$243M).
Lester Wong: Thank you, Joe. Good morning, everyone. We are again pleased to report demand is improving at a faster and stronger pace than previously expected. Customer sentiment remains strong and utilization levels across our largest served market remain above average. This strength continued to be led by general semiconductor and memory demand, which directly supports data center capacity expansion globally. We also see improving conditions in traditional markets such as premium smartphones. Over the past year, utilization rates have continued to increase and the need for incremental capacity continues to grow.
As explained last quarter, data center growth requires new forms of advanced packaging, which supports the most advanced logic and memory applications. Data center growth also requires new capacity for high-volume traditional packaging solutions, which support networking, communication, power management and storage requirements. Additionally, we have seen positive momentum within automotive and industrial end markets.
During the March quarter, revenue increased by 21.5% sequentially. We have improved visibility within fiscal 2026 and anticipate a slight sequential improvement into the fiscal fourth quarter. Our financial performance was above prior expectations, and we remain focused to aggressively ramp production in our core and advanced markets. Additionally, we continue to deliver new TCB, power semiconductor and memory solutions to support our customers' evolving production needs. Revenue recognized for our leading Fluxless Thermo-Compression solutions have increased sequentially, supported by OSATs, foundries and IDMs.
Our fiscal year 2026 outlook remains strong for Thermo-Compression and supports aggressive sequential growth. In addition to Thermo-Compression, we recently announced several new and innovative offerings which address additional packaging transformations within power semiconductor and memory. Our new Asterion-TW system announced in late March is well positioned to support increasingly complex high-current and high-reliability power applications. This new system complements our recently released clip-attach and pin-welding solutions. We also announced the ProMEM Suite of memory features and highlighted our growing portfolio of DRAM solutions supporting both cost-sensitive and high-bandwidth memory applications.
Two specific areas of focus are around panel-level base system architecture and long-term industry development of true production-capable hybrid bonding solutions. Despite challenging market conditions over the past 3 years, we continue to invest in R&D in several exciting new growth areas. Over the coming year, we anticipate significantly expanding our Advanced Solutions segment production capacity to support approximately $400 million of revenue.
Turning to end market review. General semiconductor revenues increased by 19.4% sequentially to $148.9 million, driven by higher capacity and technology requirements for both ball bonding and advanced solutions segments. Memory shipments increased by 93% sequentially to $31.3 million. Our memory business is currently focused on supporting NAND technology and capacity requirements, although as advanced packaging trends continue to evolve throughout the memory market, we expect to gain market share in DRAM with our new solutions. Automotive and industrial shipments increased by 63% sequentially, driven primarily by high-I/O and high-volume power and mixed-signal packaging. Aftermarket Products and Services (APS) end market demand decreased sequentially due to lower refurbished system sales during the March quarter; the broader consumables portion of APS has remained consistent sequentially.
Within advanced packaging, transitions to both vertical wire and thermal compression remain on track, and we continue to be positioned well. We are increasingly focused on hybrid bonding technology and are confident we can provide a very competitive solution within this emerging process. Hybrid may still be a few years away from broad market adoption, but it is now time to invest and accelerate market engagements. In the interim, TCB is the production solution for today's most complex heterogeneous applications. Our TCB business is expected to grow at least 70% sequentially this fiscal year, generating over $100 million of revenue. We anticipate the majority of our sequential TCB growth will continue to stem from large applications and heterogeneous packaging trends, and we will allocate additional resources towards emerging HBM opportunities.
Our other unique memory opportunity continues to be addressed with vertical wire, which provides a highly capable alternative for cost-effective bandwidth through die stacking. We anticipate strong sequential growth in both TCB and vertical wire over the coming years. We introduced our latest ACELON dispense system in November at Productronica, which is now deployed with several customers for evaluation and progressing well. During the March quarter, we recognized revenue associated with a new dedicated panel-level dispense solution.
On the financials — my remarks will refer to GAAP results unless noted. We again delivered revenue above guidance and continue to execute on our production ramp in core markets and Fluxless Thermo-Compression. Gross margins came in at 49.3%, and we delivered $0.66 of GAAP earnings and $0.79 on non-GAAP earnings. Gross margin remained strong sequentially due to customer and product mix. Total operating expenses came in at $81.1 million on a GAAP basis and $73.8 million on a non-GAAP basis. Tax expense came in at $7.4 million; we anticipate our effective tax rate will remain slightly over 20% near term.
For the June quarter, revenue is expected to increase by 28% sequentially to $310 million with gross margins of 48%. Non-GAAP operating expenses are expected to be $85 million, representing an increase in variable compensation as well as an increase in critical headcount to support our growing market opportunities. GAAP earnings per share is targeted to be $0.87 and non-GAAP earnings per share to be $1.00.
We are expanding the Advanced Solutions segment production footprint by investing in capital expenditures. These investments have started in April and are planned to significantly expand our Thermo-Compression capacity by the first half of fiscal 2027. Total capital expenditures in connection with this expansion are expected to be $20 million, with $12 million deployed in fiscal 2026.
Operator: [Q&A — selected]
Krish Sankar (TD Cowen): Utilization across geographies?
Lester Wong: China has been very high for the last couple of quarters — over 90%, around 92%. Strong utilization in Korea, Japan and Taiwan (other Asia). Southeast Asia is still a bit soft but improved. North America and Europe also improved. Still led by China as well as Japan, Korea and Taiwan.
Krish Sankar: Who's the incremental TCB buyer this year?
Lester Wong: It's all three — we've always had a very strong position in IDM, moved into foundry over the last 1.5 years, and now we see a lot of OSAT interest. We're also talking to some fabless customers.
Denis Pyatchanin (Needham): Outlook for future quarters?
Lester Wong: For the fiscal fourth quarter, we expect sequentially incremental maybe 5% to 10%. We're getting much better visibility now through FY '26 — strength throughout the core business as well as Advanced Solutions through the rest of calendar '26.
David Duley (Steelhead): What triggered the TCB capacity expansion to ~$400 million annually?
Lester Wong: We're investing now because we definitely see a very bright future in Fluxless Thermo-Compression. We believe we have the best system in the market — both formic acid and plasma, the only people who have that, with flexible material handling. The tool has been proven at IDMs, foundries, and now OSAT. We've gotten a lot of inbound interest and we believe this is the time to be prepared for a significant ramp over the coming years.
David Duley: Will you take share or find new niches?
Lester Wong: Both. We're not in memory/HBM right now — if that market opens up, it's significant. Within logic, our solution is proving very robust against competition, so we will take share. Additional customers will qualify more applications on FTC at both foundry and OSAT.
David Duley: What's behind the memory bounce-back?
Lester Wong: On vertical wire — that's more of a '27 and beyond play, focused on low-power DDR for on-premise AI. On memory in general, we see a rebound, particularly in China — a lot of the Chinese memory OSATs are expanding significantly, driving our ball bonding business in China.
Rebecca Zamsky (B. Riley): What drove the A&I positive surprise?
Lester Wong: It's mainly automotive — semiconductor content is going up in automotive, both around ADAS and infotainment, high I/O count, and our new tools serve that market well.
Rebecca Zamsky: OpEx trajectory?
Lester Wong: We guided non-GAAP OpEx to $85 million — a big part is variable incentive compensation and sales commissions tied to revenue. We're also investing in fixed costs, particularly R&D around advanced packaging (panel-level architecture and hybrid bonding). We're going to try to accelerate that program.
Operator: Thank you. This concludes today's call.