Semiconductor production equipment company Kulicke & Soffa (NASDAQ: KLIC) reported Q4 CY2024 results exceeding the market’s revenue expectations , but sales fell by 3% year on year to $166.1 million. On the other hand, next quarter’s revenue guidance of $165 million was less impressive, coming in 4.9% below analysts’ estimates. Its non-GAAP profit of $0.37 per share was 32.1% above analysts’ consensus estimates.
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Kulicke and Soffa (KLIC) Q4 CY2024 Highlights:
Fusen Chen, Kulicke & Soffa's President and Chief Executive Officer, stated, "As we anticipate core-market demand to gradually improve, we remain focused on delivering new systems and features within the Ball, Wedge, and Advanced Solutions segments. Over the coming quarters, we also expect ongoing market adoption of our unique Fluxless Thermo-Compression (FTC), Vertical Fan-Out (VFO), and emerging battery assembly solutions."
Company Overview
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
A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Over the last five years, Kulicke and Soffa grew its sales at a tepid 5.9% compounded annual growth rate. This fell short of our benchmark for the semiconductor sector and is a rough starting point for our analysis. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.
We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. Kulicke and Soffa’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 24.2% annually.
This quarter, Kulicke and Soffa’s revenue fell by 3% year on year to $166.1 million but beat Wall Street’s estimates by 0.7%. Company management is currently guiding for a 4.1% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 14.3% over the next 12 months, an improvement versus the last two years. This projection is commendable and suggests its newer products and services will catalyze better top-line performance.
Software is eating the world and there is virtually no industry left that has been untouched by it. That drives increasing demand for tools helping software developers do their jobs, whether it be monitoring critical cloud infrastructure, integrating audio and video functionality, or ensuring smooth content streaming. .
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 213, which is 56 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 Q4 Results
We liked that revenue, operating income, and EPS all beat in the quarter. However, revenue and EPS guidance for Q1 both missed, and this is weighing on shares. The stock traded down 5.2% to $41.15 immediately following the results.
Is Kulicke and Soffa an attractive investment opportunity right now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free .