Kulicke & Soffa Misses Revenue Expectations, But Is Now the Time to Buy?
Kulicke & Soffa (NASDAQ: KLIC), a leading semiconductor production equipment company, has reported disappointing Q1 CY2025 results. The company’s revenue fell 5.9% year-on-year to $162 million, missing Wall Street’s estimates of $165.1 million. This decline is even more significant when considering the 17.2% annual sales drop over the last two years.
The company’s non-GAAP loss of $0.52 per share was also below analysts’ consensus estimates. In addition, Kulicke & Soffa provided a revenue guidance for Q2 CY2025 that fell short of expectations, projecting sales of $145 million at the midpoint, which is 23.2% below analyst estimates.
Q1 CY2025 Highlights
- Revenue: $162 million vs analyst estimates of $165.1 million (5.9% year-on-year decline)
- Adjusted EPS: -$0.52 vs analyst estimates of $0.19
- Revenue Guidance for Q2 CY2025: $145 million at the midpoint, below analyst estimates of $188.8 million
- Adjusted EPS guidance for Q2 CY2025: $0.05 at the midpoint, below analyst estimates of $0.35
- Operating Margin: -52.3%, up from -61.1% in the same quarter last year
- Free Cash Flow: $77.98 million, up from -$26.72 million in the same quarter last year
- Inventory Days Outstanding: 116, down from 213 in the previous quarter
Company Overview
Headquartered in Singapore, Kulicke & Soffa (NASDAQ: KLIC) is a leading provider of production equipment and tools used to assemble semiconductor devices. The company has been struggling with slow sales growth over the last five years, posting an annualized revenue growth rate of 4.2%. This performance falls short of our benchmark for the semiconductor sector.
Sales Growth
A company’s long-term sales performance is a key indicator of its overall quality. While any business can have a good quarter or two, enduring companies tend to grow over time. Kulicke and Soffa’s revenue growth rate has been sluggish, with an annualized growth rate of 4.2% over the last five years.
Semiconductor Industry
The semiconductor industry is cyclical in nature, meaning that sales can fluctuate significantly from year to year. Long-term investors should be prepared for periods of high growth followed by periods of revenue contraction. Kulicke and Soffa’s performance shows it grew in the past but relinquished its gains over the last two years.
Story Continues
This quarter, Kulicke and Soffa missed Wall Street’s estimates and reported a rather uninspiring 5.9% year-on-year revenue decline, generating $162 million of revenue. Adding to the miss, the drop in sales could mean that the current downcycle is deepening. Company management is currently guiding for a 20.2% year-on-year decline in sales next quarter.
Looking Ahead
Sell-side analysts expect revenue to grow 17.6% over the next 12 months, an improvement versus the last two years. This projection implies its newer products and services will fuel better top-line performance.
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.
Key Takeaways from Kulicke & 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 significantly and its revenue fell short of Wall Street’s estimates. Overall, this quarter could have been better.
Conclusion
Kulicke & Soffa’s earnings report left more to be desired. Let’s look forward to see if this quarter has created an opportunity to buy the stock. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation when deciding if the stock is a buy.