Good evening, and thank you for joining us. I'm with Stefano Beretta, our CFO, presenting the first quarter 2024 results and the guidance for the second quarter of this year. As usual, Q&A session will follow at the end of the presentation. Revenues recorded in the first three months of the year are in the mid-range of our guidance. As anticipated during our last call, this is the result of the expected trend of each of our reference markets. More consumer-exposed markets are correlated, and related inventories confirm to be in the process of normalization, expected to turn to a recovery within the end of this year. Artificial intelligence is the bigger driver, and it is expected to remain strong, if not stronger, during the next quarters.
Automotive and industrials suffer of the ongoing inventory correction started in the last quarter of 2023, and confirmed by the main players also for the next months. The latest available data, released by the Semiconductor Industry Association on March 2024, certified the recovery of the semi space on a monthly basis comparison versus 2023, both in logic and memory segments. The boost coming from artificial intelligence into memory is crystal clear and represents the driver for the growth in the semi space in 2024. Moving to logic, the market includes the adoption of advanced packaging. We discuss, we discussed about that also during the last call, and I'm glad to confirm that we are seeing an acceleration in the adoption of advanced packaging, which is definitely positive for Technoprobe. We are able to manage this technological complexity, playing a leading role in this game.
Said that, we confirm our positive view for the next quarters ahead. Now, let me turn to Stefano Beretta, who will give you more colors on our numbers.
Good evening, everyone, and thank you for joining us. So as you will have seen in our press release, revenues in the first quarter were EUR 101.8 million. In the middle of our guidance, registering an increase of 11.5% compared to the same quarter of prior year, sequentially consistent compared to Q4 2023. Gross profit and the EBITDA decreased compared to Q1 2023, to EUR 43.1 million and EUR 24.7 million respectively, representing a 42.3% and a 24.2% margin, as guided during our prior call. On this page, you can see a summary comparison between the financials at the end of Q1 and Q1 2023 and 2024.
So just to comment it further, revenue year-on-year increase of 11.5% was driven by the gradual recovery of the consumer segment and by the volume related to artificial intelligence, partially offset by the slowdown in volumes in the automotive and industrial segments. If I can tell you, revenue expressed at the constant currency, so using the same average FX rates at the end of Q1 2023, would have been approximately EUR 1.9 million higher than the reported revenue. In fact, the three-month average US dollar-euro rate for the Q1 2024 was approximately 1.086, compared to 1.073 for the Q1 2023.
On a gross profit level, the decrease in the margin from 50.5%- 42.3% was the result of our strategic decision to maintain our organizational structure at the level of prior year, with a higher level of depreciation and amortization, given the high level of investments we made during 2023, in particular, in terms of labor and capacity, and also due to the consolidation of Harbor Electronics from August 2023, which also still contributes to a margin dilution. Finally, it's worth remembering that during the year, a prudent inventory reserve of approximately EUR 13 million was recorded to reflect both a lower inventory rotation, given the already mentioned reduction of revenue. This is for 2023, but just a reminder.
Gross profit at a constant currency would have been approximately EUR 0.9 million higher by using the three-month 2023 average rate. Consistently, the EBITDA reflected the same trend, showing a decrease in the margin from 29.5%-24.3%, including a negative forex impact of approximately EUR 0.7 million. We would like to highlight that EBITDA was also impacted by a significant amount of R&D costs in the quarter for approximately EUR 14 million, in line with the amount recorded in 2023, and representing now approximately 14% of our revenues. Confirming once again the mindset and the commitment of our leadership to continuously develop new products and solutions.
Finally, net financial position is down approximately EUR 10 million in the quarter, mainly due to EUR 12 million generated through the operating activities, more than offset by EUR 24 million absorbed by the investment over the period, mainly related to our investment in Taiwan. I hand over now to Stefano Felici, who will provide you with some update about the transaction with Teradyne.
... Thank you, Stefano. As announced in November, the combined transaction with Teradyne was subject to the approval of the U.S., other foreign direct investment approvals, antitrust merger control review. Two days ago, we finally received approvals from all the authorities, and we are ready to finalize the operation within the end of May. Let me remind you that under the term of the investment agreement, with reference to the acquisition of the DIS division, at closing, Technoprobe will pay cash a total amount of $85 million to Teradyne. With reference to the acquisition by Teradyne of 10% stake in Technoprobe, at closing, Teradyne will pay cash the total amount of EUR 384.7 million.
As part of the shareholders agreement between T-Plus and Teradyne, effective as from the closing date of the investment agreement, Teradyne will have the right to appoint a non-executive member of the board of directors of Technoprobe. As a result of this commitment, we will also join forces in the strategic partnership aimed to accelerate development of advanced interface technologies that unlock the full potential of the semiconductor test systems. With reference to the DIS division, let me also remind you that DIS is specialized in the design and manufacturing of device interface boards, including more than 400 employees, distributed in 10 different jurisdictions, with activities mainly concentrated in United States, China, and Taiwan. In 2023, the DIS business branch had revenue of approximately $100 million.
Now, I give the floor to Stefano Beretta to introduce the guidance for the second quarter of this year.
Thank you, Stefano. We project now an overall recovery in our reference market with a progressive upward trend in terms of volumes and revenue contribution, more pronounced in the last part of the year. It's worth to underline that the guidance of the second quarter now includes the contribution of the DIS business for five working weeks, starting from May 27th. And that said, the second quarter of the year is expected to show the following: revenues to be about EUR 141 million ±3%. Gross margin in the range of 41% ±2%. EBITDA margin in the range of 26% ±2% as well. So thanks, everyone, for the attention, and now we can move to the Q&A session.
Thank you to the speakers today. We now have an opportunity for questions. As a reminder, if you would like to ask a question, please use the Raise Hand function on your screen, or for those dialing in, it's star nine on your keypad. Once your name is announced, please unmute your line, state your company name before asking your question. Thank you. The first question today comes from Mr. Giovanni Selvetti. Please, Giovanni, the floor to you.
Hello, guys. Can you hear me?
Yes.
Yes, very well.
Hello. Hello, hi, and congratulations for the results. So, first one for me, if you can please quantify how much of DIS you're considering in your Q2 guidance, assuming roughly EUR 120 million revenues for DIS means roughly EUR 10 million a month, should we thus include a EUR 10 million contribution in Q2 guidance? And, still even assuming this EUR 10 million, right, in Q2 from DIS, if we take them out and we consider just the organic growth, the implied growth quarter-over-quarter is roughly 30%, which compares to a roughly 9% growth in logic, guided by your main competitor. Should I conclude that in logic, you're still gaining market share? And, the third question is a more general one.
In one of the previous conference call, you seem to be considering enter the HBM market, which, thanks to AI, is enjoying a good momentum. I was wondering if it's, if it's still something you're considering or if there are any updates there. Thank you.
Thank you, Giovanni. Let me take the first question. So DIS revenues for the five weeks is a bit higher than EUR 10 million in our estimates. We believe we'll be in the region of between EUR 12 million and EUR 14 million. I can give you now just the region, because the DIS business is not yet in our hand completely, because we are waiting for the handover on the end of May. So what we can do now is just estimating the backlog we will be given at the closing of the... at the execution date. And as a consequence, we can do just our best estimates.
But, as I said, the last five weeks of the quarter, of the second quarter, are expected to be pretty good due to some cyclicality in the business of DIS. That doesn't mean that that can be projected arithmetically through the rest of the year, so that must be carefully elaborated when and once we'll have full control of the business. But our guidance now, as I said, incorporate an estimate between 12 and 14.
Okay.
As a second part of your question, sorry, for the market share, we believe we are in a good position now, to... with our customers. It's too early now at this stage of the year to say who gain and who lose, market share. The most important thing for us is to see the market grow and, that we have the right products, to satisfy the needs of our customers.
... Yeah, yeah, I want to also add that, that, especially for artificial intelligence, we, we are in very good position because we, we developed in the last years, specific technologies to address very demanding products, very difficult to test. And therefore, we think we are in a very strong position in that segment. For your last question about HBM, we think is also that type of memory product is the most challenging one compared to all the other ones, like DRAM or NAND. And the good thing here is that we think to leverage on some of our technologies that we developed already for logic. So we are working to develop such of a solution, so it's still early to...
It's definitely an interesting segment to address for the future.
Many thanks, Giovanni, for your questions. Our next question now comes from Mr. Fabio Pavan. Please, Fabio, go ahead. Fabio, can you hear us? Please unmute your line.
Yes. Hello, can you hear me?
Yes.
Yes. Hi, thank you for taking my question and for your presentation. Just a question on the artificial intelligence stuff. You were commenting, if I understand properly, there was already contribution in the first quarter. And if we look at the guidance for Q2, my question is, the speed up is mainly driven by these new artificial intelligence-driven projects, or much more for what you call normalization in consumer? Thank you.
I would say that is a combination of both, because we see also a recovery in the consumer market right now. I would say that this growth quarter-to-quarter is a combination of both.
Thank you.
Many thanks, Mr. Fabio, for your question. Our next question now comes from Mr. Domenico Ghilotti . Please, Domenico, the floor to you.
Can you hear me now?
Yes.
Okay, so I have a follow-up on the contribution of DIS. So in particular, if you can provide also some clarification on the contribution in terms of gross margin EBITDA, because I see that actually, if I take out the DIS contribution, I would have expected maybe more operating leverage in your underlying organic performance. So if you can maybe help us in understanding the two trends. And then a follow-up on the memory size on HBM. Do you think you can go alone? You are saying that it is an interesting asset and then potentially you are looking for opportunities, but or do you think that you need a M&A transaction to enter the market?
Thank you. So let me take the first part of the question about the market contribution of DIS. In this space, at least for the first month of the acquisition, the focus will be on the integration of DIS business. Currently, we do not expect very high profitability to be incorporated in our figures. What we expect is a dilution in general compared to our SoC business. Overall, we expect to have, at least for the first year, 2024, a gross margin in the region of 30%-35%, and an EBITDA contribution for DIS, that should be also combined with Harbor, and then I will explain better in a high single-digit number. Why I mention Harbor?
Because they are really combined as a business. So Harbor is a manufacturing entity, producing PCB. DIS is a design center, is a design, is a group of designers and engineers, designing PCB. So when we will have a full control of both business, starting from the second part of the year, the work of Technoprobe will be to integrate both of them and to make them more correlated as much as we can. So the profitability standalone is something we can give you right now because it's day one of the acquisition. But after that, in the next quarter, we will work to combine and to make efficient the combination between the two entities, and together also with Technoprobe, because also Technoprobe will benefit from the design of DIS.
But for the moment, you can take the figures I just provided.
Okay. I will answer to your second questions about HBM. So first of all, I'd like to remind again about our strategy, M&A strategy, which is again, typically we are interested in technology, and because we like to acquire if we see the opportunity. We'd like to acquire companies with a high content of technologies, and possibly with technologies that can be integrated in our products. So right now, we don't see in the current, let's say, memory players or captive players, we don't see anything that really interesting for us.
We think, so therefore, we think that we have a better chance to develop this technology internally, leveraging on our SoC technology for logic, which is much more complex than other technologies. So this is the plan for now.
Thank you. Our next question today comes from Luca Bacoccoli. Please, Luca, the floor to you.
Hi. Good afternoon, everyone. Can you hear me?
Yes, sir.
Okay, good. So two questions from my side. First one regards the second quarter guidance. So I just would like to better understand what is the contribution of Harbor Electronics in the second quarter guidance, because even carving out the DIS contribution, it seems that that's a strong sequential acceleration in the second quarter top line. So I would like just to understand what is going on on the like for like growth. And finally, the second question regards the artificial intelligence. During the previous call, you were mentioning an overall contribution of the artificial intelligence to the 2024 sales of approximately 15%.
But it seems that this segment is gaining momentum above your initial expectation. So, if this is the case, what could be the overall contribution to this year sales? Thank you.
Thank you. Harbor Electronics is currently bringing a little bit of losses rather than a positive contribution. This is due to a difficult we are facing in their production phases and in processes when approaching the more complex design that Technoprobe is able to provide for manufacturing. So in the second quarter, we expect still a small negative contribution to the business. We had in Q1 as well some, let me say, double costing because of some product that didn't work properly, so we had to redo twice the work and having a double cost in terms of cost of sales and investment.
So for the moment, Harbor is still working on the optimization of their internal processes, and as Technoprobe, we are providing them with all the support they need to resolve the situation and to turn their business in a positive shape in the third quarter.
Yes, and about the artificial intelligence, so for sure, we see very positive and strong demand. I would like also to remind that it is not only the... the problem is not only the manufacturing of the chips and wafers, but here there is also some bottleneck on the advanced packaging, so. And so far, we see our main customers speeding up in the adoption and in increasing the capacity for advanced packaging, and this really is what is driving the growth here. So it's difficult right now to say a specific number. My expectation is that it can go up to even to 20%, probably towards the end of the year.
But, again, this is really depending on the capability, I mean, the capacity of our customers to increase the advanced packaging capacity.
Thank you. Currently, we do not have any further questions queued, but we will wait... Oh, one question came in now from Mr. Andrea Balloni. Please, Andrea, the floor to you.
Yes. Good afternoon. Can you hear me?
Yes.
Good afternoon, everybody. My first question is on your order intake. I was wondering which kind of visibility is your order intake providing to you in terms of months? Is that something that is exceeding one month or one month and a half, that was the average of the last 12 months? Or is still something in this range? And my second question is about your guidance. If I understood correctly, your guidance is including only around one month of DIS. Is that correct?
Correct. 5 weeks-
Yes
... from May 27th-
Okay, fine, so-
To end of June.
Okay. And, you said that this is something, that should be around EUR 12-14 million per month. So, I would... Can we assume that, in next two quarter, Q3 and Q4... should we consolidate the DIS for three months, you should have, at least level of sales in the region of EUR 160 million per quarter. And this is also in light of the last conference call, you have guided a much stronger trend in the second half, compared to the first half. So is it correct to assume three, four should have around EUR 160 million per quarter?
Well, this is too early to assume now the revenues for Q3 and Q4, also because as I said before, we first need to fully incorporate and to control the DIS business, so to fully be aware about their capacity. So, if you look in the past, the DIS business brings a turnover of EUR 100 million per year overall, depending then on the cyclicality on a quarterly basis. So it's not just an arithmetical exercise, we just need to get deeper in details with them. For the SoC business, what we as...
For the probe card business in general, what we have seen, and also talking with our customer, the expectation overall is to see a 2024 increase of in the region of 10% overall compared to 2023. So then you can do the split-
Okay.
- quarter as you like, in general. But, you know, every quarter is different from the other, considering the low visibility we have on a quarterly basis. So the overall trend that we have seen in 2024, and we expect, so far, is at 10%, for probe card. In the region of 10%.
Oh, okay.
A low double digit-
Okay
- would be better.
Okay, very clear. So I will start with the question in another way. My point is, it's still confirmed that second part of the year will be stronger compared to the first half, or second quarter is something stronger than initially expected in the previous conference call?
As said by Stefano, it's a little bit early to say that because, unfortunately, we still don't have such long visibility, because also our customers are not giving us better visibility. But so far from what we see, we think that would be a second half.
Better than the first one.
Okay, thank you. And, about the order intake and visibility?
Again, it's we are talking about 2-3 months, the visibility.
Okay.
Which is-
So it has improved a little bit compared to the last couple of quarters, basically?
Little bit, but still, yeah, in this range. Yes.
Okay, okay. Thanks a lot.
Thank you. Currently, there are no further questions queued, but we'll wait just a few moments to give everyone the opportunity. As there are no further questions, I will now hand back to the speakers for any final comments before bringing this presentation to a close. Please go ahead.
Thank you, everyone, and we'll see you again in three months from now.