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 1520% versus Q1-24 due to a reduction in share-based compensation expense.”