Good morning, good afternoon, ladies and gentlemen, and welcome to BESI's quarterly conference call and audio webcast to discuss the company's 2021 third quarter results. You can log in to the audio webcast via BESI's website, www.besi.com. Joining us today are Mr. Richard Blickman, Chief Executive Officer, and Ms. Hetwig van Kerkhof, Senior Vice President, Finance. At this moment, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, ladies and gentlemen, this conference is being recorded and cannot be reproduced in whole or in part without written permission from the company. I would now like to turn the call over to Mr. Richard Blickman. Please go ahead, sir. Thank you. Thank you all for joining us today. We will begin by making a few comments in connection with the press release we issued earlier today and then take your questions. I would like to remind you that some of the comments made during this call and some of the answers in response to your questions by management may contain forward-looking statements. Such statements may involve uncertainties and risks as described in the earnings release and other reports filed with the AFM. For today's call, we'd like to review the key highlights for the third quarter and nine months ended September 30 this year and also update you on the market, our strategy, and the outlook. First, some overall thoughts on the third quarter. BESI reported strong results for both the third quarter and first nine months of this year as we leveraged our leadership position in advanced packaging to expand revenue growth, executed strategic initiatives to drive profitability, and refined our business model to take advantage of emerging opportunities in the wafer-level arena. For the quarter, revenue of EUR 208.3 million and a net income of EUR 84.2 million increased by 92.3% and 147.6% versus the third quarter last year. Results were slightly ahead of the midpoint of guidance despite ongoing supply chain disruptions, which constrained the potential number of customer shipments. In addition, we maintained gross margins above 60% and limited operating expense development that aided profitability and resulted in a net margin above 40% for the second consecutive quarter. Q3 2021 orders of EUR 209.2 million trended favorably relative to typical seasonal patterns, increasing by 4.5% sequentially versus Q2 of this year and by 120.4% versus Q3 last year. In general, order growth reflected continued strong customer demand for advanced packaging applications as customers increased their investment in artificial intelligence, 5G, data center, vehicle electrification, and cloud infrastructure applications. Versus the second quarter this year, growth was primarily due to follow-on orders for hybrid bonding systems, as well as increased demand for high-performance computing and automotive applications, continuing trends we saw in the second quarter of this year. Growth for such end-user markets helped offset reduced demand by Asian subcontractors for mobile applications as incremental capacity ordered in the first half of this year was installed for new product introductions in the second half of this year. Results for the first nine months were also strong, very strong, with revenue and orders reaching EUR 577.6 million and EUR 736.5 million respectively, increases of 78.3% and 134% versus the prior year period. Year to date, revenue and order growth resulted from significantly increased demand across all BESI's end-user markets, geographies, and customers, with a particular focus in the first quarter on high-end mobile applications, followed by strengths in the second and third quarters for automotive and high-performance computing applications. Net income also rose strongly, increasing by 145.8% versus year to date last year to reach EUR 215.3 million due to substantial revenue growth combined with tight controls of overhead and personnel costs. As a result, BESI's net margin expanded to 37.3% year to date 2021 versus 27.1% year to date 2020, highlighting the significant operating leverage in our business model. As seen in this next chart, BESI's financial performance has improved significantly versus the last cycle in 2017. Factoring in the midpoint of the fourth quarter 2021 guidance, we expect revenue of EUR 765 million and operating profits of EUR 333 million for the year 2021, up 29% and 59% respectively versus fiscal 2017, with operating margins climbing 8.2 points to reach 43.5%. We are very pleased to have achieved such milestones in a span of four years. Our liquidity position continued to grow with cash and deposits, and net cash increasing by 15.5% and 39.2% respectively, versus the second quarter this year, due to strong cash flow generated from operations, post a significant working capital investment required in the first half of this year. In addition, our capital allocation policy continues to reward investors with total distributions of EUR 163.7 million in dividends and share repurchases year to date, highlighting our commitment to long-term value creation. Next, I'd like to speak a little bit about the current market environment and our strategy. As seen in this next chart, the semiconductor equipment industry continued its upward growth trajectory in the third quarter of this year. CapEx budgets of the major players have increased again since the second quarter, particularly for computing and automotive applications. Given continued market strengths, VLSI revised its 2021 assembly equipment forecast upwards to 52.8% in the third quarter versus 41.7% in the second quarter. As such, it appears BESI is gaining market share. VLSI still forecasts a total assembly market of $5.9 billion in 2022, representing 7.3% growth versus 2021, including incremental wafer level assembly investments. At present, we are completing a strategic review for our five-year plan with refinements to our organization and management plan for the next phase of BESI's development. As such, we hope to realize the potential of the new generation of below 7 nm chip-to-wafer assembly applications, while maintaining the exciting growth opportunities of our existing advanced packaging portfolio. Towards this end, we will have increased development and service personnel by approximately 20% and 40% respectively by year-end, and increased our presence in the U.S. and Taiwan to help support new fabs planned by customers. In addition, we are in the process of significantly ramping BESI's hybrid bonding production capacity in alignment with customer roadmaps for 2022-2025. Over the past year, the BESI and Applied Materials teams have made excellent progress working together to process customer materials and accelerate development of advanced heterogeneous integration technologies. Now a few words about our fourth quarter guidance. Looking forward, we believe that the market drivers supporting the growth of the assembly equipment market in this upcycle remain intact based on updated industry research forecasts and increased CapEx spending plans recently announced by our principal customers for mobile, automotive, and computing end user markets. We also see near-term incremental growth opportunities represented by hybrid bonding and other chip-to-wafer process technologies consistent with favorable order trends over the past two quarters. For the fourth quarter this year, we estimate that revenue will decline by between 5%-15% versus the third quarter, as new products are introduced by customers, capacity added in 2021 is deployed and typical second half year seasonal trends. However, revenue is anticipated to increase by 60%-80% versus the fourth quarter last year, highlighting ongoing assembly market strength. In addition, we forecast gross margins between 59%-61%, roughly equivalent to the third quarter of this year, and for operating expenses to be flat ±5% versus the EUR 30.4 million realized in the third quarter of this year. That ends our prepared remarks. I would like to open the call for some questions. Operator. Thank you, sir. Ladies and gentlemen, we will start the question and answer session now. If you have a question or remark, please press star one on your telephone. Go ahead, please. Star one for questions or remarks. The first question is coming from Mr. Peter Olofsen, Kepler Cheuvreux. Please go ahead, sir. Your line is open now. Yes, good afternoon. I have two questions. The first is on hybrid bonding. I think you first started talking about the orders in Q1, and then you talked about the follow on orders in both the Q2 and the Q3 release. Could you maybe help us on how we should look at the shipment ramp of the volume production tools? Did you already ship some tools in Q3? And how will that develop in the coming quarters? And will that then be the cluster tool combined with AMAT, or will that come at a later stage? Is that one question or two? Yeah. Sorry. The second question is on the supply chain. Yeah. Yeah, we still put limited the upside in Q3. How do you see that evolving going into Q4? It seems that the situation in Malaysia, which is important for you, is a bit improving. Do you see that also the pressure on the supply chain is easing a bit, or is it still as difficult as it was in Q3? Excellent. I'll explain a bit about that. First, hybrid bonding. Well, in the course of this year, we have received orders somewhere in the mid-teens, or let's say the high teens, close to starting with a two. Shipments Q4, Q1, also already a few in Q2. These are all individual systems for two major customers and certain development centers. Hybrid bonding is picking up strongly. Especially this last quarter, we received double-digit orders for production tools. The cluster tool is under development, and as we mentioned in a previous call and also the analyst update, we expect to be able to install the first tool somewhere towards the end of the first quarter. A lot of work is being done at this moment, and that then, after successful installation qualification, should become the workhorse for this industry from second half next year onwards, and especially into 2023. A very exciting ramp in adoption of hybrid bonding. Your second question, supply chain. Well, every day, we read about supply chain issues in every industry. Similarly, in our world, we have basically, since the beginning of this year, difficulties and unexpected difficulties sometimes in certain parts, and especially critical ones, our ICs and controllers and in, yeah, let's say, unique parts and machines. On the other hand, so far, we have been able to solve those issues one by one. Sometimes a small delay, but mostly under control. Again, our supply chain model with not only multiple suppliers for every module, but also more and more a supply chain organized in the world and Southeast Asia, plus more and more an independent supply chain in China, has helped us to overcome many of the constraints so far. You can also see that in our numbers, they wouldn't look as they are looking. So we are able to solve those issues. Going forward, one should expect at some point in time that these supply chains become, let's say, resolved in many ways because capacities are being built, solutions are being organized or developed, however you want to call it. Over time, that should look more positive. There's another element, of course, the impact of COVID in our whole supply chain. Many of our suppliers have had issues, also travel restrictions, and on top of that, issues with logistics in general, whether it is sea freight or air freight or increased cost for container and whatever shipment you can imagine. Supply chain remains a critical part of our business. The last comment, you can also see that a little bit in our inventory. We have made sure that certain critical components we have for an annual supply on stock. That has increased our inventory by somewhere around EUR 7 million-EUR 8 million, so not to get stuck with certain critical components. Well under control in a world which today is in that sense very exciting. Does that answer your question? Yes. That's very helpful. Maybe a quick follow-up on the hybrid bonding. As the shipments ramp and potentially hybrid bonding becomes a bigger portion of your revenues, is that something that would meaningfully affect your gross margins? No. It should, if we do our homework well, it should increase our gross margins because we have a unique product at this moment, which is ahead of the pack according to many of our customers. That should help in expanding our margin structures. Is there any learning curve or volume ramp that you have to go through, or could the margins already be quite strong from the start? Well, of course, we are in new territories, but since four years, we are ready. Major customers are sampling with our systems. Of course, there's ongoing features being developed on those systems. Simply for you to imagine, it's not one size chip which has to be bonded. There are many different sizes, smaller ones, bigger ones, thinner ones, so different bond heads. Yeah, how much that will be a learning curve is difficult to anticipate. Of course, in this technology, there are healthy margins. Okay. Thank you very much. The next question is from Mr. Stéphane Houri, Oddo. Please go ahead. Yes, good afternoon. I have two questions actually, and I wanted to come back on the first one on the hybrid bonding opportunity, because you have said in your press release that you were building the capacity in line with the plans of your customers. Can you please share with us what kind of capacity you are building at the moment, i.e., if you can update us on the size of the market that you see going forward and the kind of market share that you will grab? That's the first question. The second question is to have your thoughts and your feeling about the current market evolution as there are some voices in the market or among investors who are fearing that you know this market can't be as good as it looks. Meaning that there must be too much double ordering, and at some point there will be a correction in the market. Can you share with us your view on 2022 visibility on that front? Thank you very much. Pleasure. First of all, what are we doing anticipating the demand for hybrid bonding systems? Last year, we completed a first clean room facility in the development center in Austria, and then we started in May this year to build a major production facility clean room in Malaysia, which is near completion. By the end of November, it should be ready. In the meantime, we have a somewhat smaller capability to assemble these machines in clean room. Once the construction is ready, we should be able to build per month between 12 and 15 units. On an annual basis, around 150. That should satisfy the demands currently anticipated for the years 2023, 2024, and maybe we should expand further to be ready for the demand 2025. It all depends on the rate of adoption of hybrid bonding. That translates in a market size of somewhere around EUR 100 million-EUR 300 million based on current machine designs and also ASPs, average selling prices. Our market share, and that's good news so far, as I mentioned earlier, we have a head start in supplying already three years ago, a system capable to achieve 125 nanometers with a decent throughput. Units per hour, which is now around 1,500, which should go up to about 2,000. That is all well-prepared to translate into a successful market position going forward. Also, the orders received, and especially the orders in the third quarter, demonstrate a successful development of our position so far. On the overall market, 2022, as we mentioned, so far, all independent market analysts expect continued positive market demand for 2022. Of course, if you look at this industry for a few years, for me it is over 10 years now, I think it's coming up to 38 years, upcycles last between 6 and 8 quarters, and one can debate where we are. Did this upcycle start in Q4 2019, or did this upcycle start in Q4 2020? About a year ago, when we had a similar call, we were very cautious, and all of a sudden, mid-November, the industry took off. Many argue that we are still in the early phases of an upturn. If you look at BESI, if you look at also the industry over time, it's very hard to predict these cycles. They are dependent upon global GDP in the first place, and also the transition into next generation, which is fully happening right now. Also, COVID has accelerated the digital society in many ways, and we all benefit from that. There are many views that could last, the increased demand, the shortages in semiconductors in every type and version, also industries, simply to mention automotive. Many of the positive views predict a continued growth in demand for packaging. One with a few more gray hairs would expect natural cycle turns. Then again, BESI is well prepared. As we have shared in many of the presentations, also the latest analyst meeting, our model shows that we can grow much faster than anyone in the industry, but at the same time, going into downturns, we maintain margin levels and we enjoy very low break-even levels. The cyclical nature has helped us to gain share over cycles. Again, I don't see at this very moment significant, let's say, signs that we are over the hill, but that could be next week different. That's as much as I can comment. No, that's very clear. Thank you very much for that. Let me just come back on the hybrid bonding answer, which was very comprehensive as well. When you say market size of EUR 100 million-EUR 300, do we agree that it's per year? Yeah, yeah, per year. Okay. Per year. Okay. Is it included already in the EUR 1 billion opportunity that you're targeting, or could it come on top of it? We mentioned also we have just completed, again, a strategic review, and we have built models for the next five years. Anticipating further, let's say, adoption of hybrid bonding in line with the views of our major customers in those areas, both in logic and also in memory. For that, you can also compare what's happening in overall chip design. A nice example was the analyst update of ASML, where you could see a chiplet, an AMD chiplet, where BESI is also involved. Once that really becomes mainstream, that could be because of higher ASPs and because of many developments which are possible using this hybrid bonding technology. That could increase our total revenue development over five years well beyond the $1 billion. Our goals, and we mentioned the $800 million after 2017 in 2018, which we will achieve this year, certainly in U.S. dollars. Our horizon is not five years, but mostly three years. Anyway, significant growth opportunities if we continue to do our homework right. The development for the leaders in this industry with excellent partnerships, and especially the partnership with AMAT, has helped us so far tremendously and will continue to help us. That bodes well. Thank you very much for the comprehensive answer. Thank you. The next question is coming from Mr. Marc Hesselink, ING. Please go ahead. Yes. Good afternoon. Thanks. My first question is actually on the strategic review. You already mentioned it includes the increase of some personnel and some capacity, but what is it exactly? Is this something that you align your ideas with your clients? If so, is it new that you have such a close cooperation with your clients now on the technology roadmaps? Second question is on the order level, which was quite high, seasonal. Was it mostly because of the hybrid bonding orders or are there also areas that are exceptionally strong compared to like the normal seasonality that you have in your business? Thank you. Excellent. Let me start with alignment with customers. The only reason we are around today is because of the ongoing relationship with key customers in this industry for over 30 years. We call that pick the winners in mobile, in the computing space, in automotive, and on an ongoing basis, we have always prepared ourselves for the next cycle. Once this cycle turns, and a nice example in reaching this close to €800 million this year, if we would not have had our homework prepared already starting in 2017, 2018 to reach that level. Remember, our revenue in 2019 was €356 million. It's all about understanding what is required in terms of technology. A careful selection on an ongoing basis, what will be the mainstream applications and what will be required to serve those customers. You're very right. In every strategic review over all these 30 years plus, we engage our customers simply to be prepared. As time goes on, this hybrid bonding brings us much closer to the chip design, ever closer, and the stakes are higher, the development costs are higher, the development time is longer. That requires an ever closer contact and understanding and commitment to be prepared on the one hand and to enjoy the largest share of wallet at the time of industry ramp. Simply to share with you that is well prepared for the next round and the investments and commitments to be successful in both. The existing world and also the new hybrid bonding world requires to be prepared in the organization, the organization structure. That's in summary what's behind the comments on our strategic review. If we look at the orders for Q3, it's very simple. As we mentioned, first half year, and that's very typical, is always orders for next generation high-end smartphones. Then introduction of new models in September timeframe. The strength in Q3 has come from the computing side, computer data centers, etc. High-end logic. Automotive, very strong, and also initial double-digit orders for hybrid bonding systems. A different mix, but at very positive levels. Okay, clear. Then how will it convert into revenues? Normally, there's a quite short lead time for your business, but it seems to be a little bit longer. Is that when you expect that to be delivered? Well, as I mentioned, answer to an earlier question, the hybrid bonding systems is spread over Q4, Q1, and some early Q2. Some more orders expected either this quarter or certainly next quarter. They have a somewhat longer lead time, because they are very complicated machines built in clean room. There are other more, let's say, standard machines which have shorter lead times, and very much depends, and I haven't said that yet. We should have added that in the comments. A major, let's say, positive effect could be China's next round. The question, there's also certain issues which we haven't mentioned on electricity for certain regions in China, and that has an impact on this industry. that has had an effect on Chinese subcontractors ordering systems. Once that is resolved, the power supplies, you can expect a catch up, whether that happens in Q4 or Q1. You could say that's the wild card. Those are machines which we turn around in six to eight weeks. Depends a bit on the configuration, some even a bit shorter. There are many aspects on what could happen. Okay. That's fair. Thank you. Does that answer your question? Yes. Yes, it does. Thank you. The next question is coming from Mr. Charles Shi. Please go ahead. Hey, hi. Good afternoon, Richard. Thank you for taking my question. I wanna start with the rev rec, revenue recognition of hybrid bonding. I understand that you already got the like orders on the like high teens number of units. However, when I look at your Q4 guidance, if I assume hybrid bonding revenue could reach somewhere in the low double digit, that would imply your base business is gonna have a greater decline than usual. I was kinda thinking maybe I got a little bit ahead of myself, and the rev rec in Q4 may be somewhere in single digit range in euro term. Can you provide a little bit comment on that rev recognition ramp in Q4 for hybrid bonding? That's my first question. I have a follow-up on your base business. It's an excellent question. Since it's new technology, it requires certain criteria for IFRS to recognize a certain revenue. At the same time, as I mentioned, the orders are not delivered in one quarter. They're spread out over three quarters, maybe two, so Q4, Q1, and early Q2. That also has to do with the infrastructure. The revenue recognition is simply according to the rules. That's not new in that sense. We have delivered these machines starting already three years ago. Four years ago, a test machine and then a qualifying machine thereafter. But it's mainly due, Charles, to that it's not all delivered at once. We have to test those machines ourselves. As I mentioned, the expansion of our clean room in Malaysia will be ready by the end of November, and that also has an impact on the delivery schedules. The schedules are, as I mentioned, some in Q4, most in Q1, and some in early Q2. I hope that answers your question. Yeah, you did. That's very helpful. I wanna ask a second question on your base business. Maybe you partly answered my question by unpacking a little bit on the Q4 revenue guidance, where the hybrid bonding rev rec will start and at what magnitude qualitatively. I wanna ask you, in terms of your base business, you mentioned about China outage that could have had some effect on your Chinese subcontractors' ordering behavior. That's one. Yeah. The other is the Malaysia COVID shutdown in the last quarter, which may have impacted some of the subcontractors in Malaysia. I think you sort of mentioned, if I understand correctly, if those demand which sort of impacted because of those external factors, if they come back in Q4, Q1, that may represent upside to your Q4 guidance. Is that a correct assessment, or can you provide more color around that? Thank you. Well, there are two possibilities. One is, let's say, and that is based on a continued upcycle that you get a catch-up. Also the fact that there's so much IC shortage that Chinese subcontractors will definitely expand capacities as soon as that is again feasible with power issues resolved. A negative one could be that some read into this may be an overcapacity. Well, it's hard to tell. If it comes, it is an upside, of course, and we're well prepared for that. If it doesn't come, it doesn't come. Could also come in Q1. That's, yeah, let's say, as much as I can tell you. Got it. Thank you, Richard. Maybe my last question on hybrid bonding, demand the next year. I think last time you did mention you are expecting unit shipment somewhere in double digit. In terms of revenue that could acc-