Besify2014

Company Name: BE Semiconductor
Company Ticker: BESI NA
Date: 2015-02-26
Event Description: Y 2014 Earnings Call
Market Cap: 932.39
Current PX: 23.29
YTD Change($): +4.76
YTD Change(%): +25.688
Bloomberg Estimates - EPS
Current Quarter: N.A.
Current Year: 1.713
Bloomberg Estimates - Sales
Current Year: 407.667
Page 1 of 18
Y 2014 Earnings Call
Company Participants
• Richard Blickman, President & Chief Executive Officer
• Cor te Hennepe, Senior Vice President Finance & Legal
Other Participants
• Unidentified Participant
• Peter Olofsen, Analyst
• Robin van den Broek, Analyst
• Edwin de Jong, Analyst
Presentation
Operator
Good morning, good afternoon, ladies and gentlemen, and welcome to the BE Semiconductor's quarterly conference
call and audio webcast to discuss the company's 2014 Fourth Quarter and Annual Results. The audio webcast is
available on Besi's website www.besi.com.
Joining us today are Mr. Richard Blickman, Chief Executive Officer; and Mr. Cor Te Hennepe, Senior Vice President,
Finance. At this time, 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. Go ahead, sir.
Richard Blickman, President & Chief Executive Officer
Thank you. Thank you all for joining us today. I will begin by making a few comments in connection with the press
release we issued earlier today and then we'll take your questions. I would like to remind everyone 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 our fourth quarter and the year-ended December 31st, 2014,
and also spent some time updating you on the market, our strategy and the outlook.
First, some overall thoughts on the year and the fourth quarter results. In 2014, Besi generated substantial revenue and
profit growth and delivered another year of strong total returns to shareholders. Revenue grew by 48.6% in 2014, and
net income increased by 341% to an all-time high of EUR71.1 million. A strong performance was due to renewed
growth in the semiconductor assembly equipment market, new device introductions, market share gains and continued
progress in making our business model more scalable, flexible and profitable.
Revenue growth for the year far exceeded industry average growth rates. We gained traction with the world's leading
IDMs and supply chains in the provision of leading edge die attach and packaging systems serving higher growth
advanced packaging applications such as smart phones, tablets and intelligent automotive electronics.

Date: 2015-02-26
Market Cap: 932.39
Current PX: 23.29
Current Year: 1.713
Page 2 of 18
Sales and market share growth in 2014 was gained in key products such as multi module, flip chip die bonding
equipment and ultra-thin molding systems. We also significantly increased TCB die bonding orders year-over-year and
have a leading position in this emerging growth category. Besi's market position in 2014 was also enhanced by
increased penetration of the China smart phone market and Japanese suppliers of electronic devices and subassemblies.
Also in 2014, our net margins reached 18.8%, approximately triple the net margins of 2013. Besi's profit
improvement resulted from strong revenue growth, expanding gross margins and significant operating
leverage inherent in the business model. During the year, we successfully ramped our revenue to
record levels while continuing to reduce European and North American based costs and move the
supply chain gradually from Europe to Asia.
Our fourth quarter last year performance was stronger than anticipated. Revenue of EUR89 million was within the
guidance and exceeded Q3 2014 revenue by 67.8% highlighting underlying strength in our markets in a seasonally
weak quarter and favorable market position. Besi's net profit of EUR19.7 million and net margin of 22.2%, exceeded
expectations aided by increased production efficiencies, the depreciation of the euro versus the dollar, and the upward
revaluation of deferred tax assets at our Swiss and Dutch operations.
We ended the year in a strong financial position with total cash of EUR135.3 million, which equals EUR3.59 per share
or 19.4% of the value of our year-end stock price. Given the increased profits in 2014, encouraging prospects for 2015
and our cash position, we propose to pay a cash dividend of EUR1.50 per share this year, an increase of 355% over
2013. It represents our fifth consecutive annual dividend and payout ratio relative to 2014 net income of approximately
80%. Our payout ratios for 2012 and 2013 were 71% and 77%. At the year-end stock price of EUR18.53, the proposed
dividend yields 8.1%.
With that, I'll turn the presentation now over to Cor, our Senior Vice President Finance.
Cor te Hennepe, Senior Vice President Finance & Legal
Thank you, Richard. Besi's revenue growth in 2014 was almost doubled current VLSI estimates for the year. Growth
was primarily due to improved global economic conditions, successful new device introductions, the industry's move to
more advanced packaging technologies, and market share gains. Orders by IDMs and subcontractors represented
approximately 60% and 40% respectively of total orders against 51% and 49% in 2013.
Our 14% sequential quarterly revenue decrease was consistent with our seasonal second half year revenue pattern and
was within guidance. However, revenue increased by 76.8% versus Q4 2013 due to improved market conditions and
market share gains that particularly strengthen a variety of products, including multi module, flip chip and epoxy die
bonding systems, ultra-thin molding systems and plating equipment. Similarly, orders decreased by 10.5% sequentially,
but increased by 42.2% compared to Q4 2013. The sequential decline was due to a 42% decrease as it compared to
orders for die bonding equipment, our IDM orders were up slightly. As compared to the fourth quarter of 2013, orders
grow as IDMs in each of our principal geographic markets significantly increased capacity for advanced packaging
applications in the in a more robust market environment.
Gross margins increased strongly in 2014, rising by 4% points to reach 43.8%. Growth was due to our strong revenue
performance, increased labor efficiencies from our Asian production transfer and increased Asian die attach shipments
[ph] and a decrease in the value of the euro versus the dollar. The ForEx benefit was particularly important in the
second half of the year. Our 43.8% point gross margin in Q4 2014, decreased by 1.5% compared to the previous
quarter, which improved by 3.7% point versus Q4 2013, and it was at the high end of guidance.
The sequential decrease was due to increased inventory provisions from the rise of all the legacy die attach product line
at year-end and a higher percentage of plating systems in the product mix. For this last year gross margins improved

Date: 2015-02-26
Market Cap: 932.39
Current PX: 23.29
Current Year: 1.713
Page 3 of 18
primarily due to the benefits of much higher revenue levels, increased labor efficiencies and the reduction of the euro
versus the dollar.
We achieved significant operating expense leverage in 2014, and expense growth was limited to 13.4% versus revenue
growth of 48.6%. Moreover, we've been able to keep total OpEx between a range of EUR20 million to EUR25 million
per quarter for the past 12 quarters highlighting our cost control efforts. Drilling down a little deeper, we conceded
about EUR5.8 million of the OpEx growth in 2014, was a variable based in terms of warranty and selling expenses, and
EUR3.7 million of the increase was from share-based incentives and pension compensation.
The R&D account for most of the balance as we ramped-up our TCB efforts and introduced next generation die
bonding systems. As for Q4 2014, our operating expenses increased by EUR1.6 million versus the previous quarter,
due primarily to a one-time EUR1.2 million pension contribution to align Besi's pension scheme with current market
practice.
Now a few words about our liquidity. We had a strong cash generation in this quarter, wherein our cash increased by
EUR30 million compared to Q3 2014 to reach EUR135.3 million and net cash increased by EUR32 million to reach
EUR118 million. Cash flow benefited from profits generated combined with strong collections and inventory reduction.
As compared to year-end 2013, our net cash position increased by EUR47 million despite the payment of 12.4 million
of cash dividends to shareholders. We enter 2015 with a solid base to finance our development programs, strategic
initiatives and returns to shareholders.
And with that I'll turn the presentation back over to Richard.
Now I'd like to spend a couple of moments updating you on the market and our strategic priorities. In general, the
industry picture in 2014 bright and significantly in comparison to the past three years, wherein VLSI currently
estimates 24% growth for the assembly equipment market, with further growth of around 3.4% is expected for 2015.
Growth has been driven primarily by improved economic conditions, new device introductions and expanding
customer demand for below 20-nanometer advance packaging applications.
From our perspective, the outlook appears favorable going into 2015, given elevated to year-end backlog levels in
comparison to 2013. Order trends through February 2015 and a more positive customer sentiment generally.
Applications such as smartphones intelligent automotive electronics, the Internet of Things, wearable devices, memory
and streaming video content should further push demand for advanced packaging equipment in the future.
Based on current VLSI data, we have significantly increased the share of our addressable market from 22% to 32%
over the past three years, particularly in the fastest growing segments such as flip chip, multi module, and ultra-thin
molding. But specifically, we've increased our die attach position from 28% to 39%, and our packaging equipment
position from 11% to 18%. These market share gains stand mainly from the high accuracy and reliability for our
product portfolio, our attractive cost of ownership and highly competitive cycle times.
Besi's operational strategy focuses on ever increasing scalability and structural cost reductions to profitably navigate
high levels of industry productivity and competition. In 2014, we successfully scaled the business to meet record
revenue levels, moved approximately one half of our supply chain to qualify Asian vendors and completed the
rationalization of our US die sorting operations.
In addition, break-even revenue levels were further reduced to approximately 50 [ph] million per quarter. In 2015, we
plan on further reducing European based cost, particularly in Switzerland after also approximately 15% increase in the
value of the Swiss franc versus the euro since January.
Swiss franc based costs represented about 20% of the total costs in expenses in 2014. As such we announced today the
transfer of certain die attached software, engineering logistics and the administrative functions from Switzerland to
Besi Singapore's application engineering facility. The transfer is anticipated to occur by the end of Q3 2015 and to save

Date: 2015-02-26
Market Cap: 932.39
Current PX: 23.29
Current Year: 1.713
Page 4 of 18
approximately EUR6.5 million net on an annualized basis including facility savings.
Charges of approximately EUR1 million are anticipated of which approximately half a million will be incurred in the
first quarter. We also will recognize a one-time pension related growth payment gain of approximately EUR5 million.
The transfer is not anticipated to result in a material change to Besi's aggregate headcount position.
On the development front in 2014, we further increased the speed and accuracy of our die attach systems through next
generation introductions. We also introduced a new wafer molding system which was successfully shipped in the first
half. Significantly, increased customer shipments of TCB die bonding's reinforced basis leadership position in this
technology. We believe that we have the fastest, most accurate TCB platform on the market and are hard at work to
develop systems capable of handling ever larger and thinner die's.
For 2015, we anticipate the introduction of next generation packaging systems and expansion of the TCB application
beyond the memory market. We also plan to further advances streamlining die bonding platforms designs to
incorporate in more common products and modules.
Now a couple of words about our guidance for the first quarter. Based on the strong year-end backlog, we expect
sequential revenue growth between 0% and 5% in Q1, which represents between 27% and 34% growth versus the first
quarter of last year. (inaudible) for foreign exchange influences will affect both gross margins and operating expenses.
Gross margins are anticipated to increase 46% to 48%, primarily as a result of the appreciation of the US dollar versus
the Euro. Operating expenses are expected to increase by 5% to 10%, mostly due to the rapid appreciation of the Swiss
franc versus the euro. We currently expect that tax rate of approximately 10%. As a result, net income will increase
substantially versus Q1 2014. For the full year, we are looking at CapEx equal to 2014 levels of around EUR6.5
million, primarily focused on upgrading Asian production capacity and equipment.
In summary, 2014 was an excellent year highlighting the potential of our business model. Our products continue to be
well accepted by the market and we're gaining market share with our advanced packaging systems portfolio. Revenue
growth, operating leverage and strategic plan execution have resulted in an expansion of gross and net margins to reach
or exceed benchmark industry levels. Given the sudden increase in the value of the Swiss franc, we've taken swift
action to adjust a Swiss based cost structure and supply chain. We have a positive outlook for 2015 and expect strong
comparisons again in Q1 versus last year. Going forward, we are developing more leading edge new products and have
operating initiatives in place to further drive upward revenue and profit growth.
That ends my prepared remarks. Operator, any questions?
Questions And Answers
Operator
Ladies and gentlemen, we will start the question-and-answer session now. (Operator Instructions) First question is from
Peter Olofsen, Kepler Cheuvreux. Go ahead, sir.
Peter Olofsen, Analyst
Good afternoon, gentlemen and congratulations on strong revenue numbers. I have a couple of questions, maybe
starting with the gross margin guidance. I understand that the strong US dollar is playing a role here, just to clarify, as
long as the US dollar euro exchange rate stays where it is right now, you think the gross margin is sustainable and
where could gross margins potentially go?
If I remember correctly, you were targeting a five percentage point improvement in the gross margin from a 40%
starting point. With the Q1 guidance, we are already ahead of that, so where could gross margins potentially go given
the measures that you are taking toward to structurally improve the gross margin.

Date: 2015-02-26
Market Cap: 932.39
Current PX: 23.29
Current Year: 1.713
Page 5 of 18
First of all, the influence of the US dollar exchange rate currently on our business model also taking the current product
mix, it's about 50 basis points per dollar cent.
Dollar per cent.
Dollar per cent, so the dollar moved from 1.25 to now about to 1.12 as of today. So that has a significant impact
positively on the gross margin. So if the dollar stays at that level, then given a comparable mix, you are correct then we
are already well above the 45% as we indicated as a target. So then, the target should move up comparatively.
As I mentioned in some of the comments, our further cost reductions across the board is a continuing factor in our
strategy. And in the course of this year, further cost will reduce in Swiss currency, but also with supply chain moving
more to Asia gradually step-by-step that should also further increase and improve our total gross margin.
Okay, that is helpful. Then maybe on the dividend, which was actually a positive surprise to me, but can you update us
on the dividend policy, the payout has been between 70% and 80% in recent years. Is that a kind of payout that you are
targeting also for coming years or do you intense to gradually increase your dividend, could you maybe update us on
your policy there?
The dividend policy is as follows. We have come from a 30% of profits available for dividends to 50% and then we
increased it last year to a range between 40% and 80% -- of net profit. Of course, it is dependent upon business
situation, the strategic agenda we have and currently needless to say with over 18% net income loss, a positive outlook,
the maximum of the range is a very simple logic outcome of the proposal. Also as efficient cash position, net cash
position at year-end, with also expected was the guidance to further improve in the first quarter that will leave ample
room of net cash for further strategic developments of the company. So in that light, you should see our dividend
policy.
Okay. That is clear as well. Then may be turning to customer demands, it seems that a demand from IDM customers
has been particularly strong in recent quarters. What is driving the demand from these customers, which end-markets
and what type of equipment are they mainly interested in?
First of all, the increase from IDMs typically is pointing towards the next positive cycle, and that is based on the next
generation technology with applications in the different fields. So in communications, in computing, in automotive, and
that is where we are since many, many years with strong relationships with the major IDMs involved in the new
business cycles. And typically, the subcontracting world mix up after that, so that is a positive start always of the next

Date: 2015-02-26
Market Cap: 932.39
Current PX: 23.29
Current Year: 1.713
Page 6 of 18
cycle. How strong the next cycle will be, it's difficult to predict, also how successful the new product roll outs will be is
hard to predict them, but the bottom line is, that it is a strong sign when IDM business across the board picks up.
And when it comes to products, the strong demand that you've seen from these customers, is it across the board --
across the product lines or are there some product lines standing out there?
Well, if you simply look at our net income and gross margins. One will never achieve these levels if not all products are
in excellent shape. So clearly we have today a product range which is in an excellent market position. All of them
benefit from today's investments.
Okay. That is clear. Maybe touching on one of the product lines, TCB. Can you give an indication what percentage of
sales in 2014 was from TCB? And in your introduction, you mentioned that in '15 the number of applications will
increase beyond memory. So do you expect the revenue share of TCB to increase in 2015?
That's hard to predict, because TCB is still smaller as a percentage of revenue. As we indicated earlier, it is below 5%,
but still multiple systems and growing fast. Still it is early days, many customers, many publications are predicting a
positive roll out for this year, next year, especially 2017 that also has to do with the next shrink in chip design. We are
ready for that, still our belief is that 2015 will not be more than 5%.
Okay and when you mentioned 2017 and the next shrink, then you're referred to do logic foundry market?
Well, first the memory market. The stacked memories are the drivers and we are in a very strong position at this time,
and that's also the volume market in logic that should follow, but anyway still early days.
Okay. One final question on the industry, we have heard the Chinese government is committed to invest billions of
dollars in the semiconductor industry, and we have for instance seen a bit by a Chinese company for our chips. As the
balance of power in the industry shifts to China, how will that affects your position in the industry? Is it an opportunity
for you? Could it be a potential threat? Do you see a new competitors in China? How could it affect Besi in the future?

Date: 2015-02-26
Market Cap: 932.39
Current PX: 23.29
Current Year: 1.713
Page 7 of 18
First of all it's a great opportunity, because we already have a significant position in China. About 30% of our total
revenue goes to Chinese factories and there is a mix between Chinese but also subcontractors and subsidiaries of
companies outside of China. We also have our own facility in China since 2002 where we make high precision parts.
This year we will produce the first die bonders locally in China in our own factory starting mid-year and we are very
much (Technical Difficulty) of Chinese Semiconductor industry and which is also in smartphones, tablets, automotive,
the similar picture. So in that sense, it is (Technical Difficulty) and that is a great opportunity for us.
And then on the equipment side, do you see local competitors in China or is it mainly the same competitors that you
also see in other countries?
The same competitors, but one of them is already the main or partly Chinese for decades. One we know very well
which has been our competitor forever, and as you can see we are both very successful in different parts of that market
in China.
Okay, that's clear. Thank you.
Thank you, Peter.
Operator
Next question is from Robin van den Broek from ING. Go ahead, sir.
Robin van den Broek, Analyst
Yes, good afternoon gentlemen. I appreciate that the visibility on order intake is fairly short, but if we look at the sales
momentum of last few years, especially towards Q2, we have seen quite an impressive ramp.
Do you have any indication on the back of the order -- order intake in the last few weeks or by talks with their clients,
whether we can expect a similarly strong pattern for this year, any visibility or any help on that would be much
appreciated?
Secondly, your market share has increased towards 32%. I think that's the 5% point in the last two years. So that's quite
impressive. How do you think that market share will evolve and where do you think you can be in 1 or 2 years' time, do
you think that 5% point can continue?
Thirdly on thermal compression bonding, I was curious to hear your client feedback on big American clients that has
used your competitor's machine at first. Are there any developments that you can start supplying these machines there
as well, and do you think overall that's the transition to TCB will be market share accretive for you or do you see a
bigger risks of losing market share on that technology?

Date: 2015-02-26
Market Cap: 932.39
Current PX: 23.29
Current Year: 1.713
Page 8 of 18
Next question is on OpEx, you're guiding 5% to 10% increase for Q1, and I was wondering if you could share your
thoughts on that post Q1.
Sixth question is on the cost reductions related to Switzerland. How do you manage to put within 1 million get out 6.5,
I was wondering if you can share that. So maybe I can do that myself as well.
And seventh question is related to the reported tax benefit from I think additional tax losses carried forward in the
fourth quarter, can you maybe explain what happened there and can we -- maybe we see that again its profitability
remains well or if it improves, and also hear you guide for a tax rate of 10%? I think you have been guiding for 10% to
15% in the past, should be more look at the lower end of that range, so any color there would also be appreciated?
Sorry for the long list but
I've written all your questions down. Thank you.
Thank you.
Thank you. Let's start with visibility. Orders Q2, Q3 you're right in your assessment that if you look at the past years.
Q2 was typically the high end of cycle of a seasonal pattern. It's hard to predict, because every year these orders,
typically come in after Chinese New Year. So the next two weeks will be critical to see whether we have a similar
pattern or not. You can probably -- if you trace back our conference calls in the past two years have a similar
commentary. What also could happen and we've seen that in the past is that we have Q2 and Q3 more evenly balanced,
we saw that last year, we saw much less drop in Q3 compared to the year before. So in any case, seasonality is hard to
predict, usually Q4 and Q1 are the low points. We started off Q1 much better than last year, if you remember revenue
in Q1 was 70 million, we now guide revenues somewhere between 90 million and 95 million. So that's much higher.
Hard to predict.
But maybe to ask it. Are you worried at all to have a lower net income this year than last year?
We're end of February who am I [ph]. The only thing I can answer, our margins are substantially higher and our cost
with all the programs in place and not only the next chapter in Switzerland should reduce further over the year. So
when we can have higher revenue were similar then that should not be impossible. That also depends on the dollar is
this structurally higher dollar or is this for a short period of time. We've seen a lot of volatility in the exchange rate in
the past also. So who am I to predict all that.
If we go to market share, if we understand today's strong position in all of our products and also our successful
continues faster ramping and also the capabilities we have with our supply chain expanding volumes in Asia. We
should be able to further positively develop our market share. Yes of course, on successful further introduction of
next-generation products, addressing the ever smaller dimensions and faster, it's all about accuracy and speed. And of
course, our goal is to have ever larger parts of this product?

Date: 2015-02-26
Market Cap: 932.39
Current PX: 23.29
Current Year: 1.713
Page 9 of 18
On TCB your question, no detailed further comments. We are as we mentioned in the call successful, that's what we're
doing right now. If time comes, we increase our customer base, we will add further comments. Your next question was
on market share in TCB, whether there's a risk. Of course there is a big risk. Simply to understand again the mechanics
of TCB. TCB is a process called thermal compression bonding, it's a slow process compared to flip chip, you need at
least four machines to have the same capacity. From a cost factor, it's a factor of 10. So, you are looking at the potential
markets of nearly the size of today's assembly equipment market. Though all of our competitors are doing whatever
they can to become a leader in that segment.
So far we have the best platform the fastest in the industry. It can fulfill the needs of the major customers developing
this technology, but we are able to hold on to that is of course our (inaudible) every single day.
Okay. Maybe give some indication why you have the best platform now? How can we measure that?
First of all we have a platform which is based on the successful flip chip, that's from with a double bond head concept,
which -- because of the double bonds head and safe production, valuable production time in heating and cooling down
process step. So an intermittent process is sort of like a twin scan in a stepper. And that concept is unique. And as long
as that is technologically feasible, that gives us a major advantage and that's also foreseen. So double as opposed to
single and that also leads to significant floor space. At the same time, this concept has been developed by us in the past
10 years in every way to be very productive. You can say on the high-end flip chip, more than 90% of all devices are
made with our equipment. So the strength of (inaudible) proven its capability over the past many, many years. As
opposed to competitors who have developed completely new platforms, who also have also tried to modify platforms
developed for higher accuracy to the TCB requirements which are much slower, much more complicate, though the
sweet spot today is basically our platform.
But would you argument that if you basically have 90% of the high-end flip chip market that transitioning from there to
the TCB market is probably a far smaller steps to undertake then, you are starting off with a new platform at all or --?
Well that depends of course. I mean, every day is a new day, you have to prove your performance. So there is never
given based on an existing and then the previous technology, but it definitely gives you the experience in the minds of
all of our development people and engineers and that experience is part of the success or major part of the success so
far.
Okay. If we go to your questions five the OpEx increased 5% to 10% Q1, maybe Cor you can give some more
comments on OpEx going forward.
So looking at OpEx 5% to 10% increase, as you've seen earlier or heard earlier in the call, already for 20 quarters we
kept our cost between EUR20 million and EUR25 million, and clearly this increase we expect now has to do with the
increase in the Swiss franc. We told you that we will adjust the workforce in Switzerland, but it takes a big time. So
that's basically one of the main drivers behind the increase of the OpEx.

Date: 2015-02-26
Market Cap: 932.39
Current PX: 23.29
Current Year: 1.713
Page 10 of 18
Post Q1, of course, by reducing gradually the workforce in Switzerland, there we will reduce workforce in Switzerland
and replace it by workforce in mainly Singapore that takes time and so there will be some doubled costs in Q2 and Q3,
but after that we for sure want to have our OpEx back between the range that we've seen already for several years. But
let's say, in the transition phase, there will be some doubled costs there, so we won't see significant decrease until
towards the end of the year.
Are you guiding OpEx up for Q2 and Q3?
That still a bit early to see because we are working out all plans and there is more effects. Of course we also having our
OpEx cost that are variable with the revenue. So it depends also on our revenue levels and talking about warranty,
about freight cost, about certain sales commissions, and so at this moment, that's hard to see. We will increase
workforce in Singapore. So that will have an upward effect, but there could be also some downward effects. So that's
still too early to say. And with the decrease build there, we will only see towards the end of the year.
And then, we talk -- you talk about cost reduction. We have 1 million of restructuring costs and that brings a saving of
6.5 million. In Switzerland, the rules are different from the Netherlands. We do have social plan for our staffs in
Switzerland, but that's from a -- at a different level than it is in the Netherlands and that's why this ratio of 1 to 6.5 is
different from what we've seen in the past when we get to use our workforce basically in Netherlands. And so, this is
more related to specifically the Swiss situation.
Then the group curtailments, please explain that?
Okay. That was one of the question but we also mentioned curtailment. So in Switzerland we have a plan which is a
defined benefit plan, according to IFRS. So we have to make all kind of calculations to see what is our -- what are our
balance sheet positions, what are the balance sheet positions of the pension fund. By the way all our pension liabilities
in Switzerland are covered by insurance policy. So there is no risk for Besi between the IFRS, yet to make all kinds of
complicated calculations by actuarial experts to come to certain liability positions and asset plan positions. If you have
a significant reduction of workforce who is attached to this pension funds, then IFRS prescribes that the reduction of
liabilities which is a logical result of the reduction workforce has to reported via your P&L. We've seen that earlier in
2012 with two smaller magnitude, but the current curtailment is based on the current expectation of the reduction of
workforce and first estimates of our actuarial export and this is around EUR5 million. It is -- it's not cash in or out, it's
an IFRS hurray [ph] of recording the effects on your pension liability, that reduction of workforces.
Then a question on the reported tax loss carry-forward in revaluation. Basically what happened -- what happens every
year is that at year-end we do a very extensive impairment test and also valuation of our deferred tax asset position. We
still have tax loss carry-forwards in our company, and given the results we've seen this year, it means that we are more
and more utilizing the tax loss carry-forwards, which were still in value in our balance sheet.

Date: 2015-02-26
Market Cap: 932.39
Current PX: 23.29
Current Year: 1.713
Page 11 of 18
And we assess these deferred tax asset and these net -- these tax loss carry-forward positions, we look at value every
year in the same way we look ahead for four, five years, that's a typical IFRS term. We see what we expect based on
VLSI in our own forecast, what we expect for profits in the various jurisdiction and based on that we make valuation of
the deferred tax assets.
This year, the main part was in Netherlands, with also a significant part was still in Switzerland, because those are the
jurisdictions in which we have the most significant tax loss carry-forward. And to a lesser extent, we have tax loss
carry-forward available in United States. And there more to come, you will see later in the annual report that the Swiss
tax position is fully valued, but they're still in US and in the Dutch jurisdiction, there is still tax loss carry-forward not
valued. So depending on the development of results and after market, there is in potential some more tax loss, some
more deferred tax asset revaluation to come.
And the last question is on the guidance. We said 10%, so it will -- yeah we expect 10% to 12%. So we expect to be at
the lower end of the guidance of normally 10% to 15%.
That's the longer term guidance or just for this year?
Just for this year, because in the IFRS it work so if all tax loss carry-forward is valued, then your effective tax rate will
increase and will increase more towards the statutory rate, in Switzerland that's 10%, so that's fine, but in Netherlands
it's 25. And so that once it's all valued under IFRS, then you will see an increase of the effective tax rate. However, we
don't expect it to be higher than 15% given the fact that the die attach group is fully in Switzerland, and so around 70%
of our revenue and with that related profit will go over Switzerland.
What is also important to understand is that the deferred tax -- having deferred tax assets and tax loss carry-forward
means that although we report a certain effective tax rate, the cash out is significantly less. So that has a positive effect
on our cash flow.
Great. Thank you very much.
Operator
Next question is from (inaudible) to Kempen. Go ahead sir.
Unidentified Participant
Yes, good afternoon everybody. A question around your dividend proposal and these related to the net cash position
that will remain after that. You have once said you think net -- or a net cash level story of about 80, 80 million is
required for Besi. But if you would just simply subtract the proposed dividends, you would actually get below that
level. Do you still stick to that 80 million sort of target or assumption or how do you look at that?
My second question is on R&D costs, actually the costs are not really going up over the year. Is that a sustainable thing
or do you expect to invest some more in R&D?

Date: 2015-02-26
Market Cap: 932.39
Current PX: 23.29
Current Year: 1.713
Page 12 of 18
And the third question relates to the supervisory board change, you are mentioning in your press release Mr.
Lindenbergh, as he is also a 5% shareholder or there any -- is there any agreement with him about maybe a lookup of
shares or anything around is holding, can you say anything about that?
Okay. Let me start with question one. You are right that we have indicated in the past that for a strategic purposes, 80
million net cash is a very comfortable basic position. One should also bear in mind that Besi access to capital markets
has been limited over the past many years due to the major restructurings we have carried out after the acquisitions, and
also to build up of our whole infrastructure, our operations in Asia, in Malaysia, and China. So in that light, the 80
million is slightly more flexible. However, if you simply calculate the guidance for Q1 and the cash generation in Q1,
you add that to the net cash in year-end and you subtract the EUR150 with share dividend, you're not far away from the
80 million. Also if you look at our receivables, so on the current run rate and we saw that the cash in Q4 was very
strong 28 million.
We have made that calculation very carefully and you are fairly right. We certainly would not have proposed this
dividend, if that would be a risk to the long-term future of the company. At all these considerations clearly come to the
conclusion, that if you can make this decision at the high end of euro, dividend policy in the current situation, you
should also stick to your policy which you've propose to your shareholders. Is that answering your question?
Yeah, absolutely clear. Thank you.
Okay. If we take the R&D costs going forward. Yes we have a period behind us where we have been very successful in
focusing on the right R&D investments and also in the products which have come and have hit markets on time, and is
looking positively further going forward. It can very well be with technology further developing, that the R&D cost
will increase simply because it is not linear, it is exponential. So next generation that's firms will require significantly
higher R&D investments. So one can expect in the years to come that R&D should go up rather than to go down.
On the third question, of course every Director and non-Executive is bound to the rules of the AFM. And we are certain
that Mr. Lindenbergh who is been very helpful in supporting our strategy also has been an excellent Board member in
those years will certainly live according to the rules of the world.
Right. But there is no, there is nothing really agreed we've hand around his holdings?
I don't think that is appropriate. That is for any major shareholder.
Right.

Date: 2015-02-26
Market Cap: 932.39
Current PX: 23.29
Current Year: 1.713
Page 13 of 18
There are clear rules specified by corporate governance. Well, it's to go to (inaudible) or the updated status, to
non-Executives and Directors, Executive Directors leaving a company.
Right. Okay. Thank you.
Operator
Next question is from (inaudible). Go ahead sir.
Yes, good afternoon gentlemen. Question from my side. One, should you also interpret the high payout ratio as a sign
that Besi is not planning any acquisitions in the short term? And my second question is on flip chip, can you elaborate
on the growth there and how large is your segments is now as a percentage of your total sales? Third question is on the
non-cash pension gain of 5 million, are you going to treat that in the P&L, so where we will see that in the P&L and in
what quarter? And maybe last question is on estimated growth for Besi's addressable market in 2015, if you can give
any guidance there that would be very helpful? Thanks.
2015. Okay. First of all, the first question can be answered as follows. Besi has a history of six acquisitions and we
have done all acquisitions in a lower parts bottom of a cycle. They were clearly aimed at technology and technology
going forward. So supporting our product portfolio and that we will continue to do. The product portfolio in line was
the technology road map of the industry, whether we have opportunities or not is hard to find. The dividend policy is
separate of that, and also from fundamental discussion, I think the concept that current shareholders have supported the
growth of the company so far and has taken the risks and the reward is a dividend and of course there is an element of
looking forward.
The company is in a sound position. We have a very strong balance sheet, and as we discussed in earlier questions,
sufficient net cash will further develop the company after this dividend. And those are all considerations which have
brought us to this proposal. That doesn't mean that we have no excuses [ph] inside, that's not the answer.
Flip chip, flip chip as a percentage of Besi revenue, it varies quarter-to-quarter that you can say on an annual basis, it is
about 30% of our overall revenue. The treatment of the 5 million gain through the pension curve.
Yeah it will be recorded in P&L depending on exactly how the progress of the restructuring will be. There is
complicated IFRS rules for that, so that's currently not fully to be determined. It will be recorded in P&L and so be
recorded in P&L on the lines to which the staff belongs, that will be dismissed. So if it's sales and marketing staff, it
will be in SG&A, and if it's general staff, it will also be in SG&A. In case it would be production staff, the relevant part
will be reported in cost of goods sold.

Date: 2015-02-26
Market Cap: 932.39
Current PX: 23.29
Current Year: 1.713
Page 14 of 18
So we will see it in the basically in the salary costs?
It is exactly. It's a personnel cost topic.
And then over the year or only one quarter?
That as far as I said, that's still to be determined. It could very well be in one quarter, but that depends on special
situation, that's requires detailed analysis and that one we haven't made yet.
It's either Q1 or Q2.
Yeah.
Okay. Great. And on the adjustable market for '15?
The addressable market for '15 of course, our goal is to continue the stronger development compared to the average.
Our goal -- we have mentioned that many times is to grow gradually towards a 40% overall market share of the
addressable market, that's still a ways to go. But if we reach 35% this year, that will be a major achievement.
So 35 is your short-term target?
It's definitely a target for this year. But let me explain a bit more how we look at that. A market share in this world is an
outcome, is not the target. You can't put more power into your sales and reduce your cost to get a higher market share.
So our strategy for many years is to build products with gross margins well above 40%, now about 45%. And in the end
that results in the market share success. So yes 35% is an outcome, but it's not the goal as such our goal is profitability,
increased profitability, because that's where it's all about.

Date: 2015-02-26
Market Cap: 932.39
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Current Year: 1.713
Page 15 of 18
Okay, thanks. Maybe a last one on the gross margin. You've positive gross margin guys for Q1, is it truly and solely
based upon the favorable US dollar or is there also positive margin sales mix?
It's definitely the dollar tailwinds, but also the product mix for this quarter is reflecting that.
Okay, great. Many thanks.
Operator
Next question is from Edwin de Jong, SNS. Go ahead, sir.
Edwin de Jong, Analyst
Good afternoon, gentlemen. A few questions left only about products actually. What has been the developments in
(inaudible) especially in TCB, is there been many improvements in -- mainly the last month of TCB that was shipped
last year. On new defines introductions, are we going to see a new introduction in die attach or will it be mainly a
packaging equipment? And then the Russian [ph] interest in centers in the press release on solar, and I can't remember
that that was quite a small activity so far, is there anything happening there or? Yeah those were my questions.
Perfect. Well, first of all on the TCB front. It is all about thinner dice at the defined accuracy. So that means lower.
(inaudible) anymore?
Lower bomb forces at the given accuracies which is favorable to our concept, let me put it that way. So you might
remember that few years ago it was all about bomb force up to 500 new tools. Now it is around less than 10% of that.
But in that technology, those are the most stringent criteria at this moment, but there is no major or let's say there is no
development away from which is a risk to us if that is your question?
And your second question is very important. We launched at -- let's say we will launch in two weeks Semicon China,
next generation 2100 epoxy die bonder hS, in the meantime we are so successfully double-digit systems to a major
Chinese customer, that's the next growth product. Also on packaging, we are introducing two new systems of molding
system and also a turbulent [ph] form.

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Market Cap: 932.39
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Current Year: 1.713
Page 16 of 18
And this things also again for the especially for the mobile?
Yes, for the mobile world. Two sided molding system which is for the wearable's where we have already delivered
several systems, very successful 100% market share. And then also we will deliver this year if all goes well, the first
fully automated way from molding system.
As for this year that sounds like the new system?
Yeah. We delivered last year semi-automated system were two, and now we will have to first fully automatic system.
On solar, we have successfully delivered two systems for copper lines in solar cells to major solar manufacturers in the
world, and it's fair to say that we are very encouraged by the first results and that could be a major growth products in
the years to come. These are plating lines $3 million (inaudible) 95 meters in length, but also we are still very
successful in the semiconductor plating arena.
-- was really small like and I can make can remember and how much was it in the Q4 more or less?
Not in Q4, in the total year, it's about 4% of revenue.
Okay. That's helpful. Okay. Thanks.
Operator
Next question is from Peter Olofsen from Kepler Cheuvreux. Go ahead, sir.
Yes. I wanted to come back on the US dollar. Just to make sure that I understand it correctly. The reason that you had a
positive impact on the gross margin, is that because you bill your customers in US dollars, well part of the cost of sales
is in euros it that the reason or?
Well, it's a dollar market. So for instance, if a machine -- if we sell a machine for $300,000. As I mentioned before, the
target is to have a gross margin above 40%. And if the competitive product is $200,000, we have more room to offer

Date: 2015-02-26
Market Cap: 932.39
Current PX: 23.29
Current Year: 1.713
Page 17 of 18
these products within increasing dollar. At the same time, our cost base is still from 14% in euros. So across the board,
that improves not only gross margin, but also the OpEx side.
Okay. And then looking at the guidance for the first quarter that implies 27% to 34% growth year-on-year. When I look
at the US dollar, that's about 20% stronger than a year ago. So that is a big part of the year-on-year increase that you
have in sales in euro terms?
No. That you can't make the comparison like that. The comparison is on the cost side. So if we then send an invoice to
a customer for a $300,000 for that machine, we then cash that invoice if it would be a euros to euros, and we simply
receive more euros. But the dollar end of the market is the dollar market stays the same.
But if you send an invoice to your customer in dollars in euro terms that's not 20% more than a year ago. So in the
year-on-year comparison that helps you.
I don't think it's a bit less than 20%. But if we invoice in US dollars the same amount, and US dollar increases then we
do see in euros make it a higher amount that is correct. Of course, not all is invoiced in US dollar is also part still euro.
So it's -- you cannot say that the 27% to 34%, that 20% points out of debt is based on US dollar, there is an effect but
not that significant.
Okay. That's clear then. Thank you.
Operator
Next question is from Robin van den Broek, ING. Go, ahead sir.
Yes gentlemen. One of the follow-up on the TCB market. Richard in one of your answers to my questions, you said
that the costs for TCB for similar installed capacity will go up by 10 times, is that reflecting current process fees or is
that basically what you see happening in 2017, that's basically the TCB market will be 10 times larger than the flip-chip
market?
That is on current -- if you make a theoretical model of the same chip output, the same volume in chips, for that you
need 10 times more money. But that of course won't happen. It will grow very gradually, it is of course increasing the

Date: 2015-02-26
Market Cap: 932.39
Current PX: 23.29
Current Year: 1.713
Page 18 of 18
total equipment market for semiconductor assembly significantly.
But here you are saying with this new technology you will have pricing power. So I think in the back end market, it is
less aggressive I mean in the full [ph] time market, at least the last decade and if you for example look at the (inaudible)
there always able to pricing the new technologies. Will you see a similar effect for TCB?
Absolutely.
I think that's helpful. Thank you.
Operator
There are no further questions, please continue.
Well, then I thank everyone for taking part in this call. Is there any further questions you know where to reach us.
Thank you all. Goodbye.
Operator
Ladies and gentlemen, this concludes the conference call. You may now disconnect your lines. Have a nice day.
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