Earnings call transcript: Technoprobe Q4 2024 sees strong AI growth

Technoprobe SpA (market cap: €4.2 billion) reported robust financial results for the fourth quarter of 2024, driven by significant growth in its artificial intelligence segment. The Italian semiconductor testing company saw a 53.3% year-over-year increase in quarterly revenues, reaching 156.3 million euros. Despite this strong performance, the company’s stock price fell by 1.33% in recent trading, closing at 6.02 euros. InvestingPro analysis shows the company maintains a GOOD financial health score, with 8 key insights available to subscribers.

Key Takeaways

• Technoprobe’s Q4 2024 revenues rose 53.3% year-over-year.
• AI-related revenues accounted for 35% of total revenues, up 15% from 2023.
• The company is expanding its testing capabilities, particularly for AI chips.
• Stock price decreased by 1.33% despite strong earnings.

Company Performance

Technoprobe’s overall performance in Q4 2024 was marked by a substantial increase in revenues, particularly from its AI segment, which grew by 15% compared to 2023. The company continues to strengthen its position in the semiconductor testing market, with a focus on advanced testing solutions for AI chips. This aligns with industry trends, where demand for AI data center chips remains high.

Financial Highlights

• Full Year 2024 Revenues: 543.2 million euros, up 33% year-over-year
• Q4 2024 Revenues: 156.3 million euros, up 53.3% year-over-year
• Gross Profit: 223.4 million euros, up 12.1% year-over-year
• EBITDA: 136.5 million euros, up 11.2% year-over-year
• Gross Margin: 41.1% (42.5% excluding reorganization provisions)
• EBITDA Margin: 25.1% (25.4% excluding reorganization provisions)

Outlook & Guidance

Technoprobe’s guidance for Q1 2025 anticipates revenues of approximately 157 million euros, with a gross margin of 44.6% and an EBITDA margin of 30.2%. The company expects the AI market to constitute 35-40% of its total revenues in 2025, maintaining its focus on AI and advanced testing technologies. Based on InvestingPro data, analysts maintain a moderate buy consensus, with the next earnings report expected on April 29, 2025.

Executive Commentary

Stefano Felicchi, a key executive, emphasized the role of artificial intelligence as a primary growth driver for the company, stating, "Artificial Intelligence will remain the main growth driver also for 2025." Felicchi also highlighted Technoprobe’s commitment to maintaining its leadership position in AI, saying, "We are working to secure the leading position of Technoprobe in artificial intelligence."

Risks and Challenges

• Potential US tariffs could impact 15-20% of deliveries.
• The consumer segment remains stable, but automotive and industrial segments show weakness.
• The company’s restructuring of its US operations may present integration challenges.
• Supply chain disruptions could affect production timelines.

Technoprobe’s strategic focus on AI and advanced testing technologies positions it well for future growth, despite current stock market fluctuations. The company’s ongoing investments in research and development and expansion into new markets are expected to support its long-term objectives. According to InvestingPro’s Fair Value analysis, the stock appears slightly overvalued at current levels. Access the comprehensive Pro Research Report, available for 1,400+ top stocks, for detailed valuation analysis and expert insights.

Full transcript - Technoprobe SpA (TPRO) Q4 2024:

Stefano Felicchi, Company Spokesperson/Executive, TechnoProbe: Good evening and thank you for joining us. I’m with Stefano Barreta, our CFO presenting the full year 2024 results and the guidance for the first quarter of this year. As usual, a Q and A session will follow at the end

Stefano Barreta, CFO, TechnoProbe: of the

Stefano Felicchi, Company Spokesperson/Executive, TechnoProbe: presentation. 2024 confirmed TechnoProbe as leader in the testing of logic chips for artificial intelligence. Investments we made in the last couple of years together with the solid know how of TechnoProbe in the MEMS technology have been the drivers to achieve this leadership. Looking at the revenues split, 35% of revenues refers to artificial intelligence, approximately plus 15% compared to 2023. A better than expected result driven by a surge in volumes of chips for data centers, feasible thanks to the increase in manufacturing capacity compared to 2023.

Artificial Intelligence will remain the main growth driver also for 2025. Demand is seen as both realistic and extremely strong. Also bear in mind that Artificial Intelligence as well as the most technologically advanced chips requires high performance, low power consumption and quick data processing features supported by advanced packaging architectures. These architectures which use sophisticated technology and aggregate components to create a single electronic device require advanced testing solutions based on MEMS technologies. That said, we are assuming a progressive and steady increase in demand for advanced logic testing solutions.

Let’s move to consumer segment, which for us refers mainly to PC and mobile. It is stable at approximately 50% of our earnings. 2024 has been a year of stabilization and the segment is expected to post a slight growth in 2025. In fact, we think that they will still suffer from a slower adoption of AI at the edge which is confirmed to be the real catalyst. The exposure of automotive and industrial decreased in 2024 for 20% to 14%.

The industrial segment is expected to remain sluggish in 2025 due to the destocking expected to continue at least in the first half of this year. The automotive segment will show same areas of weakness as well as OEM inventory containment measures and slow electrical vehicle sales even if the long term trend of electrification has not changed. In this scenario, our expectations for the current year are positive. We are working to secure the leading position of TechnoProbe in artificial intelligence to consolidate our distinctive knowledge in the advanced testing space, both at front end and back end, and continue to work hard on the ambitious project to enter in the high bandwidth memory market segment. As you know, we will dig more into our competitive positioning in the testing space, focusing on the growth trajectories of our company in a couple of weeks during the Capital Market Day that will be held on April 14.

Now I turn over to Stefano Barreta who will give you more color on our 2024 results.

Stefano Barreta, CFO, TechnoProbe: Thank you, Stefano. Good afternoon, Gerardo. As you can see in our press release just published revenues in the fourth quarter were euro 156,300,000.0 beating the guidance and registering an increase of 53.3% compared to the same quarter of prior year with a sequential increase of 7.2% compared to Q3 twenty twenty four. Gross profit increases 48.7% compared to the same period of 2023 up to 63,300,000.0 representing 40.5 percent margin at the lower end of our guidance, inclusive of approximately 6,000,000 of fixed dust impairment and 1,500,000.0 of severance and other provisions related to The US organization announced during the quarter. Excluding these, the gross profit would have been equal to 45.3 percent beating the guidance consistently with the revenue.

Also the EBITDA closed at the higher point of the guidance, it increased at 85.8% compared to the fourth quarter of twenty twenty three with a margin of 26.4%. Without The U. S. Reorganization provisions would have been equal to 27.3%. Moving to the year to date figures, total revenue were $543,200,000 with a year on year increase close to 33%.

Gross profit was $223,400,000 12 point 1 percent up compared to the same period of 2023 and representing a margin of 41.1% or 42.5% without the reorganization provisions. The EBITDA for the year closed at 136,500,000.0 up 11.2% compared to the same period of 2023 and representing a margin of 25.1%, twenty five point four % without the reorganization provision. For the completeness of information and comparison purposes, it’s worth remembering that all the above figures include a new perimeter of consolidation inclusive of the contribution of Arbor Electronics twelve months in 2024 compared to a little less than five months in 2023 and DIS tech seven months in 2024 compared to zero in 2023. If we can move to the next page, so thank you. So you can see the simple annual trend by quarter of our main KPIs.

So revenue, gross profit, gross margin and EBITDA. So this low but steady grow in all our KPIs was really consistent with our prudent view of the market and confirms the solidity of our plan. So despite the uncertainties that characterized 2024, particularly in the consumer automotive segments like Stefano Felicchi said a few minutes ago. So the organic revenue just for your information in 2024 compared to 2023 was as expected mid double digit at 14%. On this page you can see the usual summary comparison between the financials at the end of twenty twenty three and 2024.

So just to comment it further, so revenue year to year increase of 33%, thirty two point seven % was driven by a gradual recovery of the consumer segments and by volumes related to the artificial intelligence. And for the other half of the contribution for Arbor and the ISTech, all of them partially mitigated by the weakness in automotive and industrial. Revenues expressed in constant currency, so using the same average FX rate of 2023 would have been approximately 3,200,000.0 higher than reported revenues, meaning less than 1% unfavorable impact. Effecting to twelve months average U. S, the euro rate for fiscal year twenty four was pretty aligned with prior year, so 1.082 compared to 1.081 of 2023.

On a gross profit level, the decrease in the margin from 48.7% to 41.1% was the result of the expected dilution from the mentioned acquisition together with the relevant increase of depreciation following the investments in fixed asset made in the last twelve months. And also due to the growing complexity of our products and to the related and temporarily lower performance registered in the second and third quarters of the year now resolved. Moreover, as mentioned during Q4, a significant reorganization processes has affected The U. S. Structure.

So bringing into the accounts provisions for approximately 13,500,000.0 of which 7,500,000.0 impacting the leverage profit, six of them are related to fixed asset and 1,500,000 relative to severance inventory and other minor provisions. Finally, it’s worth remembering that during the year a prudent inventory reserve approximately $13,000,000 was recorded to reflect both as lower inventory rotation given the earlier mentioned reduction of revenues together with a potentially faster obsolescence of on end semi finished products. Gross profit at cost of currency has been approximately 1,500,000.0 higher by using the twelve months twenty twenty three average rate. Consistently, the EBITDA reflect the same trend showing a decrease in the margin from 30% to 25% including a negative forex impact for approximately $1,400,000 We would like again that EBITDA was also impacted by significant amount of R and D costs, approximately $63,000,000 6 million dollars more compared to the amount recorded in the same period of 2023 and representing approximately 12% of our revenues, confirming once again the mindset and the commitment of our leadership to continuously developing new products and solutions. Finally, few words for the next financial position that is up for almost $395,000,000 in the twelve months period mainly due to 124 generated through the operating activities.

Together, $3.85 generated through the capital increase following the Teradata acquisition of 10% stake, both of them partially offset by 94,000,000 absorbed by the investment of the period, 82,000,000 absorbed by the acquisition of the ISTech and 35,000,000 absorbed by the share payback program. We wanted to include also this page in a very synthetic focus on investments which gave which have grown to the threshold of euro 100,000,000 compared to 73 in the previous year, representing now a portion equal to 80% of the revenues. As just mentioned in the previous comments, most of the investments were dedicated to the completion of the second MLO and MLC factory in Taiwan, which will be operating starting from the second quarter of twenty twenty five, as well as to the increasing production capacity and automation in manufacturing processes of TecnoProbe Ita. Now I hand over to Stefano Felicchi for the next comment.

Stefano Felicchi, Company Spokesperson/Executive, TechnoProbe: Yes, as you know, we signed partnerships with the Teradyne and Adventist, the two main tester manufacturer. Our aim is to build an open ecosystem to share knowledge on the entire testing process to facilitate the technology evolution. Now I will hand back again to Stefano Barreta for the rest for the first quarter twenty twenty five guidance.

Stefano Barreta, CFO, TechnoProbe: Thank you Stefano. So we project an overall stabilization in our reference market for the first part of the year with a slight sequential increase in revenue together with a progressive recovery of profitability. So let’s say first quarter of the year is expected to show the following revenues to be about 157,000,000 plus minus 3%. Gross margin in the range of 44.6 plus minus 2%. EBITDA margin in the range of 30.2% plus minus 2%.

So thanks everyone for your attention. Now we can move to the Q and A session.

Moderator: Thank you to the management team. We now have an opportunity for questions. Thank you. The first question we have today comes from Giovanni Sevetti. Please Giovanni, the floor to you.

Giovanni, I

Giovanni Sevetti, Analyst: can see

Moderator: that you’re on mute.

Alberto Jegra, Analyst: Yes. Can

Giovanni Sevetti, Analyst: you hear me now?

Moderator: Yes. We can hear you. Thank you.

Giovanni Sevetti, Analyst: Hello, everyone, and thanks for taking my question. I have a very quick one. Was wondering if you can give a sense of what CapEx is going to look like in 2025. I can see and thanks for the split of the SEK 100,000,000 roughly invested in 2024. I’m just asking that to have a sense of what the D and A way it’s going to be, let’s just say, going forward because I could see that in 2024 was higher than actually more than expected.

The second question is more about the cash, which is of course now already a lot and it’s increasing at $650,000,000 roughly million. I was wondering if you can give us an idea of how the cash is going to deploy, if you’re still intending to buy back or if you are planning to just say invest this cash or if you think about this, just say good portion of financial income below the EBIT to be in a way stable. And maybe if you can give a bit more color on the gains on FX below the EBIT line. That’s it.

Stefano Barreta, CFO, TechnoProbe: Thank you, Giovanni. So moving back to the first question about CapEx in 2025, will be in the range of 50,000,000. So we expect to be back to the usual level of investments. So after the big investment we did in the last couple of years. So we do not expect that to increase that much compared to what we did in 2023 and 2024.

So the increase of the depreciation and amortization for 2025 will be mostly due to the investment we already did in 2024. Back to the second question about cash. So you are correct. So we are in the region of €670,000,000 total cash of the company. Net financial position is 10,000,000 lower due to the lack of use of for leasing, but cash is pretty high I agree with you.

And the strategy now is to keep part of this revenue, of course, for our operations, let’s say one third of them will be fully dedicated for operation. The other third of the cash will be dedicated to potential, you say M and A, you can use it, there will be the opportunity to make some good deal on the market for which we’re always keen for that. And the remaining part is currently, let me say invested in the money market. So with zero risk or 10 deposit, zero risk as well, considering the good remuneration that are currently offered by our banks. So for the moment, we have no other place for that portion of the cash.

And about your third question of gain on FXA, the most part of this gain is considered unrealized gain because if you consider that in the last month of the year, the FX rate between US dollar and Europe dropped significantly compared to the average rate of the year that was 1.08, it went down suddenly to 1.05. So down, I mean, stronger US dollar. So the most part of the transaction occurred at the year end that were converted at a better rate. So the most part of that gave us a significant boost in terms of FX impact. So this is the main explanation.

Giovanni Sevetti, Analyst: Okay. And if I may, since you mentioned that a third there will be in a way, destined to potential M and A, is there anything that you’re scouting now? Is there anything that you’re evaluating at the moment or it’s just, let’s just say, regular scouting but nothing can close, let’s just say? Yeah.

Stefano Felicchi, Company Spokesperson/Executive, TechnoProbe: So just to answer this question, first of all, I like to remind our DNA as a company was always to develop the key technologies in house because that is the reason and to vertically integrate these technologies and in order to have a competitive advantage in the market and have a better cost, be more cost effective. But time to the time also we are looking upside of course because we can speed up sometimes the process and we can integrate something knowledge is already available. So we are always scouting for technologies and I would say as a regular scouting at this moment, we don’t have any specific target but we’ll always see if there are something that is popping up that can be interested to integrate in our portfolio.

Giovanni Sevetti, Analyst: Okay. Thank you very much.

Moderator: Thank you for these questions. Our next question comes from Alberto Jegra. Please, Alberto, go ahead.

Alberto Jegra, Analyst: Good afternoon. Can you hear me?

Stefano Barreta, CFO, TechnoProbe: Yes.

Alberto Jegra, Analyst: Okay. So my first question is on the end markets because you are projecting a broadly stable consumer market in 2025, then a lower demand in the auto and industrial. So, what about, AI data center? Can you give us a sense of, which kind of growth should we expect after the stronger 2024 Then on M and A contribution, what is the DIS and our board contribution in the fourth quarter and in the guidance for the first quarter? More in general, can you help us understanding what is driving margin up in the first quarter compared to the last quarter of twenty twenty four despite the similar level of sales?

Then one last question on tariff. I know it’s still a bit an uncertain environment, but can you tell, can you tell us how much of your products are shipped to The US and more in general your view on this topic? Thank you.

Stefano Felicchi, Company Spokesperson/Executive, TechnoProbe: I will start to answer to the first question about the market. So we can what I can tell you is of course you can see 2024 was a very strong year for AI and we see the 2025 at least as much as strong as 2024 or even higher at this moment, slightly higher. As far as computing and is flat I would say and we see still weakness in the automotive and the industrial. But what is driving more than any other segment is the AI and the the procrastin for the AI are more complex and also the price, the average price is higher. So that is driving a very strong revenue for us.

Stefano Barreta, CFO, TechnoProbe: About duties, this is a very sensitive point, so thanks for asking. This is something we are really, really careful about and monitoring everyday situation. So for the moment, as you said, there are no particular concrete signals or triggers that can show some new duty, some custom duty on this semiconductor space. So for the moment, we are still on the window. In case we for sure we debate with our customers to understand which is the best solution to continue to serve them in the best way we can.

For the moment, approximately a volume of 45% to 50% of our market is in The US with The US customers. Even if this market is not completely translated into shipping into The U. S, in fact, the shipment into U. S. Is reduced because most of them, most of these customers already prefer to get shipped in other countries, so in Asia, basically.

And we can reduce the portion I mentioned in a range between 1520% in terms of volume shipped to The U. S. Market.

Moderator: Thank you. We now

Alberto Jegra, Analyst: Sorry, I had another question on margin contribution from acquisitions.

Stefano Barreta, CFO, TechnoProbe: Yes, please.

Alberto Jegra, Analyst: Sorry, my question was on the contribution of Arbor and DIS on sales and profitability in the last quarter of twenty twenty four and what you expect in the first quarter of twenty twenty five? Thank you.

Stefano Barreta, CFO, TechnoProbe: So, I can tell you in the last part of the year, both of them combined Arbor and DAS combined more or less for zero profitability, including all the reorganization costs that we have recorded already in 2024 that affected already EBITDA and gross profit. So both of them were pretty neutral in terms of contribution for 2024, diluting of course the other part of the business of the prop car. So moving forward, our world has been reorganized, so the Santa Clara facility has been closed in Q1 twenty twenty five and also the microfabrica facility has been reduced a lot and merged into Technoprobe America. So both of them have continued to perform their operation until the March 2025 and will be completely shut down April 2025 and going on. So that’s why in Q1, we do not expect a significant reduction in cost.

In fact, our EBITDA will increase, we expect an increase up to more than 30% that is already a good strong signal for our business, but still including some dilution from our performance. Moving forward, the contribution that will be measured between DIS and TechnoProbe will not be that clear in terms of segregation because DIS now is in the process of a complete integration into the model of Technoprova and a significant part of its business will be addressed to serve the current TechnoProbe prop card manufacturing. So it will be pretty difficult and not completely clear which will be the contribution going moving forward in 2025. But overall, just to give you a broad sense of the measure, so in 2025 EIS, if we would cost it a standalone, it make a profitability of in the region of 10% or something like that. But most of that will be transferred to techno growth profitability.

So it will be borderline to define a separate division. We are considering ourselves as a unique cash generating unique units.

Alberto Jegra, Analyst: Thank you very much.

Moderator: Thank you. Our next question now comes from Gianmarco Bonacina. Please Gianmarco, the floor to you.

Gianmarco Bonacina, Analyst: Yes. Good afternoon. Two questions for me. First one, business wise, can you give us an update on the qualification process for HBM? Is this something you are aiming for to this year or next year?

And then also on final testing, my understanding was that you bought DIS to have some products for, let’s say, entering this new market? How is going the work to prepare a new product for, let’s say, advanced testing for ICs? And then a question on provision and D and A. I see that you had 69,000,000 of D and A and provision for the full year. I understood you said you had 7.5 provision in Q4.

It’s not clear for the full year. So just to understand what is the recurring underlying D and A stripping out all the provision for the full year? And sorry, the last one is about the margin, given that you will have some benefit from the restructuring of Harbour and DIS in the rest of the year. So can we consider the 30% EBITDA margin you should have in Q1? Percent EBITDA margin you should have in Q1 as a floor for the year?

Thank you.

Stefano Felicchi, Company Spokesperson/Executive, TechnoProbe: Okay. I’ll start with your first question about HBM. Yes, I confirm we are running some qualification with main HBM players. So the expectation is to finish the qualification by the end of the year and if positive, we can expect to start some business in 2026. And about the final test, this is already in progress It’s actually, DIS is doing already introducing already, final test business to main customers.

So this is already happening as part of DIS business.

Stefano Barreta, CFO, TechnoProbe: Okay, so moving to the provision question. So, DNA is correct what you say. So, the most part, you have to strip it out from DNA in general overall approximately 12,000,000, 6 million are above the gross profit and 6,000,000 are below the gross profit. So total provision for impairment of fixed asset was equal to 12,000,000, including both our board electronics and microfabric attribution. So when I mentioned 7,500,000.0 before, it includes the 6,000,000 above the gross profit plus 1,500,000.0 for the severance related to employees and inventory and other production.

But strictly related to DNA, we talk about six above gross profit and six below gross profit. And the last part of your question was the profitability. So the margin, 30% is expected to be actually the flow for the year, depending on of course, the trend of the FX rate, depending on the volumes, depending of extraordinary provision if may happens. But let’s say if the business will be as a recurring business, we do not expect less than 30% with the path we are now gone. Thank you.

Moderator: Thank you for this question. We now have a question from Fabio Pavan. Please, Fabio, the floor to you. I see that Fabio is having some problems, so we will move on to the next question, which comes from Domenico Ghillotti. Please, Domenico, go ahead.

Domenico, please let me unmute your line.

Domenico Ghillotti, Analyst: Can you hear me now? Okay. So the first question is on, if you can provide some more color on the agreement with AdvanTest, so the opportunity there and so the strategic implications. And the second question is on the MLO. So you are trying to produce internally, so the MLO.

So I’m trying to understand how much do you think you can already manage with the new plant that you are starting up in Taiwan in terms of internal MLO production? And if you see any implication on your business from the deal executed on FICT that I found if I’m not wrong, it’s a supplier of MLO.

Stefano Felicchi, Company Spokesperson/Executive, TechnoProbe: For starting from Adventist, For us was a strategic deal to assure the PCB supply chain and as Adventist has a much stronger, a bigger factory in US and Taiwan. And so for us was not making sense to keep a small company factory like Harbor in The US. So with this deal, we we can say that we are going to be sure to have a to secure the supply chain for this very important component of the pro carbon and the final test force. And to your coming to your second question about MLO, we can already it’s not something we are trying to do, but it’s already happening. And right now we are about taking let’s say, we can produce 50% of our internal need in our need is produced by our factory and 50% is our source.

And the reason of the extra investment on the MLO line was also to have the possibility to go to 100% if needed. And, so this is, we have so we’re not worry about this because we are going to have enough capacity for all our need. Now you’re Also yeah. So So In this moment, there is no anyway, no sign that the current supplier will stop supply the everybody. But on our side we feel that we don’t we will not have any problem because we have enough capacity in there.

Domenico Ghillotti, Analyst: Yeah. Do you satisfy with the quality of the product that’s coming from internal production or do you need to ramp up the

Stefano Felicchi, Company Spokesperson/Executive, TechnoProbe: No. The product actually we develop in house as even better performance. And this was again coming back to our DNA as a company is to develop technologies. We are, let’s say, we develop technologies that are not available. So and that is was the case.

So the MLO done with a very complex technology was not available three, four years ago and that’s why we decided to invest in that technology to have a technology that could follow the future roadmap. So at this moment we can say that our MLLO is is the most advanced MLLO in the market and we can follow the really the roadmap for this following many years ahead of us. And of course we cannot know, we don’t know if the other technologies available in the market will be able to do that. But we are very confident in our technology because it’s based on on wafer technologies, so semiconductor technologies, so very advanced.

Alberto Jegra, Analyst: Thank you.

Moderator: Thank you for these questions. We’re gonna try to give the word back to Fabio Pavan. Please, Fabio, remember to unmute your line in order to ask the question. Thank you.

Fabio Pavan, Analyst: Yes. I’m here. Can you hear me now? Yes. Oh, finally.

A few quick follow ups. The first one is, we’re looking at twenty five q one guidance. Would it be fair to assume that the data center and AI business would finally go, end up in representing more than 40% of of top line? Second question is, again, on AI, can you give us some more color on what’s going on in terms of demand for for customers, if there are new customers, if the demand is coming from same customers? And finally, a follow-up on the tariffs.

If I got it properly, you were saying that you can neutralize a big portion of the potential impact in terms of duties. Just was, wanted to double check if 15% of revenues is the number we may expect to be affected by these duties? Thank you.

Stefano Barreta, CFO, TechnoProbe: So let me start from the bottom. So I didn’t say we can neutralize the duties. The percentage is more or less what you said, so between 1520% of the deliveries are addressed to The US market, so they in case will be subject to duties. In that case, there will be any custom duties associated to our products, we will discuss with the customers which is the better way, the best way to mitigate and to reduce the impact. So sooner or later, someone should decide who can absorb the cost of this or part of this or none.

So depending on which would be the agreement with them, we can then mitigate the impact, but just in case for the moment, there are no particular triggers. Back to the first question about the split for the AI, we can see an overall addressable market for AI 2025 that is equal between 3540% for the full year. Given the split by single quarter is very, very difficult also because there is always the cutoff data. So we can have an order in Q1 but the delivery in the second quarter related to AI. So it’s very tricky to give a day by day location by market.

Overall, we expect to grow the AI market as said, So in the region of 35 to 40% for the full year. And I missed the second question, sorry, can you repeat that? What was the?

Fabio Pavan, Analyst: I guess it was still referring on on some potential more color on on your AI services, but partially you already have asked for this question.

Stefano Felicchi, Company Spokesperson/Executive, TechnoProbe: I can maybe add the, that, of course, as you know there are two main players for cloud AI and for those we develop some specific technologies we feel very strong. There are some other opportunities that are coming from hyperscalers and we are talking about custom ASICs devices. So in that case, for sure we are in the position that we can leverage on our technologies even though these products are less complex than the main chips. There are still pretty complex devices and they can leverage from our technologies to get a better performance. But this is an opportunity that actually is not depending on us but depending on how the market of the and of the hyperscalers will develop this segment.

But for sure it’s a good we see a good opportunity that in that area.

Fabio Pavan, Analyst: Super. Thank you very much.

Moderator: Thank you, Fabio. We now have the question from Luca Bacoccoli. Please Luca, the floor to you.

Luca Bacoccoli, Analyst: Hello. Can you hear me?

Stefano Barreta, CFO, TechnoProbe: Yes. Yes.

Luca Bacoccoli, Analyst: Ciao. Good afternoon, everyone. So, a question and a clarification. The question regards the margin evolution in the coming quarters. If I got it, right, you basically completed the restructuring in, The US as for hardware electronics is concerned.

So I was wondering what margin should we expect in terms of improvement, thanks to these restructuring activity. And a clarification is on the first quarter guidance margin, which are improving significantly despite, the, restructuring was not completely yet over. So what I was wondering, what is driving the strong margin increase, we’d say it’s, which are almost basically, flat sequentially. Thank you.

Stefano Barreta, CFO, TechnoProbe: So, starting from the revenue lines, the top line, increase of more or less 7% compared to prior quarter. We talk about Q4 respect to Q3. There was a this 7% was affected a bit by of the single quarter benefit from effects and that growth increase in the profitability as well for the full year. So, you see the sequential increase already arrived at 25% is the best quarter more or less, best quarter of the year. And we expect plus 5%, five points more in Q1 twenty twenty five, so around 30%.

The organization effect in the Q1 will be still limited as measured because the two fabs, Microfabrica and Harbor Electronics are still operating in the quarter. So, there is a partial effect, if you want because most of the provision has been recognized in 2024, but we expect a further benefit in the second part of the year. So second, as to should be a Q4. Where we can arrive? That really depends on the complete integration of DIS.

There is still a way to go to be fully integrated in terms of processes and efficiency. And also, as long remember, don’t forget that EUA fab for which we invested more than $100,000,000 in the last couple of years are still running not a full capacity. So we expect fiscal year twenty five to run between 2530% of the capacity. So that brings a bit of additional cost and the efficiencies to do, but we will not be able to reach the full efficiency to that of ’25. And we are currently not really able to define if the full efficiency will be getting it in q three, q ’4, or q one, ’20 ’20 ’6.

That’s why we are very, very careful when we want to project our our profits. But for sure, that would be increased compared to 2024. And it’s a very, very good, and important signal for our business.

Luca Bacoccoli, Analyst: Okay. Thank you. And just another follow-up on profitability. You are mentioning that pricing on artificial intelligence is higher than the rest of the business. Does this translate also in better margin?

Thank you.

Stefano Barreta, CFO, TechnoProbe: This is likely slightly better, because that’s correct. There will be higher revenues, but you have to remind that there will be higher cost, especially R and Ds, especially cost of products. So, profitability will increase a bit but not that much to have a significant amount or visible amount on the overall profitability of the company. We always say that the best driver for the profit profitability is volume. So, when the volume goes up, profitability of the company is more than proportion.

Luca Bacoccoli, Analyst: Okay. Yuri, thank you.

Moderator: Thank you, Luca, for your question. Our next question now comes from Alberto Jegra. Please, Alberto, go ahead.

Alberto Jegra, Analyst: Yes, one, last curiosity from my side, because during, his last analyst, they spoke about joint development project with you to launch a new product on the market this year than with more material financial impact on 2026. So can you provide any additional color on that? Thank

Stefano Felicchi, Company Spokesperson/Executive, TechnoProbe: you. Yeah. So basically, there are several projects and several applications that we are working together with them. And the reason is very simple is because the as you know, the ProCard is interfacing with the tester. And the and the tester is the one that is is where the test program is loaded and to the ProCard is is reaching the the silicon under test.

So it’s very clear that the two things are not separate things but the test technology should evolve based on the Prokart technology and also the opposite. So the Prokart technology is evolving based on test technology. So there are many things that should develop together in order to have a better test coverage. And so this is basically the reason of several joint development projects.

Alberto Jegra, Analyst: Thank you very much.

Moderator: Thank you. As there are no further questions, I will now give the word back to the speakers for any final comments before bringing this presentation to a close. Thank you.

Stefano Felicchi, Company Spokesperson/Executive, TechnoProbe: I’d like to thank everyone and we will waiting for you for the Capital Market Day on the 04/14/2025.

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