Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Significant improvement in free cash flow from minus CHF15.3 million to plus CHF8.1 million.
- Sequential increase in net sales by almost 34% from Q1 to Q2.
- Incoming orders increased by 22% compared to H1 '23, with a book-to-bill ratio of 1.1.
- Positive development in the semiconductor market, with microchip revenues increasing by almost 19% compared to the first month of 2023.
- Successful launch and positive customer feedback for new products like the Synertia RF Matchbox platform and CA20 lab inspection system.
Negative Points
- First half-year sales did not match the previous year's level.
- Significant pricing pressure from Asian competitors in lower-value x-ray applications.
- Lower sales in the automotive industry due to stagnation in new car production.
- IXM division recorded lower sales compared to the exceptionally strong first half of 2023.
- EBITDA margin remained flat compared to the previous year, indicating challenges in improving profitability.
Q & A Highlights
Q: Can you provide insights on the sustainability of the recent uptick in orders and the development in July based on conversations with OEMs?
A: We believe the uptick is sustainable and expect further increases, supported by our guidance. Discussions at the Semicon West show confirm that market dynamics related to AI and HBM are spilling over into NAND and DRAM, boosting incoming orders. (Nicola Rotondo, Interim CFO; Stephan Haferl, CEO)
Q: Given the low EBITDA margin in H1, how do you expect to meet your full-year guidance?
A: All divisions are expected to grow in H2, with the majority of growth from PCT. Operational leverage and increased production volumes will boost gross profit margins, helping us achieve the guided EBITDA margin. (Nicola Rotondo, Interim CFO)
Q: Can you provide an update on the Synertia platform's design wins and market share targets?
A: Progress with Synertia is strong, with additional design wins and intensified engagement with Tier 1 and Tier 2 customers. We maintain our mid-term market share target of 5% to 10%. (Stephan Haferl, CEO)
Q: How is the CA20 product line progressing in terms of customer qualifications and revenue expectations?
A: Technical qualifications with some customers are complete, and commercial negotiations are ongoing. The fab machine development is on track, with prototypes to be sent out in September. Revenue projections are not disclosed at this time. (Stephan Haferl, CEO)
Q: What are the expectations for the recovery of NAND WFE orders?
A: We expect a strong recovery in the NAND industry by the end of this year, driven by increasing demand for memory for AI applications. (Stephan Haferl, CEO)
Q: How are discussions progressing with other Tier 1 customers for Synertia design wins?
A: We are in deep engagement and qualifications with other Tier 1 customers, although no design wins yet. The release of the Synertia matchbox has increased interest. (Stephan Haferl, CEO)
Q: Can you provide an update on the competitive landscape in the RF generator business?
A: Advanced Energy's new generator and matchbox releases are seen as attempts to copy Synertia, indicating our technological lead. We believe we have a competitive edge, but must continue to innovate to maintain it. (Stephan Haferl, CEO)
Q: What is the outlook for sales in China, and what risks do you see?
A: China represents roughly 25% of our sales in H1. We expect continued growth in China despite geopolitical risks and domestic competition. We are prepared to adapt to any changes in export restrictions. (Nicola Rotondo, Interim CFO; Stephan Haferl, CEO)
Q: How do you plan to achieve the full-year sales guidance, and what would need to happen to reach the upper end?
A: We have a high backlog and expect increasing orders, making us confident in our guidance range. We will narrow the range further in the second half of the year. (Nicola Rotondo, Interim CFO)
Q: What steps are being taken to increase profitability resilience, and what is the target EBITDA margin during a downturn?
A: We are working on flexibilizing costs and consolidating activities in Penang to improve resilience. Our target is an EBITDA margin around 20% during downturns, with a ROCE above 9%. (Stephan Haferl, CEO; Nicola Rotondo, Interim CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
