Amkor Technology Inc
NASDAQ:AMKR
US |
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
|
US |
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Mastercard Inc
NYSE:MA
|
Technology
|
|
US |
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
|
US |
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
|
US |
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
|
US |
Visa Inc
NYSE:V
|
Technology
|
|
CN |
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
|
US |
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
|
US |
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
|
US |
Coca-Cola Co
NYSE:KO
|
Beverages
|
|
US |
Walmart Inc
NYSE:WMT
|
Retail
|
|
US |
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
25.13
44.68
|
Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
Johnson & Johnson
NYSE:JNJ
|
US | |
Berkshire Hathaway Inc
NYSE:BRK.A
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Mastercard Inc
NYSE:MA
|
US | |
UnitedHealth Group Inc
NYSE:UNH
|
US | |
Exxon Mobil Corp
NYSE:XOM
|
US | |
Pfizer Inc
NYSE:PFE
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
Nike Inc
NYSE:NKE
|
US | |
Visa Inc
NYSE:V
|
US | |
Alibaba Group Holding Ltd
NYSE:BABA
|
CN | |
3M Co
NYSE:MMM
|
US | |
JPMorgan Chase & Co
NYSE:JPM
|
US | |
Coca-Cola Co
NYSE:KO
|
US | |
Walmart Inc
NYSE:WMT
|
US | |
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
Good day, ladies and gentlemen, and welcome to the Amkor First Quarter 2022 Earnings Conference Call. My name is Diego, and I will be your conference facilitator today. At this time, all participants are in a listen-only mode. After the speakers’ remarks, we will conduct a question-and-answer session. As a reminder, this conference is being recorded.
I would now like to turn the call over to Jennifer Jue, Head of Investor Relations. Ms. Jue, please go ahead.
Thank you, operator. Good afternoon, everyone, and thank you for joining us for Amkor's first quarter 2022 earnings conference call. Joining me today are Giel Rutten, our Chief Executive Officer; and Megan Faust, our Chief Financial Officer.
Our earnings press release was filed with the SEC this afternoon and is available on the Investor Relations page of our website, along with the presentation slides that accompany today's call.
During this presentation, we will use non-GAAP financial measures, and you can find the reconciliation to the U.S. GAAP equivalent on our website. We will make forward-looking statements about our expectations for Amkor's future performance based on the environment as we currently see it.
Of course, actual results could differ. Please refer to our press release and other SEC filings for information on risk factors, uncertainties and exceptions that could cause actual results to differ materially from these expectations.
Please note that the financial results discussed today are preliminary, and final data will be included in our Form 10-Q.
And now I would like to turn the call over to Giel.
Thanks, Jennifer. Good afternoon, everyone. And thank you for joining the call today. Amkor delivered solid results in the first quarter with both revenue and profitability at the high-end of guidance. Revenue of $1.6 billion and EPS of $0.69, our first quarter records, reflecting year-on-year increases of 20% and 40% respectively. Continued strong demand for our advanced packaging solutions, particularly in the communication and market through better than expected results.
Now, let me review the current dynamics in our end markets. Our communications business grew 22% year-on-year, driven by demand for advanced SiP and flip chip technology for the latest 5G processors and peripheral devices in new smartphone models. Some weakness in the China market was offset by strength in the high-end smartphones, as well as the spring launch of new models. With Amkor’s leadership position across multiple semiconductor devices in 5G phones, we expect the ongoing proliferation of 5G to remain an important growth driver.
Solid performance in the automotive and industrial markets drove 15% growth compared to first quarter 2021. In the automotive supply chain we observed an increased attention to risk management. Both semiconductor suppliers as well as Tier-1 companies are exploring multiple sourcing arrangements as well as options to establish regional supply chains. With Amkor’s manufacturing lines in the main automotive geographies, we are well positioned to support our customers in implementing these changes.
In Korea, we have a strong automotive manufacturing hub for advanced packaging. In Japan, we offer a well-established manufacturing base supporting a broad range of automotive solutions, including emerging silicon carbide power products for EV. And in Europe we are expanding our technology portfolio in our Portugal factory, where we have started production of automotive sensors using wafer level fan out and MEMS technology. In all locations, we are working with lead automotive customers on the next generation products, and we have multiple new product introductions ramping this year.
With our global manufacturing footprint and broad technology offering, we expect ongoing strength in this market, ADAS, electrification and infotainment and telematics will drive continued expansion of semiconductor content per car. As the leading automotive outset, Amkor has a strong track record of partnering with customers who demand automotive grade quality and supply reliability. Automotive qualified manufacturing lines are a critical differentiator, and we are proud to have received recognition from top automotive companies for our commitment to quality and supplier reliability.
Our consumer business increased 11% year-on-year supported by strength in traditional consumer product and a broad portfolio of IoT wearables. Our advanced SiP assembly and test platform offers a turnkey solution for the IoT wearable markets. And our high-volume cost-effective flip chip technology offers excellent value to customers for traditional consumer applications. We expect the consumer market to further expand, and overall product and customer pipeline remains strong.
IoT wearables continues to be an important driver for growth. Although we expect that this emerging product category is more prone to quarterly variability, due to supply chain constraints and varying product life cycles. Continued strong momentum in the computing market drove year-on-year growth of 36% with 10 consecutive quarters of sequential growth.
We achieved robust growth in all computer applications. In data centers, introduction of AI, as well as the trends of increased data traffic is driving investments in high performance computing. utilizing the latest silicon nodes with advanced packaging technology. We see similar technology requirements in the wired and wireless infrastructure markets, notably in support of 5G infrastructure. Although the PC market is softening, we observe the trends to ARM-based PC architectures. In this emerging PC segment, Amkor is able to support our customers with a proven multi-chip modular solution.
With our broad advanced packaging portfolio and established partnerships with lead customers and foundries, we believe we are well positioned to capitalize on opportunities in these growing computing applications. And we continue investing in advanced technology and manufacturing scale for these markets. Finally, our test business grew 14% compared to first quarter 2021. We have established a broad test expertise by supporting both industry leaders as well as emerging companies in new application areas. Through early engagement in customers product life cycles, we are able to define test strategies and intelligent equipment selection to provide differentiated test solutions. We are broadening the scope of our test services in areas like 5G communications, computing and system level testing to enhance this turnkey support to our customers.
Our manufacturing organization continues to demonstrate Amkor’s commitment to quality and supply reliability to our customers. The ongoing semiconductor supply challenges require diligence and flexibility from our global organization to meet customer requirements, while maintaining industry-leading quality standards and high factory utilization.
In late March, the Chinese government mandated the COVID-19 lockdown of our Shanghai factory. Demonstrating the utmost and flexibility our manufacturing team is closely cooperating with local authorities and customers to minimize the impact and resume regular operations. We anticipate that our Shanghai factory will return to normal production during the second half of the quarter. Our guidance reflects this. And as we work through this dynamic situation, we are doing what we can to support our people and keep them safe. We're leveraging our global factory network to support our customers. And we work with authorities to enable a control three star of production.
In addition to managing the supply chain challenges, the Amkor team continues to expand our global manufacturing footprint to ensure we can capture future growth opportunities and meet expanding customer requirements. Besides supporting a changing automotive supply chain, we are also expanding our footprint to offer customers a broader geographical diversification.
In November 2021, we announced our plans to expand our global factory footprint by building a state-of-the-art factory in Bac Ninh, Vietnam. The project is on schedule to start pilot production in the second half of 2023. When completed our Bac Ninh manufacturing campus, we will offer our customers an attractive large-scale cost-effective manufacturing location with a diversified technology portfolio.
Now let me turn to our second quarter revenue outlook. We have included an estimated revenue impact for the Shanghai lockdown of around $120 million in our guidance. Assuming that the situation continues to improve. Including this impact, we are expecting second quarter revenue of $1.52 billion at the midpoint of our guidance. This will represent a year-on-year increase of 8%. Megan will now provide more detailed financial information.
Thank you, Giel, and good afternoon everyone.
Amkor delivered strong financial results in Q1, setting first quarter records for revenue, gross profit, operating income, EPS and EBITDA. First quarter revenue of $1.6 billion was up 20% year-on-year and down 7% sequentially. The communications end market led the strong performance versus guidance with strength in both the iOS and Android ecosystem. All of our end markets grew double digits year-on-year and computing achieved another quarter of record revenue.
While we were able to exceed our Q1 expectations, this did not come without challenges. We continue to successfully manage the ongoing supply chain constraints on wafers, substrates, lead frames and components to support robust customer demand. Revenue for advanced products grew 26% year-on-year in the first quarter and represents approximately 70% of our business. Demand for advanced SiP and flip chip solutions within the computing, automotive and industrial and communications end markets is strong and is driving this significant growth.
Our mainstream products make up around 30% of our business and demonstrate continued strength with a year-on-year increase of 9% in the first quarter. Gross margin of 20.4% exceeded the high-end of our guidance driven by disciplined cost control. Gross profit of $325 million is a first quarter record. Operating expenses for the quarter were in line with expectations at $115 million, resulting in operating income margin for the quarter. That's 13.2%.
Net income for the quarter was $171 million, resulting in record Q1 EPS of $0.69. Q1 EBITDA increased 30% year-on-year to $363 million and EBITDA margin was 23%. Our balance sheet is solid, we ended the quarter with $1.2 billion of cash and short-term investments. During the first quarter, we executed a new $600 million revolving credit facility, replacing a $250 million revolving credit facility.
Total liquidity increased to $1.9 billion, providing us with financial flexibility. Our total debt as of the end of the first quarter is $1.2 billion. And our debt-to-EBITDA ratio is 0.9x.
Moving on to our second quarter outlook. As Giel mentioned, a government mandated COVID-19 lockdown impacted our Shanghai facility beginning in late March. Our factory team has been working closely with local authorities to resume regular operations. And we anticipate our Shanghai factory will return to normal production during the second half of Q2.
Market demand continues to remain strong across our portfolio and geographic footprint. And we don't expect the short-term disruption to have a material effect on our mid and long-term results. With the reduced Shanghai factory output included and assuming that the lockdown ends as currently anticipated, we expect revenue to be between $1.47 billion and $1.57 billion.
Gross margin is expected to be between 16.5% and 18.5%. The Shanghai lockdown is estimated to have an approximately 300 basis point impact on gross margin, reflecting underutilization and incremental COVID lockdown costs. We expect Q2 operating expenses of around $115 million. We expect our full year effective tax rate to be around 15%. Q2 net income is expected to be between $90 million and $140 million, resulting in EPS of $0.37 to $0.57.
Our forecast for capital expenditures for the year remains at $950 million to support strong demand expected in 2022 and beyond. With that, we will now open the call up for your questions. Operator?
Thank you. And ladies and gentlemen, at this time we will conduct our question-and-answer session. [Operator Instructions] Thank you. Our first question comes from Randy Abrams with Credit Suisse. Please state your question.
Yes. Good morning and good result for first quarter. Wanting to just go into the Shanghai factory impact and just have a few follow ups to that. I think, first, just it seems like it's been different by supplier. Some suppliers have kept going or offering partial utilization. So was there a factor that mandated the total shutdown? And in terms of what you're seeing on the timing, like the date, you expect to get the production back up and if you're still waiting for that clearance? And given the loss of impact, I think you mentioned 120 million? How much do you see as a makeup that in third quarter? It would supplement we're normally have a seasonal ramp. But how much do you anticipate incremental revenue versus some of that production may have shifted to other non-China sites impact competitors it might be lost revenue?
Good Morning, Randy. This is Giel. Let me try to answer your questions here. First of all, on the lockdown in Shanghai, and why this is different across multiple companies. What we experienced in Shanghai was very much that the location where the factory is situated depends on the local measures that are taken. I mean, currently, we see that, for example, we are in Pudong that there are very strict measures in the Pudong area. And it's actually within Pudong. It's region-by-region. And that forced, actually the local authorities to go to a lockdown of most of the manufacturing locations in Pudong. They kept it very strict also in the Zhangjiang Hi-Tech Park, where we are situated. Other areas in the Shanghai area may experience slightly different measures. Although we see that similar things are proliferating there.
With respect to the share the impact. Now we do a couple of things, of course, we work with customers very closely, because with many of the customers, we have long-term supply agreements, where we utilize our global manufacturing footprint to shift volume to other factories in areas outside of Shanghai.
It is also a relative low season for the business. So we have a bit of excess capacity, and our customers have a bit more flexibility there. So we expect that on an annual basis, the impact will be able to compensate for a large extent, Randy, maybe not to the full extent, but to the large extent.
And just with regard to the status, do you have a date for resuming production or it's still set to how the conditions go in the coming weeks?
Yes, there are a couple of strict conditions that you need to apply. Currently, we're working with customers, and we feel that we have a way forward where we meet all of the conditions. So it could be a matter of days before we can start again.
And if we think in a worst case, the 120 million for -- it's about first half of the quarter. In a worst case if it extended if that's the way to think about it like half a quarter that much revenue impact if say another -- the outbreak gets worse again, or as we move on over time, you have more time to shift order. So you try to manage it to a lesser impact if it were to extend on further.
Yes. So I think the longer it would take the more that's options that open up to utilize all the factories. But we're fairly confident that there is a way forward where we are back to normal operations definitely before the second half of this month.
I wanted to ask on the demand side, if you could talk -- since we last had the results with the Russia, Ukraine, there's been a demand side in China from these lockdowns and inflation has been persistent. Have you witnessed in certain applications demand change that affects your view how customers if they're slowing down their rates?
Well, that's a good question, Randy. I mean, currently we are very alert on demand changes, but we have not seen demand changes, actually, we still see upsides that we cannot fulfill because of hiccups in the supply chain, materials supply or certain components supply. So we still believe that the end markets are strong, even in the communication market, where there is some weakness in the China communication market. But on the other hand, we see upside on the premium tier Android smartphones, where we hold a strong position. So all in all, we believe that the sheer demand side is still very strong. What we're watching it clearly, we're also watching the inventory in the chain when it comes to distributors, or inventory at our customers. And so far, we don't see any indications or concern.
To follow up on the inventory, it seems like the IDM's are still relatively okay, or a bit low. [Indiscernible] had built up some in the past couple quarters, like from some mismatch, but the absolute level is a bit higher. Are you witnessing it's more on a wafer bank level like waiting for substrate or is it your view, it's already finished packaging test chips that they're carrying a bit elevated inventory?
Well, the wafer bank in the foundry share sites, we have limited exposure, what the share inventory level is there, Randy. On the finished products, so the packages and tested products, we have a bit more insight. I mean, on the distributor side, we see a slight increase, but still below their target level on the IDM side, we believe that the inventory levels at both our fab-less customers as well as the IDM customers is still below their target. That is at least our observation at this point in time.
Final question I want to ask and it's just a little bit of a preview into second half given the comments on demand side. Is it rough expectations to do your catch up and could see above seasonal quarters? Is it difficult to make it up given relative tightness? And then, the way to think about the margin where you have a bit over 20%? If we start to pass that if you see the leverage, we could start pushing back into low 20s again.
Yes. From the revenue perspective, and also from the margin perspective, it should be very positive that we hear we can make up the loss in the second quarter in the remaining part of the year, maybe not in the exact portfolio elements. But we believe that the market is strong. We see upside for the details in the fourth quarter. So we have definitely confident that that we can make up for the Q2 correction due to the lockdown.
Absolutely. I want to ask one final question, the Sunbeam advanced versus mature, is the bottleneck more advanced side? But just your capacity for flip chip test and substrate or do you see also some bottlenecks on mainstream where you're running for capacity or at the lead frame constraints?
Yes. I think you already mentioned it, Randy. I think on the mainstream side we still see constraints on the on the lead frame sides, a little bit on the on the substrate side, but that's the lower end of substrates or less than in the advanced side. So mainly its lead frame on the mainstream side, which is still a significant impact. If you look to the revenue and the forecast that we cannot deliver upon on.
On the advanced product sides, it is a couple of things. If you look to SiP, it's still the more mature silicon nodes and related components that are a bottleneck in the industry, and that force end customers to make decisions on their portfolio. Then when it comes to substrates specifically in the high-end substrates sides, we see constraints in the compute segment. Certainly on the infrastructure side, as well as on certain parts of the automotive market. There were still constraints on high-end substrates.
One word I may have missed, mainstream video is a significant or insignificant impact?
Significant.
Okay, great. Thanks.
Okay. Thanks, Randy.
Thank you. Our next question comes from Krish Sankar with Cowen and Company. Please state your question.
Yes. Hi, thanks for taking my question. I had a few of them. First want a clarification Giel. You mentioned that Shanghai lock down impacted 120 million and you expect it to come back online in the second half of the quarter. Just simplistically speaking, if Shanghai was shut down for the whole quarter, would it be a 240 million impact or lesser or higher?
Well, I mean we don't quote the revenue per factory share Krish, but the mathematics adds up to about that level? Yes, I think the Shanghai factory on a revenue base is about 15% of Amkor factory -- Amkor revenue.
Got it. Very helpful. You mentioned about the China smartphone business being offset by high end smartphones, having more high end in the mix, is that positive, negative or neutral impact of both modules?
Let me try to repeat the question, Krish, so your question is related to the share premium tier smartphones and our position there and strengthen the segment's where the debt would be a positive impact to our gross margin over average gross margin. Is that correct reflection of your –
Exactly. It’s impact like positive, negative or neutral.
Yes. I think we hold a strong position in the premium tier smartphones. And we already have that for multiple years in a row. So I would consider that a positive because we deliver their full turnkey solutions, that includes both this, the bump, the [prop] [ph], the assembly and the final test. And if we add that business up, that would be a positive contribution to our average gross margin.
Got it. And then you mentioned about auto and the diversifying supply chain there. I'm kind of curious on the auto side, your exposure, if I'm right, it's more on the wire bonder side. Is that correct? And how do you see auto through the second half of this year?
Yes. Let me first try to answer the first question with respect to the diversification of the supply chain in auto. Actually, we see that more pronounced on the advanced package side. I mean, the driver behind the diversification of the supply chain in automotive is driven by security of supplies, IP protection and more control on the factory base by Tier 1 semiconductor companies, but also end customers. So if you look to where that's most prominently available, then that will be in the advanced product side.
With respect to -- and then specifically, that is very broad. So that also includes automotive sensors, which is a very broad product category. And there we see that customers want to have more control on their supply chain. Then with respect to automotive in the second half of the year, I mean, we're very confident that the automotive market will go through a strong year, the volumes in the produced cars. And I understand there are some hiccups because of the Ukraine disruption, but overall, the industry expects that are 6% more cars being built this year versus last year. Also, the EV penetration and the hybrid car penetration is faster than expected. So with that, we expect that this will be a solid year with a good second half of the year, and that's what we factor into our numbers, Krish.
Got it. Very helpful. And then a final question for Megan. The $950 million CapEx have kind of maintained for this year. I remember last year, we said $100 million goes into Vietnam. So the rest goes into Advanced SiP Packaging, wire bonders. Is there any color you can give on the remaining $850 million? How to think about what goes into SiP advanced packaging, wire bonders, et cetera?
Sure. I can do that, Krish. So out of our $950 million, there's about 30% of that is for infrastructure, and that does include the incremental $100 million for Vietnam that you mentioned. So then there's about 5% -- 3% to 5% for quality and R&D, leaving about 65% for capacity and capability that you just mentioned. And the majority of that, I would say, 90% of that equipment CapEx is geared towards advanced SiP flip chip wafer services and about 10% is allocated for wirebond mainstream business.
Got it. Thank you very much, Megan. Thanks a lot to you.
Thanks, Krish.
Thank you. [Operator Instructions] Our next question comes from Tom Diffely with D.A. Davidson. Please state your question.
Yes. Good afternoon. Maybe just a quick clarification on the Shanghai facility. Did that completely close? The doors were closed essentially to zero production when it closed or is there such a thing as a central business that would allow you to rent some capacity through there?
Hi, Tom, let me try to answer that. I mean, completely closed, no. I think we still maintain about 1,000 people on site, facilities keep on running, we make sure that equipment is maintained, all of that continues, but there is no effective production going through. So no shipments leaving the facility, but a significant number of people on site. And currently, we go through a process where we bring more people in to ramp up while we're ramping production that more people get on board.
Okay, okay, that's helpful. Thank you. And you mentioned that there's a little bit of slowing in the PC market. I'm curious, is that more of a seasonal trend? Is the weakness in end market demand or supply chain, how would you characterize the softness?
Hey, Tom, I missed the first part of your question. Which market are you referring to?
The PC market.
The PC market. Yes. On the PC market, we see a broader weakness more in the traditional PC market. The point we're making is that within the PC market, where there's a little bit slowness in this part of the year, I think that's public knowledge, we see a trend from the traditional PC architecture to an ARM-based architecture. In the traditional PC market, it is very much for a large part, a vertically integrated supply chain. If we -- if the market moves to an ARM-based architecture than the companies that are playing there are actually utilizing an outsource of supply chain, which is good for Amkor.
Okay. Yes, thank you. And then last question. When you look at the supply chain, is there any way to quantify the impact either on the results or output from either a revenue or a margin point of view?
Megan, can you comment to that?
Yes, Tom. So when we look at the constraints that we've had in the quarter, it's very difficult to quantify, one, on the top line, because both Amkor and our customers are working to refine their forecasts, both with our material supply and their downstream. So it's very difficult to quantify that. So without having that, it's also difficult to quantify the margin impact. That being said, I would say that the impact from a margin perspective is not significant given that we've still been able to deliver especially in Q1 upside results, we were able to more than offset that constraints with other demand.
Okay. That's very helpful. Maybe I'll sneak in just one more. Has there been any COVID outbreaks or impacts in any other regions besides your Shanghai facility?
Tom, no. Of course, the COVID, let's say, pandemic is already ongoing for well over two years. And in these two years, we put very strict procedures in place in all our global factories where there were flare-ups in areas like Malaysia, like the Philippines and other jurisdictions, we were able to manage that very well in our manufacturing organization with strict procedures. The Shanghai situation in our case is an exception. But currently, we don't see any other locations that see COVID impacts.
Okay, that's nice to hear. And thank you for your time today.
Thank you. And at this time, I'm showing no further questions. I would like to turn the call back over to Giel for closing remarks.
Thank you. Before closing the call, I would like to recap our key messages. Amkor delivered strong first quarter results, with revenue of $1.6 billion and EPS of $0.69, both first quarter records, and up 20% on and 40% year-on-year, respectively. Including the anticipated effect of the Shanghai factory lockdown, we expect revenue of $1.52 billion, reflecting year-on-year growth of 8%.
Demand for our technology and services remain strong, and Amkor is well positioned within key growth markets of 5G, IoT, automotive and high-performance computing. And finally, I would like to thank our global Amkor team for delivering an excellent first quarter. Special thanks to the factory management team and employees in our Shanghai factory for their diligence in managing the mandated factory lockdown and the continued focus on bringing the factory back to regular operations. Thank you for joining the call today.
Ladies and gentlemen, this concludes today's conference call. You may now disconnect.