Aixtron SE
XETRA:AIXA
US |
Fubotv Inc
NYSE:FUBO
|
Media
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
US |
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
|
CN |
NIO Inc
NYSE:NIO
|
Automobiles
|
|
US |
Fluor Corp
NYSE:FLR
|
Construction
|
|
US |
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
|
US |
TopBuild Corp
NYSE:BLD
|
Consumer products
|
|
US |
Abbott Laboratories
NYSE:ABT
|
Health Care
|
|
US |
Chevron Corp
NYSE:CVX
|
Energy
|
|
US |
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
|
US |
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
|
US |
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
|
US |
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
|
US |
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
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 |
12.76
38.91
|
Price Target |
|
We'll email you a reminder when the closing price reaches EUR.
Choose the stock you wish to monitor with a price alert.
Fubotv Inc
NYSE:FUBO
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
C
|
C3.ai Inc
NYSE:AI
|
US |
Uber Technologies Inc
NYSE:UBER
|
US | |
NIO Inc
NYSE:NIO
|
CN | |
Fluor Corp
NYSE:FLR
|
US | |
Jacobs Engineering Group Inc
NYSE:J
|
US | |
TopBuild Corp
NYSE:BLD
|
US | |
Abbott Laboratories
NYSE:ABT
|
US | |
Chevron Corp
NYSE:CVX
|
US | |
Occidental Petroleum Corp
NYSE:OXY
|
US | |
Matrix Service Co
NASDAQ:MTRX
|
US | |
Automatic Data Processing Inc
NASDAQ:ADP
|
US | |
Qualcomm Inc
NASDAQ:QCOM
|
US | |
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Good morning, good afternoon, ladies and gentlemen, and welcome to AIXTRON's Q1 2019 Results Conference Call. Please note that today's call is being recorded. Let me now hand you over to Mr. Guido Pickert, VP of Investor Relations and Corporate Communications at AIXTRON, for opening remarks and introductions.
Thank you, operator. Let me start by welcoming you all to AIXTRON's Presentation of our Q1 2019 Results. I'd like to welcome our Executive Board represented by Dr. Felix Grawert and Dr. Bernd Schulte; as well as our VP of Finance and Administration, Charles Russell. As the operator indicated, this call is being recorded by AIXTRON and is considered copyright material. As such, it cannot be recorded or rebroadcast without expressed permission. Your participation in this call implies your consent to this recording. As with previous results conference call, I trust that all participants have our results presentation slides, Page 2 of which contains the usual safe harbor statement. I would like to point out that this applies throughout the conference call. You may also wish to have a look at our latest IR master presentation, which includes additional information on AIXTRON's market and its technologies and is available on our website as well. This call is not being immediately presented via webcast or any other medium. However, we will place an audio file of the recording or a transcript on our website at some point after the call. I would now like to hand you over to Dr. Bernd Schulte for opening remarks. Bernd?
Many thanks, Guido, and a warm welcome from my side as well. As usual, I will give you an overview of AIXTRON's key developments in Q1 2019 before handing over to Charles Russell, who will go through the financials in more detail. This then will be followed by Felix Grawert for an update on some of our important development projects and a wrap-up.Q1 2019 beat our expectations for margins and earnings with a gross margin of 39% and an EBIT margin of 14%. A strong U.S. dollar and the lower product costs as a result of cost-saving measures have supported these figures. Orders at EUR 54 million have been in line with what we said during our full year 2019 conference call as they reflect the expected reluctance of customers to invest in the expansions of their production capacities before next-generation end product launches have been cleared. Taking this into account, we confirm our full year guidance with total orders to be received in the range between EUR 220 million and EUR 260 million. In the short to mid-term, we expect a growing demand for lasers due to the increasing demand from 3D sensing, security infrastructure or optical data transmission. In the longer term, we also see the increasing use of LEDs, microLEDs and special LEDs in display and other applications. In addition, we expect an increased use of gallium nitride or silicon carbide-based devices for wireless communication and efficient energy management in automobiles, consumer electronics and mobile devices. With that, let me now hand you over to Charles for a more detailed overview of the Q1 2019 financials. Charles?
Thanks, Bernd, and hello to everyone. Starting on Slide 4, our income statement. Total revenues for Q1 2019 were EUR 69 million compared with EUR 62 million in the same quarter of the previous year. Gross margin was 39% in the quarter compared to 43% in Q1 of 2018. This expected reduction in margin was caused by an increased share of sales for LED applications. The continuing strong dollar had a beneficial effect during the quarter, at least compared with our guidance, which is based on $1.20 to the euro. Approximately 70% of our sales are in U.S. dollars. Steadily reducing product costs have also had a sustainable beneficial effect on our margins. Specifically, we have achieved some significant product cost reductions by sourcing components from different suppliers and also reduced warranty expense by improvements in reliability. Operating expenses in the quarter was EUR 17 million, slightly below previous quarters because of lower project-related expenses. Selling expenses of EUR 2 million in Q1 2019 were in line with last year on a quarterly basis. But G&A expense and R&D costs were less than previous quarters because of lower project-related expenses. G&A was EUR 4 million in Q1 and R&D, EUR 13 million in the same period. The R&D expenses for the OLED activities in Q1 were just over EUR 4 million. R&D costs fluctuate over time depending on the different activities being performed. This is a normal feature of R&D and is not a cost-cutting exercise. Overall, EBIT for Q1 was EUR 9.7 million and net income, EUR 8.5 million. Turning to the balance sheet on the next slide. Inventories of EUR 80 million include some prototype power electronic systems, some of which are at customer sites as well as safety stocking for Brexit. PP&E includes the capitalization of EUR 3.9 million of leased assets under IFRS 16. Payables have reduced because we paid suppliers for the increased inventories. And customer deposits are lower, reflecting the order intake in the quarter. Moving to Slide 6, which shows our cash flow statement. The CapEx of EUR 5.6 million includes EUR 3.9 million of leased assets. The changes in working capital that I have already described under the free cash flow was minus EUR 18 million in Q1. And we ended the quarter with EUR 248 million in cash. With that, let me hand you over to Felix.
Thank you, Charles. Before getting to our outlook, let me quickly give you an update on where we stand in our OLED qualification process and in our development process of the new silicon carbide power electronics tool. We completed the installation of our Gen2 pilot production OLED tool within our customer's facilities as we told you in February. Currently, the tool is being put into operation jointly by the customer and our APEVA engineers. This represents another step forward on the way to the qualification of the OVPD technology. In the coming months, the joint operation of the system shall confirm the performance of the technology and the resulting data will be the basis for the customer's decision to order production size chamber during 2019. In power electronics, we have installed multiple beta systems of our new fully automated, high-throughput silicon carbide tool at customers in order to perform beta test and to qualify our tool for device manufacturing. At the same time, we are seeing strong interest from all relevant power players in the market for our technology. This makes us very confident that we are on the right path to address major market opportunities in power electronics lying ahead of us. Now looking at Slide 8, we can confirm our 2019 guidance that we have issued in February. We expect to receive total orders in the range between EUR 220 million and EUR 260 million, which means that we need to report additional orders of EUR 166 million to EUR 206 million on top of what we reported in Q1 during the remaining 3 quarters of 2019. This range considers both the geopolitical and the customer-specific uncertainties as well as the still unclear magnitude of a possible order in the OLED segment. Revenues are expected to be between EUR 260 million and EUR 290 million. Gross margin and EBIT margin are expected to be between 35% to 40% and 8% to 13%, respectively. Free cash flow for 2019 is expected to be between EUR 15 million and EUR 25 million. We are fully on track to reach the guided levels in all [indiscernible], also in terms of free cash flow despite the negative free cash flow value reported in Q1. Please note that these estimates fully include the result in CapEx of APEVA and are based on our budget rate of USD 1.20 per EUR 1. With that, I'll pass it back to Guido before we take questions.
Thank you, Bernd, Felix and Charles. Operator, we will now take the questions, please.
[Operator Instructions] The first question comes from Janardan Menon from Liberum.
I have two questions. One is on your order trend and what you're seeing in the market. Today, ams reported results in the morning and they sounded a lot more upbeat about how the adoption of 3D sensing is going on in the Android side. And they're seeing an increasing number of models coming out, which have 3D sensing both on the front and the back of the phone. I was just wondering, given that commentary, how would you compare what you're seeing in the market today versus 3 months ago, when you gave the guidance for the full year of EUR 220 million to EUR 260 million of orders? Are you feeling -- I mean is it a slightly better environment? Or would you say that it's pretty much the same and you have not seen any of the sort of improvement that companies like ams are talking about reflect in your discussions with customers as yet?And my second question is on silicon carbide. So you said you're in qualification at a number of customers and that there's interest in the equipment from them. When can we expect the qualification to be completed? And therefore, and when will we -- can we expect some orders to be placed by these customers for your new machine? And lastly, in your guidance, order guidance of EUR 220 million to EUR 260 million, have you factored in any orders from silicon carbide at all? And if they do come in, what would be the effect on your order book?
Thank you, Janardan, for your questions. Let me try to answer the first question. The current order level and activities and quotation at the moment is quite diversified in applications and regions. And this is why it's not really fully clear yet how the second half develops. And we always mention that the earliest area we see a potential comeback of orders for the 3D sensing market would be in the second half. So with the current view we have on this very diversified view, as I said, in applications and regions, it's difficult to say where the second half will develop in order to say whether we are more at the lower or the higher end of our guidance. So it's a bit early.
Okay. But you have not seen any increase in inquiries or anything like that coming through over the last 3 months from the 3D sensing side?
No, it's still too diversified to see really a real movement.
Understood. On the silicon carbide?
Yes. On the silicon carbide, I think you had three questions, right? The first one I understood is when the qualification will complete. We do expect the customers to complete the qualification or first customers complete their qualification throughout 2019. And that leads to when we can expect follow-on orders. The customers will have a tool currently in the qualification process. And so this will continue towards Q4 2019, Q1 2020, something around the wintertime. And yes, for sure, we do have a number of silicon carbide orders already included in our guidance.
The next question comes from Uwe Schupp from the Deutsche Bank.
Two questions, please. Let me rephrase the question from -- the first question from Janardan. Basically looking at your Q1 orders and where your guidance for the year stands, obviously implies that you are guiding for an improvement in coming quarters just in order to arrive at the low end. Is there any indication that would support that? Or is it basically purely based on hope? And then secondly, Charles, just on the higher inventory that you alluded to, I think inventories were up 70% or if not more year-over-year. How much of that is Brexit-related? And what other effects may be included here that we may not be noticing?
Thank you, Mr. Schupp for the question. Speaking about the order intake, I mean, first of all, if you multiply our order intake the first quarter times 4, you're very close to our lower end of the guidance. So it means you are right. We need an increase to achieve the upper end or somewhere between the guidance. And as we mentioned in the previous call and as I mentioned before, we still see the potential that we see increase in second half. In particular, 3D sensing basically has digested the current capacity and needs further increase in output and preparation, say, for the year 2000 -- for the growth in the year 2020 and so on. But as I said, it's very difficult to be more precise right now. We're seeing a good activity in quotations in the moment. But as I've mentioned, the application, in particular also the regions are very diversified in order to see really a clear pattern yet.
And on the questions about inventory, we have a sort of mid-single-digit million figure of inventory related to Brexit. We have a little bit more than that related to prototypes. And we are actually just -- our inventories there to be built against customer orders. We're not building to -- on speculation, if that was the aim of your question.
Yes. Keep in mind, if you look in our guidance and what the Q1 revenue has been, there's clearly a requirement of an increase in revenues for the current quarters. And you earlier heard from Felix very clear, his confidence in achieving our guidance, which means that our production to prepare this output, which will end in increased work in progress. And also we're doing increased activities with customers on the qualification of our power electronic tools, which also means we have tools at customers which are still in our reported WIP.
The next question comes from Charlotte Friedrichs of Berenberg.
The first one would be around your expectations for LED orders. You had a larger share of revenues coming from LED in the first quarter. And my question would be what your expectations are for Q2, if there's much more to come or if we're pretty much done with these larger orders? Then the second question would be around order intake in the first quarter, if you can tell us maybe a little bit what the split here is between end markets. And then finally, on the cost side for 2019, do you expect any meaningful changes in your OpEx? Or is Q1 pretty much run rate now?
Yes, let me talk about our expectations in the LED sector. I think I mentioned in the -- in our annual call that for 2019, we do not expect significant orders in the field of red-orange-yellow LEDs. This is because we got significant orders in 2018. With shipments we're seeing in this quarter and next quarter, yes, you probably -- if you look in the application split of our revenue, you see the strong portion of the LED part. And with that capacity getting installed right now, we do not see a continuation of the capacity requirement in short to medium term. So the view is pretty much unchanged to what we said 3 months ago or 2 months ago, when we gave our full year figures. So for 2019, we do expect significant orders from that application. The split in orders, you mentioned orders about Q1 was fairly evenly split between laser device application as well as power electronics and solar cell. So this was basically mainly the split, not really dominated by one of the applications. It's really echoing what I mentioned about also the short-term outlook for orders, it's pretty much diversified.
In terms of the OpEx, I think I mentioned that the OpEx fluctuated and it was quite low for some of the spend in Q1. So we do expect it to be a little bit higher in the rest of the year.
The next question is from Veysel Taze of Bankhaus Lampe.
Several questions left. One would be regarding your power business. You mentioned some better tools. Can you just give a color, if you go back like 6 months, have you added new customers in the space? And can you give a color around SiC and gallium nitride, how these both areas were in Q1? And how do you expect them to shape up throughout 2019?
Yes, thank you. So let me first comment on the silicon carbide and later on the gallium nitride. So silicon carbide, as mentioned before, we are in the process of bringing out our automated high-throughput system. So the beta tools are all for the high-throughput system. And it is multiple customers where we have placed the tool. It is existing customers, which we have been serving in the past, but it's also additional new customers, so to say. So we've been able to expand our customer base. And now all these customers on all these tool qualification programs are running, as mentioned before, throughout the year 2019. And as mentioned before, we see broad interest from even a further group of customers in the market. Of course, our expectation, our target is to even further broaden our customer base. Yes, I think that's the silicon carbide. Now let me just comment on gallium nitride, the second part of your question. So as well as you know, as we've mentioned previously, we have a good and a strong customer base on the gallium nitride power electronics. Most recently, we have been seeing increased activity, increased demand from customers in the gallium nitride RF, especially preparing for the 5G beta. And also here, we have seen a number of orders also broadening the customer base. And we expect that trend to continue throughout the year 2019, also 2020. However, of course, as I was mentioning for gallium nitride, its increase coming from a relatively small base if we talk about the number and the revenue.
Okay. And then on your order entry level in Q1, would you say that the EUR 54 million, you were surprised that it was above EUR 50 million? So were there some positive impacts or surprises? And do you expect Q1 to be the, so to say -- I mean, your guidance implies that. But would you say Q1 order entry marks the low point for the year and we should see gradual recovery each quarter, so to say, for the rest of the year?
Well, as I mentioned, it's really quite diversified in applications and that's -- that we see ongoing also currently. So it's not like that one application dominates really the demand of tools right now. And I wouldn't say that there was big surprises in order intake in Q1. It always also depends when we can book orders when we -- for specific customers in areas where you need export licenses, when you get those cleared by the authorities. And that sometimes shifts orders from 1 quarter to the next. That sometimes can be a surprise simply in the timing because authorities are not always as simple to forecast when you get the application agreed. But within customers and in markets, there were no surprises. And as I mentioned, the development in second half, it is still quite difficult because we do not see, let's say, one application really pushing forward to a significant order trend, which we can see as we stand here today.
Okay. So on seasonality, still do you think there will be a Q-on-Q improvements? Or what is your assumption there? So any color on the seasonality would be really very appreciated.
Well, I think in our business, there's no seasonality. It's really driven by the investment into [indiscernible] into certain applications. And I think Janardan mentioned it, I can only read what you also read regarding the positive outlook of some players in the 3D sensing market. And we are convinced that eventually will also turn into orders for new equipment. When that timing is, strongly depends on the demand, on the yield, on the output of requirements, et cetera. So that's a very complex formula, which is very difficult for right now to answer. But in general, that's what we keep saying. We are convinced that the 3D sensing market, the demand is intact. But I cannot tell you whether this will be in Q3, Q4, Q1, Q2 in the time forward. That's very hard to say. It depends on many factors.
Fair enough. And just one final, if I may, Charles, you mentioned some comments regarding the R&D costs. I don't -- I'm not sure if I catch them correct, would be helpful if you could just repeat them on the R&D costs.
So it's just that R&D costs fluctuate over time and that the low level of R&D spend in Q1 is not indicative of a cost-cutting program, okay? But let me add to this, the R&D cost is essentially composed of two elements, right? The one is personnel costs, which are cost kind of flat because the salaries of the people are paid out every month. And however, a material cost, which also goes through there, depends on how prototypes are being built and how material spend is flowing through. And that is variable, which is fluctuating. And it just happened by chance that in the third quarter, the number was a little bit lower because less material was consumed.
[Operator Instructions] The next question is from Malte Schaumann from Warburg Research.
The first one is on the gross margin. The gross is close to 39% on the first quarter despite a relatively high share of the LED tools. Unless you're seeing maybe U.S. dollar above $1.15, which does not seem to be on the cards, would you then say, okay, it would be fair to assume that your gross margin might develop at the upper end within your given guidance range?
So as you know, our guidance and the model is based on the $1.20 per EUR 1. And if you want to plot out what effects the U.S. dollar can have, I think you can relatively easily calculate that if you assume that about 70% of our revenues is based on U.S. dollar and you can make your own assumptions, as you just did, on what potential U.S. dollar rate is likely, yes? And very clear, as said before, we confirm our guidance in the percentage range based on the U.S. dollar rate that we have given. And the rest, I think, you just do the calculations, which you can make.
Yes, okay. Then on OLED, has the qualification process been more or less pretty much on track? Were there substantial kind of further technical hurdles upcoming that might have delayed something? Or how do you see the general qualification progressing?
Yes, the qualification progress is on track and the tool has been installed. As we mentioned before, what's now happening is a number of functional tests of the tools. It's a very complex tool with a huge and complex functionality. As I said, all the different functions are being tested and elements, blocks to the tool are being put into operation. And when that is completed, then a complete OLED test will be run by the customer as we have always explained before. And then the customer, out of running and sort of producing these R&D-type OLEDs and the customer will get their data, their measurements and make their decision, yes? So to say, within this complex process, things are on track.
Okay. Are you willing to provide a time frame when the R&D OLED stacks should be ready to be produced?
No, we wouldn't comment about details of that. But everything happens throughout 2019.
The next question is from Andrew Gardiner from Barclays.
I had another one on gross margin. To the prior question, the mix, at least relative to last year, was weaker in the first quarter. And you've already stated how you expect LED to remain at a relatively high level in the second quarter. I'm just -- can you sort of give us an idea of how you're planning for mix to progress through the year? Is first quarter the weakest level of product mix and therefore gross margin that we can expect?
Yes, Andrew, the point is definitely I think for second quarter, it's fair to assume it will be in a similar range because also the product mix might be quite similar to the first quarter because we mentioned that the second quarter has quite a number of LED tools. Now the -- what's not clear is what will be the dollar month-to-month. But I mean I leave it to your own judgment what the dollar in the short term may do. In the second half, you see shipment and therefore the mix of applications and products we do in the second half is not fully clear because that's pretty much defined by orders we're taking now, particularly in the last quarter. So I personally do not expect a significant reduction in margins for Q3 and depending, of course, Q4, depend on the mix of orders.
Okay. Understood. And perhaps one for Charles again on gross margin point, you highlighted some of the savings you had in the first quarter around product cost and warranty cost. I presume those are sustainable. But can you help sort of quantify that? Is there -- was that a material element of gross margin in the first quarter that we can expect to continue?
What we've done is over the last 12 months or so, we've steadily reduced the product costs and we expect that to be sustainable into the future. And we have an activity, which is -- takes place here in Germany to continually reduce those costs. And that's what we expect to do in the future.
I mean to be clear, of course, the larger portion of the, let's say, increase in expected gross margin came by the dollar. This is -- I think this is unfair to say in these cost reduction measures. As Charles said, they are continuous improvement measures. And they add a few tenths of a percent per month or quarter and add up over time, over a year to a range of 1% or maybe more than 1% or so.
Thank you very much, everybody, who were listening. With that, we are closing our Q1 2019 earnings call. As I said, thank you for joining, and bye-bye. See you and talk to you next time.