Hello, and welcome to the Soitech Second Quarter of Fiscal Year 2022 Sales Conference Call. My name is Val, and I will be your coordinator for today's event. Please note, this conference is being recorded and for the duration of the call, Your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done I will now hand you over to your host, Rol Bud, Chief Executive Officer of Soitech to begin today's conference.
Thank you.
Thank you, operator, and welcome to Soitech conference call dedicated to the publications of the 2nd quarter revenue of our fiscal year 2022. This is the quarter covering the period from the 1st June to the end of September 2021. I am Paul Boudre, Sofitec's CEO. Together with me on this call are Lea Alsang, our CFO and Steve Baburic, our Investor Relations Officer. As usual, we will briefly comment on our sales performance and after that we will open the floor to questions.
So before getting into our Q2 figures, let me reinforce our key announcement of today. We have raised our revenue guidance from $950,000,000 to $975,000,000 Thanks to our capacity to capture a stronger demand. We also raised our EBITDA margin guidance from around 32 to around 34%. Thanks to higher operating leverage and industrial performance. So let me give you an overview of our Q2 revenue performance.
As you may remember, we had Very strong start of our fiscal year 2022 with an organic growth of 69% in Q1. So today, I'm very pleased to report that we achieved another robust performance in Q2. Q2 revenue was up 37% on a reported basis over Q2 last year. This includes a 3% negative currency impact. At constant exchange rates, Q222 revenue was up 40% over Q222.
On a sequential basis, it represents a 5% growth excluding currency impact over Q1 twenty twenty 6% growth on 152 100 millimeter wafer sales and 4% growth in 300 millimeter. So this is our 5th consecutive quarter of sequential organic growth since the low point achieved in Q1 2021 in the midst of COVID crisis. Our Q2 revenue reached €193,000,000 This is our 2nd Highest quarter ever. It brings our H122 revenue to €373,000,000 which is a record semesters in the Swiatek's history. H122 revenue is up 53% on a like for like basis or up 47% on a reported basis compared to H1 2021.
So this is for the key figures and let's now take a look at the drivers of this strong performance. So we continue to enjoy strong tractions on all our products and across our 3 end markets. Mobile communications is still by far our largest end market and a key driver of our performance. Our revenue growth continues to be boosted by the deployment of 5 gs and the increase in Soitec's products content in every 5 gs smartphone and of course the introductions of new products. As you know, this is mainly benefiting our RFSOI and POI products.
We also continue to benefit from of the automotive industry, which is very positive for our power SOI and FD SOI products. Finally, our revenues in smart devices also increased driven by stronger sales in DSOI and Photonics SOI Wafers. Our efforts in increasing capacity triggered by higher customer demand translated into increased Production across the board. This is the case with a good ramp up of our productions of 150 millimeter POI wafers at Berenace III. We are accelerating the ramp up our productions of 150 millimeter PoI wafers.
The ongoing ramp up In Singapore led to higher productions of 300 millimeter SOI wafers and we also delivered a higher output of 200 millimeter SOI products. So let's now dive deeper in our Q2 Two figures and look at sales by revenue type. 150 to 200 millimeter wafers recorded sales of €85,000,000 At 22% increase compared to Q2 last year, excluding currency effect. This reflects a strong volume growth, of course, but sales of RF SOI in 200 millimeter were stable compared to Q2 last year. Sales of Power SOI were much higher than in Q2 2021, highlighting the strong rebound in the automotive In addition, we benefited from another strong surge in 150 millimeter POI wafers for Era filters.
Thanks to obviously the robust ramp up in productions at our Berners III facility, We have been able to respond to the increasing demand for POI. POI adoption is getting tractions on 4 gs and 5 gs smartphones filters to cope with the increasing number of frequency band and the requirements for enhanced performance. If we now look at our 300 millimeter business, we recorded sales of 100 and €2,000,000 in Q2 2022, a 63% increase excluding currency effects compared to Q2 2021. So this is a direct result of a sharp volume increase. The level of RFSOI 300 millimeter sales We also achieved another strong quarter in FD SOI confirming the rebound initiated in Q3 2021.
FD SOI Technology is bringing significant value to applications dedicated to edge computing, automotive and 5 gs. As for image SOI for 3 d sensing applications, sales remained at the same level, high level as in Q2 2021. Finally, sales of Photonics SOI for data centers were much higher than in Q2 2021 confirming the solid trend that we have seen since Q4 2021. In addition, royalties and other revenues went up from €5,800,000 in Q2 2021 €6,000,000 in Q2 2022. This represents a 3% growth at the constant exchange rate.
So on the back of this strong performance, we are revising upward our guidance for fiscal year 2022.
We are raising our fiscal year 2022
revenue guidance. We now expect fiscal year 2022 sales to reach around $975,000,000 This is an upgrade from our previous guidance from of $950,000,000 mostly due to very strong demand That we will be able to partially capture and I will thank It represents an annual growth of around 45% at constant exchange rates. As a direct consequence of this upgrade, we are also significantly raising our EBITDA margin target From around 32% to around 34%. And beyond the operating leverage, this upgrade is driven by both A very strong operational performance over H1 that will remain for the full year. A favorable phasing of our bulk silicon long term agreements, SG and A saving due to strong cost control and saving on Irene.
So before moving to the Q and A sessions, Let me highlight a couple of key events which took place recently. The first one is the adoption of our corporate purpose. This was put to the vote of and approved by our shareholders at the EGM, which took place at the end of July. Our corporate purpose stands as follows. In our soul grows an amazing future.
It is a way for us to materialize our ambitions to build innovative products that serve the transitions to A more connected energy efficient and intelligent society. And this is perfectly in line with our ESG commitments to have ambitious climate and sustainability targets that notably include reductions of greenhouse gas emissions. Indeed, our goal is to foster the performance of our products by reducing both their energy consumptions and our own direct carbon footprint. The second event is the full conversion of our convertible bonds Oceane 2023 into new shares. At the end of March, it represented a total amount of €140,000,000 in-depth.
As a result, 1,300,000 new shares were issued representing 3.9% of our share capital. So this end our opening remarks and we are now ready to take your
And we do have a few questions in the queue. The first question comes from the line of Alexander Peterk from Societe Generale. Please go ahead.
Yes, good morning and thank you for the question. Just a quick one on your EBITDA margin outlook and the upside you provided today in the guidance upgrade. So the first part would be Regarding the forward pricing of raw wafers, I'd expect that at some point this will wash out Your cost base, so you'll be your prices will start reflecting something that is closer to the current spot prices, which Higher. So does this mean that we'll have some EBITDA margin pressure ahead as much as you don't have it today? That's one part.
And then the second part is how much of this upgrade is structural because you have better yields, you have better utilization rates? And does this mean that we should think about your longer term margin outlook that you provided at CMD to also be proportionately improved given the progress you highlight here? Thank you.
So regarding the long term, What is clear is that we are just starting our new strategic plan and we will basically end It is planned by March next year. So obviously, everything new that could influence what we have presented in This year on the long term will be revisited with you guys in June timeframe And back to maybe your questions, I don't know, Leah, If you want to comment first and I'll take some after.
Yes, sure. Hello, everybody. Regarding the bulk, we have long term agreement with our supplier. And what we can see is We have favorable phasing in our bulk silicon long term agreement. So they are based by calendar year and The negotiation we had regarding this next month were quite favorable.
For sure, the price will evolve in the future. You want to complete, Paul?
Yes. And clearly, this will be in phase with also our new pricing strategy, our new LTA strategy. We take into account basically the bulk increase that we will see coming within the next Yes. So for that, I mean, we I think that back to your point, the EBITDA margin level today is clearly based on truly structural impact that we have in our manufacturing in terms of performance. Clearly, we have achieved A year level that showed the maturity of not only our mature site, which is Bernden 2 and Bernden 1, but What we see on Bernese III and what we see in Paziris have clearly outperformed some of the, I would say forecast that we had on the performance itself.
So we are extremely confident on the operating leverage that we have now built into our manufacturing. And To maybe close on the long term CMD that we share with you, I mean, 35% was the EBITDA margin on the horizon and still is. And we consider this as a floor for the long term.
And just very briefly, can you say on Paciris, What rate is occupied now and where you will be in terms of the ramp up of that capacity By the end of the year?
In fact, in terms of capacity, we say that we will Cash out EUR 240,000,000 CapEx this year, 50% of this EUR 240,000,000 was For dedicated to Singapore, 25% for BRL3 as a reminder and the rest for the existing factories. But clearly, that's where we are. I mean, we are ramping past year as quickly as we can, but also in line With our demand, right? So that's where we stand.
Thank you very much.
Thank you. The next question comes from the line of Sebastien Sztabowicz from Kepler Cheuvreux. Please go ahead.
Yes. Hello, everyone, and thanks for taking the question. Could you please make an update on your technology roadmap on silicon carbide? So have you made any progress there? And if yes, Could you please share with us any data points that you have with you?
And the second one could be on POI and notably BERNARD 3, The ramp with Qualcomm, what kind of fab loading do you expect for the fiscal year 2022 there? And how the ramp with Qualcomm is progressing? And also regarding POI, have you made any progress with the other ARS players that you are working with? Thank you.
Thanks. Thanks for the question. So I'll start with silicon carbide. Yes. So you understand the value that we bring with this technology.
So it is clearly as we go into more and more work with internally but also with our Partners, we realized the value that we could bring in terms of obviously Quality, performance, cost of ownership. So clearly, this is potentially A game changer if we succeed. Now what is true is that we are continuing to work with our partners As I said, to make sure that we can build a very complex device on our wafers. We have made continuous progress over the last few months In the quality and the performance of the wafers that we are able to ship right now to our partners, We but I have no major news in terms of these business milestones that I was talking about Before because it's still on progress, I would say that our level of confidence continued to go up. And I continue to confirm that we are going we will have to make decisions before the end of our fiscal year 2020
Thank you.
Sorry, on the POI, sorry, I skipped the POI question. So on the business side for POI, beyond Qualcomm, several customers are I confirmed that already. We developed several products to address mid- and high band right now, and we have Several products running into productions as we speak. And we are clearly working on All segments, I mean, the low, the mid and high band. In terms of the capacity where we stand today, we have basically increased Four times our capacity versus last year.
And you know the competitive advantage that are really pushing us. So It's clear that we continue to confirm that temperature stability, die integrations for multiplexers, larger bandwidth Are still the driver for the new product to come.
And how many wafers do you believe you will have in capacity at the At the end of this year at B3?
This is not really a number that we share. I'm trying to give you a little bit of a trend Four times more capacity than last year. Thank you, Paul.
Thank you. The next Question comes from the line of Didier Samama from Bank of America. Please go ahead.
Good morning, everyone. Thanks for taking my question. I apologize. I didn't quite understand the answer related to your input costs. Can you just clarify a little bit what you meant with your LTAs in In terms of raw wafer prices, how much of that is already captured?
And how comfortable you are, if you want, For calendar year 2022, I just didn't quite get the answer. Thank you.
So to maybe start with The answer, we are very comfortable, okay? It's well under control. We have bulk wafer prices that are part of our new LTA that We show some bulk increase in the range of single digit versus fiscal year 2021. In parallel to that, we have also signed new LTAs with our customers and these LTAs take into account bulk increases. And as we go into this year, but also next year, we are very in sync, I will say, with the Overall price increase and we do pass through our bulk increase to our customers.
Understood. That's very clear. And of the EBITDA margin upgrades, how much of that is due to you sort of More than passing on, if you want, to raising input cost?
You will get more details On the H1 results, that's for sure you will get all the details, but it's very structural what I can say.
Okay. All
right. Thank you, Paul.
Thank you. The next question comes from the line of David O'Connor from Exane BNP Paribas. Please go
ahead. Maybe 1 or 2, Paul, from my side. Firstly, on the raising the guidance to the €9.75 versus the €9.50 previously, How much of that is RFSOI? And if you could split it out units versus Price, how would you define that kind of incremental there if you had to split it up? And I have one or two follow ups.
So clearly on the revenue side, I mean, The higher market demand is coming from specialty SOI, FD SOI and some from RF SOI. But clearly, you can see that I started with Specialty SOI and FD SOI because that came as a very good trend and very strong trend Yes, for the 2nd part of this year.
Understood. And maybe if you can run through the loading of the fabs, especially Singapore, That will be helpful. Thanks.
In fact, you know that our loading is in Berlin 1 is full, our Berlin 2 is full. We are ramping as we enter tools clearly in Berenans III and in Paziris, we are Rushing into tools qualifications and really put these tools at work. So I want to mention also that Cingui is raising capacity As well towards the 450 ks. This is happening as we speak. So Clearly, we do not split really the capacity per se, but just for you, What I can say is that 1 third of the 1,000,000 wafer per year will be reached by the end of
That's helpful. Thank you. And the last one from my side. The recent TSMC announcement of the new Fab in Japan on more legacy mature nodes. What does that mean for FDSOI and FDSOI demand when you look at that announcement?
Thank you.
Nothing related and no comment on TSMC strategy, but nothing related to us, I mean, clearly, our product are bringing true differentiations on the market we described during the CMD, our last CMD, we continue to be extremely pleased because the demand that we see and that we continue To for C4 for the years to come are completely in line with our explanations that we gave you during the CMD. So no link to I mean, the industry needs more capacity, that's for sure. So that's clearly another example.
Very helpful. Thanks guys.
Thank you. The next question comes from the line of Emmanuel Matot from ODDO. Please go ahead.
Hello, everyone. Good morning, Paul, Diane, Steve. First question, have you changed your main assumptions regarding volume growth of smartphones sold this year and the mix of 5 gs? It seems that the component shortage in the semiconductor industry start to impact this end market a little bit.
So thanks, Emmanuel, for the questions. In fact, not at all. I mean, we stick with the same number. I mean, I recall everyone For smartphones, we are planning in our models for fiscal year for calendar year 2021, sorry, high single digit growth, High single digit growth, which means for us also in term of 5 gs smartphone, we stick with €520,000,000 And for millimeter wave phones, we still have between 60,000,000 to 80,000,000 millimeter wave phones. So we stick with it and we are very comfortable with this.
We don't change it.
And do you expect some positive news Related to SOI for this 5 gs millimeter wave in the coming months, how many fabless are currently working on that technology? Is that growth driver a key part of your own map for the next 5 years? Or Have you taken very conservative assumptions?
Clearly, in terms of the assumptions, we are I don't that we are conservative, but we try to be as close as reality. But clearly, the commercial deployment, as I said from The beginning, right, Tim, is always targeted for 2022. It could be a little bit sooner. We need to check on before now and the end of the year The possible news that we will get from Teardown on FDSOI millimeter wave. But clearly, 2022 It's the key date.
We have several, not one, several major company that Not on the it's not evaluating, but under qualifications on this technology. So we are extremely confident on the transitions that we see. And to be clear, I mean, I didn't change what I told you 2 years ago. The first millimeter wave adoptions Has been driven by simplicity and the fact that IP on bulk was available. The second wave that is happening that was is based on optimizations on what the industry has Today, the 3rd wave, the one that I'm talking about, okay, the one that we will get on the shelf maybe before the end of this year, but In any case, next year, the 3rd wave, it's about energy efficiency.
And it's see, this is why FDSOI and their FSOI come
Okay. And my last question is about licenses and Other revenues, why are they not growing faster in the current booming environment for semiconductors? It looks quite surprising for me.
I mean, you know that it is based on wafer out. And clearly, the one we are really increasing capacity today in this world is Soitech, right? We are clearly driving in terms of technology leadership, and we are supporting our customers' Advanced product, which is clearly a true benefit for us. But also We have expanded our capacity in 300 millimeter and 200 millimeter and bringing new products. So And the mixed product that we are getting is clearly to our advantage today.
I was surprised to learn that so you take only supply 52% of GlobalFoundries, so I wafers Last year. So it seems that your licenses are becoming, let's say, Key players also in this SOI world?
Absolutely. I mean, we need more than one player. But Emmanuel, I told you from the very beginning as well that we have this leadership positions that we continue to have in this industry. So the 52% with GlobalFoundry is clearly a very, very strong number, a very good number. But when it comes to Dollars, when it comes to the mixed product of what we are gaining and getting, it is clear that we have The value product and this is what we are concentrated on.
We cannot manufacture everything and we need to make sure that our licensee Get a share. And but you know that the positions on our market share is really driven by It's even value products.
Okay. That's very useful. Thank you, Paul.
Thank you. The next The question comes from the line of Ken Rumb from Jefferies. Please go ahead.
Good morning. Actually most of my questions are answered. I'm left with just to ask about GaN related to millimeter wave and so on.
So again for millimeter wave, today I think it's So still a long shot. Okay. We are obviously getting into qualifications including for smartphones, But clearly, first, we will start with applications like 5 gs and structures and At the beginning, right. That's where we see most of the volume goings right now.
Okay. Thanks.
Thank you. The next question comes from the line of Dominik Ozersky from Morgan Stanley. Please go ahead.
Yes. Hi, good morning, everyone. So first question is just to circle back on an earlier question. Could we just think about at least conceptually bridging from the 34% EBITDA margin this year 35% that you had mid term in the Capital Markets Planning. So what elements So that are declining and then improving over time.
I know you talked about bulk pricing, but then also yield as you ramp up capacity. And then the second question is just you're one of the few companies that isn't flagging supply chain and logistic issues, but could you maybe just talk about what you're seeing as well? Thank you.
Yes. On the first questions on your EBITDA, trying to understand the dynamic moving forward. I mean, it's too early for us to share anything else, but what is clear is that it is Clearly, a very good news because as I said, it's based on structural and clear Accelerations that we have made in our operations and overall manufacturing including all sites. So this is something that we consider as a strong achievement. When it comes to global supply chain and clearly what we see shortages maintained for us, High level of demand in we continue to see a high level of demand in smartphones and auto.
We never we didn't get any signals or weak signals from any of our customers. The inventory levels Very healthy across the board, and we check that at our key foundries and IDMs. So we are in extremely healthy shape here. And the good news, and I continue to say that because this is part of the strengthening of our industry, The good news is that we are clearly getting into much higher visibility. Our customer contracts now are covering 3 to 5 years And this is really giving us also a strong visibility on our investments and the Speed of our investments.
Thank you.
Thank you. The next question comes from the line of Robert Sanders from Deutsche Bank. Please go ahead.
Yes. Hi, Paul. Just to come back to the millimeter wave FDSOI opportunity. I think you've said in the past that It's relatively small in fiscal 2023 before becoming very substantial in fiscal 2024. So how should we think about the deployment timeline?
Is it just going to be a couple of models in the second half of calendar twenty twenty two And one region before becoming all models and all regions? And how should we think about the deployment of millimeter wave? There has been some Disappointment out there on the last iPhone, for example, not supporting a lot of different regions. So I'm just interested So sort of if you could just provide a bit of color on how you think this ramps up? And does it mean fiscal 2024 becomes like
about millimeter wave applications, these are really the drivers. I mean, the good news about this, I mean, And I believe you are seeing the same. We see more true applications coming to us like indoor enterprises. We See transportation hubs, we see wireless fixed wireless access. So Thiele and the 3.4.0 is also part of it.
So we are now seeing real business tractions On this millimeter wave and that's really also coming into play with this what I said, which is the Energy efficiency that the industry has to bring to this millimeter wave applications. So to your point, I always said, yes, 2nd part of fiscal year 2023 for the beginning. We could be a bit earlier, but we need to check. But clearly, it will start with a few smartphones, obviously, and a few different regions, I believe that. But I do not have the dynamic clearly in mind for the rest of the years.
Let's make sure that we start as we said and then the market will like it. The market will like the performance and the overall Efficiency, power efficiency that we will bring to this application.
Got it. And the 80 millimeter Squared opportunity you laid out, that's on day 1 basically, the 80 millimeter squared opportunity incremental For you guys versus the 60, I think, they're doing in the whole mobile today?
Most likely, yes, Rob, I mean, this is clearly something that depending on the architecture and depending on the chips that the architecture that our That our customers are looking at, we are very, very confident with this 80 millimeter square.
Okay, great. Thank you.
Thank you. The next question is a follow-up question from Didier Semana from Bank of America.
Thank you. I just wanted to get your thoughts on the Imager business. It looks like you said it was flat year over year. Can you just give us a sense of the sort of sequential performance and whether you were disappointed by that Flat year over year performance, at least relative to what we can see in the press regarding the build plan of a particular customer. It sounds A bit underwhelming.
Just wanted to understand what was the reason for the flat performance year over year?
Yes. It's more of kind of seasonality Yes, but we continue to see a very healthy year and we continue to see that Also for the years to come. So we do not foresee any negatives on this product. Yes, I mean, and I was just checking on my numbers. This What we see today, we see specialty SOI and image as part of it getting stronger and stronger Across the year.
So no issue on this.
Can you say what the business did sort of calendar Q3 over calendar Q2?
No, I don't have the data, but it was a single digit In percentage, on top of my mind, it's a single digit percentage.
And do you expect that to increase in Q4?
No comments on this. I am Okay.
All right. Thanks very much.
Thank you. And the next question is a follow-up question coming from the line of David O'Connor from Exane BNP Paribas. Please go ahead.
Yes. Thanks for the follow-up. Paul, I think there was a question on freight and logistics and concerns in the industry and And what you guys are seeing, I didn't quite catch the answer. Maybe you could kind of go into a bit more detail on that, if there's any concerns you have there Around Freight's Logistics. And then lastly, can you give us an update on the silicon photonics?
Thanks so much.
Yes. So far, I mean, we have not seen any issues on the logistics itself. We are clearly getting what we want and no issues on that. On the silicon photonics itself, so basically The silicon photonics, it's clearly an opportunity that we are measuring every year, but this Clearly now with the pandemic, we are seeing also an accelerations of Silicon Photonics in towards Businesses that I will say Health Business. So we have seen several companies getting into and Some of them having strong tractions on biosensors, for example.
And there is one that I can probably mention That you have on your radar, it's Rocliet Photonics. So we see that coming to a Stage right now where there is tractions on the Photonics itself. And we see growth So continuous growth over the year and obviously I'm not going to comment for next year, but very good. And what I will say is that we are still trying to learn more also on this Photonics. So We see that the watch business will embark a lot of these new devices And we foresee some new release towards I mean, some of them are pending September this year, but some of them will continue to show up on the shelf for Christmas.
Thank you.
Thank you. There is another follow-up question coming from the line of Sebastien Sztabowicz from Kepler Cheuvreux. Please go
ahead. Yes. Thanks again for the follow-up. 1 on RF SOI. Do you see any potential threat To your leading position on RF front end module with any kind of production new substrates, Corvo has acquired Cavendish Kinetics Back in 2019 on RF MEMS, do you believe this technology can be a threat to RF SOI?
Or do you see any potential other substrates That could compete with RSOI going forward? Thank you.
Thanks for the questions. And you know that we are paranoiac With our competitions because this technology leadership is fundamentally, I mean, one of the strengths that we are building. And we are building it with our customers. So because we share very in advance the customer roadmap, we understand with them the problem they are trying to fix and then we put Organizations in place to really deliver the next generations of products. So that's the model.
So back To this remark on this competitive technology, we don't see it coming. It's Clearly, a small very small niche applications. The problem that we are looking at is
There are currently no further questions in the queue. Thank you, Constan. There are no further questions coming via the audio line. So I'll hand the call back to the speakers for any concluding Thank you.
So thank you, operator, and thank you for your interest and your questions So the next date in our agenda will be our fiscal year 2022 interim results on the 30th November after market close. So again, thank you all. This ends our call for today and thank you for your attention.
Thank you for joining today's call. You may now disconnect.