Welcome everyone to Chroma's 2022 second quarter earnings conference call. All lines have been placed on mute to prevent background noise. After the presentation, there will be a question and answer session. Please follow instructions given at that time if you would like to ask a question. For your information, a webcast replay will be available within an hour after the conference is finished. Please visit www.chroma.com.tw/investor/index under the Investor Relations section. I would like to introduce CFO Paul Ying. Mr. Ying, you may begin.
Thanks, Mike. Well, welcome everyone, ladies and gentlemen, welcome to the 2022 first half financial release for Chroma. Well, I think all of you have already got the those data sheet we send it to the website. If you look at the consolidated income statement of the first half, you can see that the sales revenue reach at the TWD 9.3 billion compared to last year. This is a 7% growth. This growth is mainly coming from the consolidated sales of the testing equipment business, which is the main and the core business of Chroma.
For this part, it reaches TWD 8.1 billion compared to last year. This is a 21% growth. For the automation process and the manufacturing of MAS, the MAS come up with TWD 409 million compared to last year. This is a 12% growth. As to the sales of the new material for these sectors, we have already terminated a contract with the suppliers at the end of the first quarter. If we look at the numbers here, it mainly is coming from the first quarter sales revenue. For the second quarter, there's no contributions anymore since we have already terminated the contract.
This shows a 56% drop, but that's due to last year, we still providing those material to the market. Here you also can see that the gross margin due to the reduction of the low margin portion of the new material and the growth of the high margin portion of the core business. You can see that the gross profit comes to approximately 5.1 billion TWD, and to a gross rate, gross margin rate to 55%. This is also a 22% growth compared to last year. Compared to last year, the gross margin is somewhere like less than 50%.
It's 48, so this is a quite big growth. For the operating expenses, you can see that there's not much difference, well, with regard to the growth of the top line. Operating income has come to NT$ 2.2 billion, represent 24% of the sales revenue. This is a 49% growth compared to last year's. Last year, the gross margin is only 17%, so there's a very good record. For the non-operating items, well, for 2022 this year and the last year, we all of these two first half have contributions regarding to the capital gain.
For the year of 2022, this year, it comes from the second quarter, the gain of disposal of our investment, which is ADLINK, as a total number approximately at TWD 500 million. Last year, 2021, at the first quarter, we have a capital gain from disposal of property and plant of our previous headquarters to ADLINK. There's TWD 1.7 billion as the capital gain. The related tax for the capital gain is TWD 200 million. It gives us the net income after tax. It's somewhere like TWD 2.5 billion for this year.
It represents 8% decrease. Well, mainly it's due to the capital gain of last year of selling of the property and plant, which has a very big contribution. Without that, we're still doing pretty good. This first half of 2022, you can see that our EPS comes to somewhere a little bit less than TWD 6, which is TWD 5.98. As to the second quarter's income statement, if you look at the next slide, you can see that for the second quarter, the total sales revenue contributed at TWD 4.9 billion compared to the last quarter, it's a 12% growth.
Compared to last year, it's 11% growth. For the consolidated sales of testing equipment business, which is the core business, it goes to TWD 4.6 billion. Compared to last quarter, it's a 34% growth. Compared to last year, it's a 38% growth. As to the consolidated sales revenue of the MAS, it goes to TWD 188 million. Compared to last quarter, it's a 15% drop, and compared to last year, it's another 15% drop.
Well, as to the material business, you can see that since starting from this quarter, second quarter of 2022, you can see there's no numbers or nearly no numbers contribution here. Well, a lot for the last quarter or even last year, there's still somewhere like about 600 million something. In there, you can see due to the low margin and the high value part of the business like material goes down, you can see clearly see that the second quarter of the Chroma on the consolidation basis, the gross margin comes to somewhere like 59%, which is a record high. The numbers is somewhere close to TWD 2.9 billion.
This is 33% growth on a quarter-over-quarter basis and 40% growth on a year-over-year basis. For the operating income, it goes to TWD 1.3 billion and represents a 28%, compared to the sales revenue, which is also a very good number. This is 63% growth on a quarter-over-quarter basis and about 132% growth compared to last year. As to the net income for the second quarter, it goes to TWD 1.6 billion. Compared to the last quarter, it's a 95% growth.
Compared to the last year, this is a 245% growth. If we skip the capital income for that, for the second quarter of this year. The EPS 3.95 will go to 2.75. It's another record high for quarterly profit for the operating portion. This is also a very good record for the second quarter standalone. For the balance sheet highlight, if you look at this page, you can see that for the cash and short-term investment, also the inventory is growing, but at the same time, the short-term debt and long-term debt is decreasing.
On the consolidated basis, you can see that inventory turnover is at little more than the end of the last year. I think it's due to the those long-term short-term kind of inventory status, and we still have to prepare for the future production. I think that's something that exists in all of those electronic industries. As to the accounts receivable turnover data, it's a bit improved compared to last year end. Our net debt to equity right now for the consolidated basis is net cash. Free cash flow for the first half of this year is somewhere like TWD 2 billion.
This is the consolidation kind of briefing. For the quarterly numbers for the parent company, if you look at the second quarter, next page, you can see the bar chart. There's a high jump at the second quarter of this year. You also can see that sales revenue reaches TWD 3.7 billion. This is a 30% growth on a Q-over-Q base and another 52% growth on a year-over-year. For gross margin, we pretty much enjoy over 50%, which it reaches at 51%. For the operating margin, again, 28%. Either for the sales revenue, for the parent company, we reached the record high.
Also, the operating margin percentage is also reached another record high. Our net income for the second quarter, which is at the TWD 1.66 billion, and this is a 95% growth on a Q-over-Q base and another 245% growth on a year-over-year base. For the second quarter, the major growth is coming from the semiconductor and photonics sectors. For these sectors, presented a growth of 67% on a Q-over-Q base and another 82% growth on a year-over-year sales. As to the second quarter stand-alone parent company income statement, you can look at the next slide.
You can see that, again, for these record high TWD 3.72 billion compared to last quarter, it's a 30% growth. Compared to last year, it's a 52% growth. The margin, again, TWD 1.91 billion and represent a 51%, and it's 40% growth and on QoQ basis it's 44% growth on a year-over-year basis. For the OpEx side, again, we're still facing the inflation on the and also recruiting kind of issues. We put on those increase of the salary every year.
We have a little bit higher OpEx here, but we presume these OpEx will be stable, say starting from the first half of this year. Operating income for the second quarter is a little bit over TWD 1 billion. It's 1.04, represent a 28% compared to the sales revenue, which is also a high point. This is a 63% growth on a QoQ basis and another 70% growth on a year-over-year basis. As to the non-operating items, I think the biggest items will be the TWD 500 million capital gain from the sales of our disposal of our investment of ADLINK.
This is also a big growth compared to last year. For the net income, again, this is TWD 1.66 billion. It's a 95% growth on a quarter-over-quarter basis. It's another 245% growth on a year-over-year basis. As to the EPS for the single quarter, for the second quarter of this year, it reaches at the TWD 3.95. If we skip the capital gain of the disposal of the investment, then it reaches at the TWD 1.157 billion and give us TWD 2.75 as the EPS, which is another record high.
Well, if we look at the first half income statement for the parent company, again, the net sales revenue will be TWD 6.587 billion. Compared to last year, it's 29% growth. Gross margin somewhere like a TWD 3.278 billion, and we return 50% to the net sales. It's a 20% growth. For the operating income, it reaches TWD 1.6678 billion, represent 26% for the first half compared to the sales revenue. This part will be 28% growth on a year-over-year basis.
For the first half, for the parent company, again, the non-operating items were two capital incomes, one from the sales of the previous headquarters of last year, and one for the disposal of the investment on this year. It gives us the net income at TWD 2.512 billion. Although it's an 8% drop, if we skip all those capital income for this year and last year, it gives us the net income without the disposal gain at TWD 2.008 billion. Compared to last year, this is a 67% growth and reaches at the 4.78 for the core business EPS.
Well, this is at the income statement. If we look at the balance sheet for the parent company, you also look at the next slide. You can see that the short-term debt, long-term debt is also decreasing. The inventory turnover maintain pretty much the same level as the end of the last year. For those accounts receivable turnover is pretty similar to accounts receivable and accounts payable turnover days is pretty similar to the end of last year. Again, the free cash flow is falling into somewhere that we feel comfortable and
Okay, this is the kind of like a highlight for the financial numbers. For the operation highlights, I would like to let Jennifer do the briefing to you. Thank you.
Good afternoon, everyone. This is Jennifer. I will give, like, the several key highlights regarding our product breakdown. As you may see, on the slide 13, across all sectors, including testing instruments, semiconductor and photonics sectors, and turnkey solution, all sectors we have presented a pretty good result and all increased by over 20%. The biggest growth in the second quarter actually comes from the semiconductor and photonics sectors, which has increased by 67% quarter-on-quarter and 82% year-on-year. We actually increased by 26% in the first half, compared to last year first half. Our expectation that for this sector for the whole year remains unchanged. We still expect this sector to grow by 20% or more for this year. Okay.
For the second half guidance, we actually expect the biggest growth is actually come from the EV industry, particularly, EV battery cell, the formation systems. We actually received quite a decent, or several large projects for this year, and will be set to deliver from the second half of this year. We believe this kind of EV cycle as well, not only benefit to the upstream, which is the battery cell formation system, but also will be contribute to the downstream, like the EV battery pack, charging stations and several key components for EV. So as you may see the first half, our test and measurement instruments and ATS actually grew by 27% for the first half compared to last year. We expect this sector to have a double-digit growth compared to last year.
Overall this year, we actually expect the second half should do better than the first half. Even this year we decide to terminate our non-core business, which is trading business, new material, this business entities. For our second quarter, this business is going no longer enjoy any sales contributions. We believe that we're able to offset this kind of sales from our EV related business. This is pretty much wrap up for our operations highlight, and we could move on to Q&A.
Thank you. We're now beginning our question and answer session. If you have a question for any of today's speakers, please press zero-one on your telephone keypad, and you will enter a queue. After you are announced, please ask your question. If you find that your question has been answered before it is your turn to speak, please press zero-two to cancel the question. We're now in question and answer session. If you have a question for any of today's speakers, please press zero-one. Thank you. Our first question is coming from Mondrian Investment Partners, Harry Anderson. Go ahead, please.
Hi, thank you for the call. I might have missed it just now. Could you briefly explain your outlook for the semiconductor and photonics business in the second half and maybe into 2023? Obviously you've had a very strong first half, so maybe how that impacts relative to kind of the high base of the first half. Thank you.
Okay. Our semiconductor and photonics sectors actually were the biggest growth in the second quarter, as you may see from the sales breakdowns. We are actually expecting this sector to grow to 20% or more this year. Our guidance remain no change compared to the, I mean, the beginning of year with the live op. As we continue to see the growth coming from the Auto IC and the 5G related chips, we don't cover very much regarding to the consumers parts. We actually try to bring the new customers for the coming next year, especially for the foundry customers and also couple HPC makers from United States.
Do you have any guidance for that 2023 outlook? Can you maintain that kind of double-digit outlook? Can you continue to grow maybe 20% next year as well?
We haven't really moved on to the budget yet, but this is definitely one of the targets because we have remained like four years average growth rate between 20%-30%. We're actually working on several projects at the moment. I think the biggest growth drivers to come from this HPC-related. Regarding the photonics sectors, we actually have a couple projects on hand regarding to the customers wearable devices. We couldn't disclose more details at the moment. Yeah.
Okay. Thank you. I'll go back in the queue.
Thank you. We're now in question and answer session. Please press zero-one on your keypad to ask your question. The next question is coming from JP Morgan, Jerry Cai. Go ahead, please.
Hi. Sarah, it's on mute. Again, congratulations on the result. I think I just have a couple questions about first of all, about SLT. Can you maybe comment on what are you seeing in terms of SLT demand in the second half? I'm wondering, the SLT growth you've been seeing, is it mostly due to that the cost is mostly coming from the increase in number of customers, or it just simply maybe you have like increase in order from you know the same group of customers you normally deal with? That's my first question. Maybe you can also add a little bit about the SLT competitive landscape. Yeah.
Okay. In the first half, our semiconductors and photonic sectors, we generate around TWD 2.3 billion. Honestly, I would say around 60% is coming from IC testers and 40% photonic sectors. I think the HPC related customer, I mean, the SLT testers, the major shipment is actually started from end of second quarter and close to third quarter. This year, the biggest order actually comes from our existing customers. We also working with couple new customers at the moment, and we also received qualification by the foundry customers. We hope the foundry customer will start to buying the SLT from end of this year, and hopefully they will become the biggest buyer in the coming next year. That's for SLT.
Okay. Sorry, maybe you can also talk a little bit about the competitive landscape, because we do see some niche testing company that also does this in the Asia region, plus also you have, like, a maybe big, you know, global, you know, testing firm also doing this. Maybe you can tell us a little bit about what in terms of what you face in the competition. Yeah. Normally. Thank you.
We actually try to gain the market share and also close to foundry customers. So far we didn't see anyone in the market who has the same feature and also same throughputs and die sizes, which you can compete or compare to our upgrade SLT tester. I think we do demos. I think you may refer to our Slide 15. This is actually the biggest buy-in and being qualified by the foundry customers these days, as not only simply as the SLT, also blend a little bit feature of FT, final testing. This will helping the customers reduce the utilizations for the FT testing. According to customers' feedback, they still think our SLT tester is cover the full functions with the full feature.
Also regarding the tri-temperature, we are the biggest range for this temperature simulations. Can you refer several competitors that we can benchmark with?
Okay. I see. Thank you. That sounds quite interesting. Okay. Also like to quickly ask about the battery formation. I think that's, as you mentioned, is the main one of the key driver for this year. Can you maybe comment about the backlog situation you have seen in the past, say three months, you know, like, maybe since the last quarterly update, and what have you seen in terms of the backlog? How it change? And also in terms of, you know, like, you know, realizing the revenue, right? And do you see any kind of troubles or any kind of issues of booking the revenue this year due to the, I don't know, maybe some kind of logistics issues? Yeah. Thank you.
We do see the EV industry market share start to change from this year, especially. You may see our strong battery cells orders mainly come from the European car. Probably by next year you won't see just one particularly EV makers in the market, but also several, include other, like, EV, Europe OEM. You may refer to our consolidated balance sheet, end of the June. Our received in advance the cash balance reaches TWD 1.8 billion. Compared to last quarter, it's around TWD 1.4 billion. We actually increased by like TWD 400-TWD 500 million. That could be equivalent to the second half. We're supposed to have like more than TWD 2 billion order on hand.
Our challenge is we have to deliver those order and to meet the customer's expectation on the criteria and also the date. We're able to secure our coming order in 2023.
I see. Okay. Just to be clear, the latest number you talk about for the TWD 1.8 billion, the
Yes.
Prepayments received. It's related to the project that you'll be delivering this year or some of those projects, you know, could be for next year's project? Yeah.
Maybe put it this way, we have this challenge to deliver those orders this year. As I say, this will help us to secure order next year. Deliver on time is must have according to the contract. I don't think we're able to postpone or delay in delivery.
You're saying this TWD 1.8 billion will, unless you have some special agreement, like most likely is related to the project or that you will be delivering for this year, right?
Whatever we give a guidance regarding to EV battery cell, it default this year. Because right now we are already under discussion for the next year's orders. This year we need to deliver our commitment. Yeah.
Oh, sure. I guess maybe one last question about this. Maybe you can tell us a little bit about what you think about the 2023 outlook for this battery cell, after seeing this quite strong growth in the 2022, and maybe kind of share with us about the regional kind of breakdown of the growth. Thank you.
Actually, we have two growth drivers. One is actually come from China and the customers behind is European OEM. Just for potential order size, the only thing I could say is definitely cannot be just one year shop. Because this is like a confirmed, you could say the exact battery cells those are large European OEMs required. Okay?
Okay.
Another driver, which is maybe our chairman has mentioned in the Chinese call. The 4680 does indicate these US EV makers, they are going to change to these new models of the EV battery cell. In the second quarter, this is the biggest project we deliver to Japan, and as a new equipment makers. We believe this year mostly tight around, and we expect this production line will be started to ramp up at end of this year. Equivalent, this indicates that next year this will be another driver for EV battery cell projects.
Okay. Sure. Thank you. In such case, I'll get back to you too. Yeah.
Thank you.
Thank you. Thank you so much.
Thank you. Ladies and gentlemen, we are now in question and answer session. If you would like to ask questions, please press zero one. Thank you. There are currently no questions. I will hand it over to CFO Paul Ying for closing remarks. Mr. Ying, please proceed.
Well, hi. If you look at the financial result for the second quarter and also the first half of this year, it seems to us that we made a very good achievement here, and we will do our best and maintain this kind of momentum and also the steadiness and trying to reach that we committed at the beginning of this year and for the second half of this year. Before that, I wish everybody have a very good day and goodbye.
Thank you. Thank you for your participation in Chroma's conference. There will be a webcast replay within an hour. Please visit www.