Earnings Call: Q3 2018

Oct 30, 2018

Welcome everyone to Chroma's 2018 3rd 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. For your information, a webcast replay will be available within an hour after the conference is finished. Please visit www.chroma.com /investor/intax under the Investor Relations section. And now I would like to introduce your CFO, Pauline. Mr. Ying, you may begin. Thank you, Jason. This is Paul Yu. I'm the CFO of Coma CTE. And welcome to the third quarter of 2018 financial release conference. And, here with me is the Jennifer which is our director of the IR. And, this meeting, we are going to conduct in mainly in English, but, for their financial highlights and also the operational highlights, I will be doing that in, in Mandarin first and then, re repeated in English afterwards. Then after this session, it will be the Q And A. For the Q And A, basically, if you ask in Mandarin, then I will reply to Mandarin and of course, if you're conducting English, then we will be replicating English. Thank you for your time. Well, and and testing equipment to take take a proof and I can't talk. So Now, we're going roughly Okay. Thank you. Accumulation. Women doesn't have to agree. Okay. Lovely, if I get to check, please. 2 other games, women's. I decided it's the whole woman pay out sorry. How are we? Just to put them back as a 60%? How are we? It's the 8% back as a full on the windshield? Okay. Good afternoon. I will repeat our careful statements in English. Okay? Regarding to our financial highlights, the 1st 9 months consolidated sales were 13,000,000,000, a 34% growth. Consolidated testing equipment business were BRL7.3 1,000,000,000 and that is BRL3.9 1,000,000,000. Okay. Total tenant sales revenue in the In third quarter, it's 1,900,000,000 and 1st 9 months reached about 5,800,000,000 and declined about 2% year on year. For the first quarter's first three quarters' absence, apparently, this year, we will not enjoy a seasonal, you know, the traditional seasonality patterns. Which is the peak season in the 2nd And Third quarters. Instead, we will probably enjoy the peak season in the 1st and 4th quarter This is all based on the customer's achievements scheduled. Regarding to gross margin, consolidated gross margin 44%. Somewhat the last two quarters has not much changed. And parent company's testing room business gross margin is 52% both are very much in line with our expectations. 1st 9 months, the net income reached about RMB2.1 billion, increased by 24% with EPS of $5.06, for 1st 3 quarters of results. This is actually a historical sacrifice. For our balance sheets, Consolidated in the net cash position. It was due to the math of collections, and the parents is net debt to equity of around 7%. Mainly due to the large payout in the cash dividend in the third quarter. Regarding to the ROE, and also our a hourly is reached about 20% and then our a 12%. And now we will move on to operation highlights. Regarding to our products. An 880 I spoke to slow down Now for Tony, they find the ticket ticket, sales now, woman, she says com. To definitely contact And thank you sources. Thank you guys for our rigorous home take a take a test equipment into a business. I can't apply. Woman. M a s, just want to mention, say, quiet. This is, like, we're going to say, quiet. Woman, we're coming Okay. Operational highlights, we still expect the traffic instruments will present a stable and steady growth compared to last year, the whole year. Mainly come from the EV market demand, okay? The for the semiconductors sector and the Performance testing solutions. We have seen fixed those cells and other performance testers start to accelerate and drive this kind of momentum is able to fly continue to next year. And the market has mostly come from the US. But the IT market sentiment started a bit weaker from the 3rd quarters, especially the AT systems. So this year, overall test total semiconductors testing solutions, hopefully, will be slightly lower than last year's. Thank you, Soshan, because this year, we totally not have any solar sales contribution. Thank you, Soshan. This year, almost countervices actually contributed by the EV battery cell factors. So, within the overall 10,000,000 this year would be similar as last ships. Overall, we expect that the tax increment business will be doing similar to last year. Sales levels. Regarding the math, I think we're still able to deliver what we guide in the second quarter, which is doubled as last year total results. So overall in year 2018, we said that net income was still able to present a decent growth compared to last year's 17th. And now we open it up for ladies and gentlemen, we will now begin our question and answer and you are into the queue. After you are announced, please ask your question. If you find that your question has been answered before the instructor speak, please press 2 to And our first question is coming from Patrick Chang from Nomura. Go ahead, please. Hi. Good afternoon. Paul and Jennifer, may I ask, compared to when you reported, 2nd quarter earnings across the business lines, which are you seeing, are you, which business lines do you think are tracking ahead of your expectations and which are tracking, behind? And, what are your initial thought, for the growth prospect, to different product lines into, 2019. Just a rough idea would be okay. Thank you. Hi, Patrick. You made the overhaul this year. Yeah. Overall, I mean, the net change, in the past 3 months, in which areas do you see more slow down. And how quickly do you think are the, you know, or the whole year? Yeah. 3rd quarter. 3rd quarter. I mean, after you reported 2Q. Yeah. Well, we actually if you want to see we won't always see the AT system start to get weaker from third quarters. But this year, we don't we didn't enjoy the season. Now it hasn't it's just because the customer's shipment and also that's why we don't have, like, a third quarter is a peak season. So I think it will be better explained in the whole year, that's a whole year basis. The whole year is, I think, semiconductor, the AD system start to, you know, get weak from the quarter. So We're seeing a move on to 4th quarter AG system will be, you know, back to a very, very low base as we have before in previous years. And a big hotel to start to, you know, pick up quite, you know, and Chinese solution, beginning of the year, we expect that we at least will have some contribution from solar as we have in the past many, many years. But this is due to the new policy. We almost got nothing in the end for former solar cell. Business, which is a policy contract. So if you will talk about the carry forward momentum to next year, We will particularly highlight the photonics. I want to give you some, some guidance regarding to our photonics business. Of our voice business, we cover 5 different range of products, not only limited to VCSEL, also some types of communications. And the second, here, you will probably see more order or our delivery shipment will mostly go to U. S. Markets based on our current order on hand because I'll carry over our heads, carry forward to next year. It's already since the 1st 3 quarters we booked. So this is not include anything with your protections, okay, just, basic structural light holders. And last thing, we would like to highlight is our Android business. I mean, for tallest business in Android team, honestly, the older of the for the sales we booked this year, it doubled of last year regarding to ensure a team for 20 faster selling. My business is still, you know, as we guide. There's not much to change compared to 2nd quarter. If I have, if I may ask a very quick follow-up, when you reported, last quarter, I think you mentioned something about the the, photonics being, flat, year on year, based on the, 1st 6 months, traction, but, you, what you said is that you expect a 4 quarter momentum to accelerate very significantly. So for full year, you're still this part of the business to, show steady growth. Is that Yes. Well, I'm not so sure because the order is starting from 4th quarter and totally carried forward to next year. You know, sometimes customers give you a big order, they don't limit to just one quarter. It's carried forward to next few quarters. So regarding the photonics order disability, are they able to see even up to the second quarter next year? So, it's very hard for us to just give you more exactly. So regarding performance, I think, depends on how much we're able to book in the fourth quarter. But our guidance has not changed. We will be, when this year, photonics orders delivered, we'll probably not figure that last year. Even we have acquired decent order on hand. And the next question is coming from Sky Chen from CLSA. Please ask your question. An energy. Sir. So you. And DOT. Yeah. We're now in question and answer session. You. And the next question is coming from Willie Chiang from JP Morgan. Go ahead please. The whole way kind of different to just put down the street out a year on year growth is pushed out a percent. The kind of in women's, like, order delivery schedule So if Okay. Thank you. You will be Hello? Wait. The 2018, the SLT. That's a woman in town, so semiconductors itself. Overall, this year itself may be low expectations because screws market start to get weaker for the quarter. And the next one is from Arthur Live from Citi. Go ahead, please. Hi. I'm calling to make an appointment. Just a great time to get the tickets of all motor performances, itching, itching for the occupied. Gotcha. Yeah, I'm really sorry. This is so kind of a trade war that you to me, which I'm wearing it before, on settings or the to, like, now we got, like, our whole marriage, and we also want the COVID, you know, not to do it. It's a property offer. Where you throw down further investment, Okay. Make a payment itself or high payment in the it's good. So what is the for us and it's without your US market base here in 19 9. Now US without your account for funds, the I mean, you said that it's, back before. Oh, boy. After Hello? Hello? Hey. It's everything. Nobody. So yeah. Well well, this is all can't call me digital marketing agenda. Now since it's you, we're gonna send out the order on hand. Now I believe Okay? Okay. And next we'll have Douglas Ho from capital investment for questions. Go ahead, please. Hi. Cell phones. I'm not finding out the services. Right? For an alternative, it's sleeping. We're going to the tayoconazuchan in the Pikka. With the authority, the suit of the juvenile woman, high school age, there's no comments. So woman's 330, that's a good, expectation So it, We're going to the wedding. So in that case, it's going more than double to the premium to a suite. Okay. Okay. Payment. Overall, Okay. Thank you. And the next question is coming from Steve Huang, Wendell Research. Go ahead, please. Hi. How it's like a semiconductor, a whole new material your mail other segments into the software, it doesn't be anything. I have I have Hi. Our expectations. Sir. Okay. Pionic for tonica. Can you also, you know, you know, It's a sir. Okay. No, sir. Equipment moving issues here. Push out, and I don't Just holding the phone down. There's a text on here. This will do the mailbox. It's closed. This will, will take a a US market, and strong just that figure for 20 Yes. And all the handwritten. Okay. Thanks. Okay. Now to the for US market. So it should contribute also goes to US Maine. You know, Okay. The order on hand, like, to acquire married to US. Okay? Okay. Woman's okay. It's a bad and social data stolen from the driver, kind of attorney's driver. Okay. So you took a q 4 received data order carry over to 2nd quarter next year. So just switching to the just the US market. Now how about Android? It got it had cleared. To ensure Okay. The Android is from. The cutting point like so far with an ensure that I may obtain you production line. New input. That's one that just took orders not include. Mills that includes Okay. Okay. Okay. So it's all okay. It's all Android. The revenue contribution. Okay. Erinium. Android solutions. It's early. Application, okay, boutique, Application, Android applications, the full firm, okay, gain down to the combination of fiber communication, plus Thank you. ZCSEL sounds. You do measure those autonic captures. You'll turn to revenue, high yield, from my production. Okay. Okay. 1, 25. Okay. Okay. So wait. The 40 Okay. So this is what are the Tonguan Highmeadow Internet production. The next production to the whole take, order the sustainability for its So maybe this is for R and D, the stage. Not our next production. Okay. And the next question is coming from Jeff Oweiler from Macquarie. Go ahead, please. Yeah. Hi, Paul Jennifer. A few questions for me. First, I guess, the Moss and the S revenue is strong in 2018. I guess, one of the biggest questions I get from investors is, it's such a large number this year. Is there any type of guidance you can do for next year, whether there's a chance it grows, whether the chance is down a lot, any kind of, you know, just general guidance on that number for next year? Well, Jeff, for math, I think it's a typical, it's kind of a culture based and I think what we expected is the, the delivery of this project, for this year, we extended to a lease to 1 or 2 quarters of 2019. But for the new orders, in 2019, Probably we have to wait for the, 2019, the guidelines come up in the next meeting. Okay. Great. Oh, 3. Yes. Okay. So the next question is, Jennifer, you mentioned that testing instruments is weak in 4th quarter. When you said that you're talking about semiconductor testers? No. I didn't say test measurement is leaking. I mean, AD system AD system is under semiconductors. Regardless of semiconductors, product factors. We have 2 major products. 1 is related to IC. The other one is related to photonics. And I see latest factors start to get wiggles from end of the third quarter and continue. I think the trend will continue in the 4th quarter. Okay. And to clarify, you said overall semiconductor testers should be flattish year on year. No. I think it will be slightly more than last year. It should be more. It should be more than our expectation because the IC factors You run. Okay. Ophotonics is picking up. Okay. And then also testing instruments and ATS has been pretty stable growth throughout the year, every quarter. How was that in 4th quarter? And then how was the easy versus the non easy in that, you know, in that segment? It's very awkward to do discounted breakdowns, but, the reason why we can present it kind of substantial growth is because the EV market demand. You know, the EV market, we are not enjoying none of the cars delivered in the market. So we actually enjoy the people's meant for high power testing. High power means the high speed and high purchase for solar markets. That's why the total sales grew. Mhmm. Okay. And then lastly, I know you mentioned this a couple times in Chinese, but I just wanna clarify this in English. So you said Sure. 4th quarter consolidated sales should be the peak for the year. Yeah. Okay. Tomorrow, we will have to do with material filing. Okay. Understood. So so it sounds like the the APS should be okay for 4th quarter Q on Q. Turnkey Is it okay to talk to you? I think the key point here is we just want to highlight this year. We just we don't have the normal the normal. It's not have to, like, pick in 2nd and third quarter instead, we have, like, a pick in 1st and a 4th quarter. That's all. Okay. Great. Thank you. Thank you. Thank you. And next we'll have Nancy Chang from JPMorgan for questions. Go ahead please. To, yeah, you'll get to, like, a CIS ICTOS application. It's So from other times, you could say the same thing. Yeah. We can test again. Gotcha. Yeah. Yes. I see tops now. No. It's okay. So the image sensor, the full phone. You know, the application. Just a woman It's good. The order they, Hi, Nancy. Like, Good. Now, do you want to hand mail hand mail wrap up? Okay. Okay. There are currently no questions at this point. Then I'll hand it over to CFO, Pauline, for closing remarks. Ms. Yang, please proceed. Thank you, Jason. Well, So it's about take a 40 moment. Okay. So you're able to take the option. We'll make the whole set on Ibami and and she on it. But that's only good. Thank you everyone. Thanks. Take care. Thank you. Thank you. Thank you, ladies and gentlemen. We thank you for your participation in Chroma's conference. There will be a webcast replay within an hour after a please visit www.cromont.comtw/investor slash index under the Investor Relations section. You may now disconnect. Goodbye.