Welcome, ladies and gentlemen, to Chroma's 2024 second quarter earnings conference call. All lines have been placed on mute to prevent background noise. After the presentation, there will be a Q&A session. Please follow the instructions given at that time if you would like to ask questions. 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. Now, I would like to turn the call over to CFO, Paul Ying. Paul, please begin.
Thank you. Hi, everyone. This is Paul. Well, today, the 2024 second quarter earnings conference will be conducted by myself and Jennifer. I will start off with the financial review, and then Jennifer will follow up by the operational highlights. Well, let's go to the second quarter condensed consolidated income statement. You can see from here that the net sales of the second quarter of 2024 is approximately TWD 5.5 billion. And compared to the first quarter, TWD 4.4 billion, it's a 25% growth. And, similar to the 2023 second quarter, on a year-over-year basis, TWD 4.4 billion, it's also a 25% growth.
And within the TWD 4.5 billion, you can see that most of that will be contributed from the consolidated sales of testing equipment business, which is TWD 5.2 billion. Compared to the last quarter, it will be a 23% growth. And compared to last year, it's another 25% growth. As to the consolidated sales of the automation MAS, it contributed; it's a 123% growth compared to last quarter, and it's a 15% growth compared to last year.
So for the gross margin in second quarter of 2024, it's approximately TWD 3.2 billion, which is then a 59% gross margin. And it's quite the gross margin is quite similar to the last quarter, but the absolute numbers it's 27% growth compared to the first quarter of this year. And compared to last year's second quarter, TWD 2.7 billion is a 19% growth. And for those operating expenses, well, although, well, along with the growth of the sales revenue, you can see that for the expense, it's a little bit growth.
But for the operating income, for the second quarter, it's TWD 1.5 billion, and compared to the first quarter, TWD 900 million, it's a 68% growth. So, compared to the second quarter of last year, it's a 25% growth on the TWD 1.2 billion last year. So you can see that the second quarter is, it's I think the performance is quite good. And for the net income, the final result will be TWD 1.4 billion. And compared to the TWD 976 million of the last quarter, it's a 47% growth. And compared to last year, second quarter, it's a 36% growth.
This is, if we deduct the capital gain from the previous year's performance, well, this is the second best or the second highest record of the quarterly financial result. For the single quarter of second quarter, the EPS will be 3.34 TWD. Again, compared to last quarter, 47% growth, and compared to last year, it's a 38% growth. But this is the second quarter financial result. Let's see the first half of 2024 on a comparison base.
For the 2024 first half, the net sales will be a little bit less than the 10 billion, which is the TWD 9.9 billion, compared to the TWD 8.8 billion of last year first half; it's a 13% growth. And mostly was contributed from the testing equipment business, which is in 2024 first half; it's 96% occupied by the 9.4, approximately 9.5 billion TWD in that sectors. And compared to the last year TWD 8.2 billion, it's a 15% growth.
So for the grow margin on the first half of this year, it's TWD 5.8 billion, and compared to the last year, TWD 5.4 billion, it's 8% growth. And along with the OPEX spending, again, it will be a little bit high. So for the operating income for this year, first half, is TWD 2.4 billion, and quite flat to the last year first half. But if we add up with the non-operating items, which is TWD 610 million, compared to last year, TWD 200 million, it's almost 200% growth.
So that give us the net income for first half is 2.4 billion TWD compared to last year, 2 billion TWD. It's another 20% growth. So for the first half of this year, the EPS approximately 5.61 TWD. So that's the financial result. Let's go to see the balance sheet highlights. You can see from the comparison of the 2024 first half and compared to the last year year-end, you can see that the cash is pretty much grow by 33%. And it's almost flat on the inventory. And for those short-term and long-term debt, it's a kind of like a shift due to the CapEx spendings.
For the total assets, it's compared to the last year year-end, it's a 7% growth. For those turnover days, I think it's quite similar to the a little bit better for the inventory turnover and quite flat to the accounts receivable turnover days. For the net asset equity, again, we are a net cash. For the return on equity, that will be 21% for at the end of the 2024 first half. Compared to last year, it's a growth. Return on equity, return on assets is 14%, which is also a little bit better than last year. For the EBITDA, it's a 15% growth to the TWD 3.4 billion.
In cash flow from the operations, it's approximately TWD 3 billion as well. For the free cash flow, it's TWD 2.2 billion. Again, it's the performance will be better than the last year first half. And this is the highlights for the balance sheet and the income statement. And then let's go to the operation highlights. Jennifer?
Okay. Thank you, Paul. You may refer to slide 9 for our product mix breakdown for the second quarter and the first half. Apparently, in the first half, the biggest contribution was coming from our semiconductor sectors. The total sales in the first half generate about TWD 3 billion, and then it actually even already over the total semi-sales last year. So presenting the growth from this sector is about 200%. Moving to the second half of this year, we actually expect the overall sales will be better than first half, and the semiconductor will be continuously as a major contribution to our sales. Okay. For semiconductor sectors alone, we actually think the second half will be similar to the first half. I think that pretty much highlights for our operations.
I think we could move on to Q&A, see whether you have any further questions.
Yes, thank you, Paul and Jennifer. Ladies and gentlemen, we will begin our Q&A session. If you have questions for today's speakers, please press star one on your telephone keypad, and you will enter the queue. After your name is announced, please ask your questions. If you find that your questions have been answered before it is your turn to speak, please press star two to cancel your question. Now, please press star key and number one on your keypad if you would like to ask questions. Thank you. The first one to ask question, correct me if I'm wrong with the pronunciation, sorry. So it's Wesley Ching from HSBC. Go ahead, please.
Yeah, thank you. Thanks, Jennifer, for taking my question as well as Paul. My first question is regarding your ATS segment. Have you seen any pickup in EV downstream? We've heard from your certain customers that the European EV side is doing well. So in that context, have you seen any pickup in EV ATS downstream? And are you still expecting overall ATS to be flat or slight decline for 2024? Thank you.
As you know, our power business is kind of, it's, it's already become our recurring sales. As we guide in the beginning of the years, due to EV slowdown this year, so we think overall will not be better than last year. I think we will remain similar sentiments of guidance for this year regarding to ATS.
... Got it. And my second question is regarding our semi and photonics segment. May I check, given that for your SLT orders, you know, you've obviously gotten a significant uplift in the second quarter of this year, is it fair to assume that the customer will digest some of this equipment? And do you have any expectations of whether this, your SLT current booking for this year, can remain same into next year? Then I'll leave my last question for later. Thank you.
Oh, so your questions would be like, the SLT order this year-
Yeah.
-and, next year, right?
Mm-hmm.
As you know, we're dealing with the global Tier 1 customers, so these orders being concluded will not be very much changed. And then I think just like with guide last time, they already, you know, increasing order during the April and May. I think if there is any increasing order, I think it will be, should be after they start to shipment this G-Series. And if your rate, 'cause they need to increase the cycle time, it's likely they will need to buy more testers. And however, I would like to give a little bit color regarding to our semi factors. I think the first half, I think we have roughly about 85% comes from IC testing, and 15% that is, comes from photonic sector. And then you could say the first half, our major...
As you know, we manufacturing based on order received. So first half, mostly what we deliver is comes from this kind of legacy, but it doesn't mean we don't have any SLT at all. But the second half, we think the breakdown may change because, I think the second half, the driver will be mainly come from system-level testers plus, the photonic factors. So as you could see, 85-15% may not be the whole year's breakdown. Yeah.
Got it. That, that's really helpful, Jennifer. My last que-
Yeah, please.
Sorry, go ahead. Mm.
But for move on to next year, of course, we definitely have some backup orders. When Allie said, "Okay, basically, we definitely have some visibility," but, we will provide more clear guidance in the coming quarters.
Got it. And then my last question is really on your metrology segment. Essentially, how can we think about contribution moving forward?
Mm.
As you rightly pointed out, this process is also used in 3D packaging and, yeah, different customers in smartphone and high performance compute adopting this next year, or at least qualifying it, but the contribution may not be large. So just wanted to hear your thoughts really on how you see metrology going forward, and if there's going to be anything with an uplift in order. Thank you.
Honestly, we are at. We are progressing at the moment and progressing quite well. Yeah, in a well position. And since it's in final stage, I wouldn't elaborate too much in details. But however, CoWoS will not be the only advanced package. I think the next coming two years, customers should also have other, advanced package plan. So, and this will definitely increase the metrology testers need. So we definitely see these, future trends. Yeah.
Got it. Thank you so much, Jennifer.
Yeah, thank you.
Next one to ask questions, Alice Wong from Bernstein. Go ahead, please.
Hello. Hi, Jennifer and Paul.
Yeah.
Yeah, can I ask for the advanced pack... Sorry, for, for metrology business?
Yeah.
What's the revenue mix now, and do you think that will be significant in 2025 or even in 2026?
Before we final, the answer is for sure, definitely meaningful.
I see. I see. Got it. And then a follow-up question about the EV battery, the power testing business. You mentioned that, over the past two years, you see the transition of, like battery plant building in China, from China and moving to Southeast Asia. So I'm wondering if this year is a, you know, down year, for Chroma. What about 2025? Do you see, like the recovery of ATS coming in, in 2025?
I'm not so sure you're asking about ATS or return to particularly.
How about overall EV and battery business combined?
It's very hard for us to combine. Anyway, ATS is very broad sectors.
Mm.
It's not only contribute from EV sectors, because ATS mostly contribute from EV downstream, like battery pack and other accessories. Turnkey is mostly related to battery cell. This year, we actually think twenty may not be a super growth year, but we definitely have some meaningful contributions on the sales. This is due to not only we do receive the ba project from Southeast Asia, but we also have some like, maybe I mentioned last time, like a and AI products automation plan from the customer space. Okay. For ATS, just like I mentioned in the beginning, this is very, this is very, this is like our recurring sales. This is like base sales for our business. You will not see really, okay, EV down and the rest of the CapEx spending, it's also down.
I think our view regarding to ATS is not very much changed for what we got in the beginning of the year. Yeah.
Mm-hmm, mm. I see. And, maybe the last question. In your slide, you also show that, there's AI Server Power Test Solution.
Mm.
I would love to know that, compared to power testers for traditional server-
Yeah.
Is there ASP or spec upgrade for AI, server power tester?
Oh, because the power is higher, of course, ASP is higher. Just like I said before, do you see, okay, EV is, okay, demand is slow down, but okay, let's use the Delta as a reference. Okay, do you really see Delta's overall CapEx spending severely, severely down? No. Why? Because they probably spend less for EV, but they probably increase the CapEx for AI server later.
Mm-hmm.
So we also cover this kind of business, but we didn't say, oh, we are very optimistic about ATS going for the coming quarters. I think we just say this year, due to this kind of EV infrastructures, and we think well, will not be better than last year, and this kind of balances will not be changing in the coming two quarters.
I see.
But we already give you, but we already give you overall guidance regarding the whole total sales will be better than first half. Okay, so rest of that, I think, analyst could be figured out.
Mm-hmm. Mm, I see. And in overall power testers, do we have a number, like, what's the mix of AI-related power testers?
We didn't do this kind of calculation.
I see. I see.
Yeah.
No. Okay, that's very helpful. Thank you.
Yeah, thank you.
We are now in Q&A session. If you would like to ask questions, please press star key and one on your keypad. Thank you. Next one to ask question, Jeffrey Ohlweiler from Macquarie. Go ahead, please.
Yeah, great. Thank you, Paul and Jennifer. Jennifer, for metrology, can you talk a little more about, about that? You, you mentioned, you know, meaningful contributions at, at some point. Can you clarify, was that meaningful contribution from next year?
My contention is, first, advanced packaging definitely is an institutional trend, and it will not be limited to just CoWoS. It's also including other packaging.
Mm-hmm.
And honestly, metrology can be. I mean, okay, the product we should focus on is metrology for RDL, and this kind of process is not limited to just, okay, you measure RDL, you measure TSV, but you also come with other applications, you also need to have the metrology. And this is the first driver. So based on future trends, you will see, no matter which kind of a packages, advanced package, the demand for metrology RDL testers will continue to increase. Second, of course, just like I said, since we are already located at final stage, we already see the customer's projections. So that, yeah, that's why we say it's meaningful.
Okay. And then just kind of a follow-up, can you talk a little about the development of that product? Is that a Chroma-branded product designed together with Camtek, or is that a Camtek product that you guys are marketing in Asia? Or how, how does that work with your acquisition company?
No, this is developed 100% by ourselves. I don't know why you have this kind of thought that was developed with Camtek.
Well, just 'cause they're, you know, you, you acquired Camtek, and they have metrology technology. That's why I thought-
But that's a different idea.
Okay. All right. I'll strike that from my mind then. Thank you. Okay, great.
Yeah. Okay.
Thank you.
A reminder, if you would like to ask questions, please press star key and one on your keypad. Thank you. Please press star key and one if you would like to ask questions. Thank you. There are currently no further questions. Thank you for your participation in Chroma's conference. There will be a webcast replay within an hour. Please visit www.chroma.com.tw/investor/index under the Investor Relations section. You may disconnect now. Thank you and goodbye.
Thank you, everyone. Well, this is a very good result for the second quarter, but yeah, thank you. Bye-bye.