Welcome to the 2025 First Quarter Earnings Conference Call. This conference call will be conducted in English. Let's start it from the first quarter consolidated income statement. From this slide, you can see that net sales for the first quarter, approximately TWD 6.8 billion-TWD 6.9 billion, compared to last year's fourth quarter, TWD 6 billion, is a 14% growth. Compared to last year's first quarter, it's a 65% growth. Majorly, the sales revenue is coming from the test equipment business, which is occupying like 94% of our total top line. As to the gross profit, it's approximately TWD 4.1 billion, and with a gross margin of 60%, which is quite similar to the percentage of the fourth quarter of last year, but with a 15% growth on the amount. Compared to last year's first quarter, the gross profit has grown by 62%.
As to the OPEX, I think it's quite similar to a little bit growth, but quite similar to the percentage. According to the operating income, you can see that it reaches at the TWD 2.1 billion and occupies like 31%, which is over 30%. This is the first time in our record that our operating income reaches over 30%. Compared to the last quarter, it's a 40% growth. Compared to last year's first quarter, it's double the size to 140% growth. Again, for the net income, it reaches at the TWD 2.1 billion, which is a 40% growth compared to the last quarter. It's 121% and also double the size compared to the first quarter of last year. Our earnings per share goes to a little bit over TWD 5, which is TWD 5.03.
This is a record high, either from the sales revenue or from the net income. We just reached the record high last quarter. At the first quarter of this year, we break it again. If we go to the balance sheet highlights, you can see from this page that the cash and short-term investment growth by 20%, basically, it's due to the increasing for the sales revenue and the business. Short-term debt was due to the handful of cash, and then it reduced by 93%. Long-term debt grows by 11% compared to the last year. Basically, it's due to our construction for our expansion for the phase two of our manufacturing site. To the inventory turnover, it's approximately six months, which is in line with our expectations. Accounts receivable turnover is less than 80 days.
For the earnings return on the equity, it's 34% compared to the 22% of last year. This is the first time that we reached over 30%. For the return on assets, it's 22%. Again, it's over 20%. If we look at the free cash flow for the first quarter of this year, it's approximately TWD 2 billion, which is quite a number. This is the highlight for the financial statement. Let's go to the operation highlights. I will let Jennifer take it over.
Okay. Good afternoon, everyone. This is Jennifer. I will be presenting the product mix for first quarter and provide an update for each sector. Please refer to slide 8. Since our orders come with a lead time, about two to three months, the guidance will not be very much different compared to February. Our customers remain their CapEx planning. We will not give further guidance regarding the second quarter. For the slide, the semiconductor sector remains a strong growth. The overall sales have been overtaking the power business, account for 50%. However, the power business indicates an impressive growth of 31% quarter over quarter and 32% year on year. Mainly contributes from the 5G related power devices demand. The coverage includes specialty power devices from data centers, servers, etc. We expect the power business continues to grow in the second quarter.
The semiconductor sector in first quarter increased 25% quarter over quarter and 118% year on year. IC related testing equipment accounted about 80%. For 20 sectors, they are resolved. The best way to describe the first quarter regarding semiconductor sectors, SLT is major. Legacy ICs didn't drop as we expected. We have started to ship probe mark metrology equipment. This is the summary for the semiconductor sector. The two major contributions to 20 are still battery cell formations and automations for wearable devices. Consolidate all the testing equipment business reached NT$6.5 million earnings, presenting a growth of 12% quarter over quarter and 52% year on year. Our 100% subsidiary MaS in the first quarter increased by 65% quarter on quarter and 306% year on year. The strong demand mainly contributes from the automation demand across several industries, like server manufacturing.
The overall consolidated sales in the first quarter hit the record high, which is TWD 6.86 billion, presenting a growth of 14% quarter on quarter and 55% year on year. Based on our order on hand today, we expect to have another good quarter in second quarter. That would be the summary for the operation slide. We could move on to Q&A. Thank you.
Yes. Thank you, Jennifer. Ladies and gentlemen, we will now begin the question and answer session. If you have a question for any of today's speakers, please press star key number one on your telephone keypad, and you are into the 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 star key number two to cancel the question. Thank you. Now, please press star key number one on your keypad to ask the question. Thank you. We'll have our first question from Kevin Chen, Citi. Go ahead, please.
Hello, Paul. Hello, Jennifer. Thank you for taking my question. In consolidation, a very strong quarter. My first question is regarding the ATS, the automated testing system. I see that besides the [audio distortion], this segment is going very strong as well. Can we get some more detailed breakdown of this segment? Also, I would like to get a sense of how much of this strength in the first quarter would have been possibly due to some tariffs holding demand, and how sustainable of the strength do you think this is heading into the rest of the year?
Hi, Kevin. This is Jennifer. You are asking about our power business, right? ATS? The ATS power. Yeah. Mostly, it actually comes from, I would say, the China build-up of this infrastructure for AI demand. We do see the increasing demand from high power, especially related to those 5G specialty power devices, including data centers and servers. We believe this momentum will continue to move on to even the second quarter. I think overall, ATS this year will have quite a decent growth compared to, I mean, last year. I think we're able to offset the decline of last year.
Okay. Mostly, would you say in terms of percentage, this is going to be more than half of this core business from the power?
I do like. Can you repeat the question? Sorry, I'm not hearing you clearly. Yeah.
Yeah. I'm just wondering, in terms of percentage for this core business, you say mostly it comes from the AI-related server. Do you know how big of this percentage for this core business will be? Is it going to be like 50%, 60% or more?
We still keep eye out on these kind of, I mean, percentage changes, but we believe that these kind of 5G power-related devices is the coverage of ATS could reach over 40% this year.
Okay. Okay. Got it. Thank you. My second question will be on the outside piece. I know that we are not commenting on specific customers. Just wondering, for this year, last time we met, we talked about that we're expecting other new customers to start ramping up this year. I was just wondering how that has been progressing so far. In terms of, let's say, contribution for the SLT revenue this year, would it be climbing? I believe last year it was about 10%. Is it going to be a much larger percentage this year?
10% of what?
10% of SLT last year. It will be coming from like the non-.
We do not currently count the system-level test percentage. As you could see, this kind of breakdown could change according to different shipments in each quarter. However, as we addressed in the last quarter, this year, one of the biggest contributions from system-level tests will be coming from non-AI portions, including according to our current confirmed order for the second and third quarter, mostly related to auto. As I said in the beginning, we did not see the customers planning to change any of their CapEx planning for this year. I think another contribution will be coming from IC makers. As you could see, the recent comment about the CapEx spendings this year will remain no change. I think overall, SLT this year will definitely include these two parts. First one, non-AI portions. Another one is coming from IC makers.
Quickly, for the ASIC makers, do we see more demand coming from, let's say, China?
We didn't sell the SLT to China at the moment.
Okay. Got it. Thank you.
Yeah.
Thank you. Next one, Hans Liu, UBS. Go ahead, please.
Yes. Hi, my name is [audio distortion] . Congratulations on your solid results. Thanks for taking my questions. I think just a quick follow-up on your full year outlook because this year is since the first quarter, and even the second quarter, you were guiding sequential growth through the first half of this year. I was just wondering if you could share more view into the second half, what your book-to-build looks like right now, and if we could still see that the full year growth will be able to outperform your historical in the down cycles in the past couple of years that historically your sales have been declining in those down cycles for the industry. I was just wondering if you could actually outperform that. Yeah. That's my first question.
Hi, Han. Of course, we're always looking for outperform. As you could see, the market still remains some kind of uncertainty, especially for geopolitical factors. I think we will take more conservative views, I mean, regarding to the second half this year. I think we need to consider maybe for equipment companies, tariffs, this kind of issue with pass-on costs and our shipment to the United States currently remains low. I think it's not more than, I would say, around 5-8% at the moment, even with receiving the payments and revenue from United States customers. I think equipment still depends on where and which location the customers are planning to build up their CapEx. However, we still keep an eye on the market changes, even we do have quite a decent order visibility even rolling up to the third quarter.
Okay. Okay. Got it. Because when I look at first quarter, sales was up 55% year on year. Then second quarter, just based on your expectation, it will grow sequentially. At minimum, it will still be able to grow like 30% year on year. I was just wondering if that kind of momentum would you be able to expect into the second half of this year. It seems there is some uncertainty. Could you actually share a little bit on which part of the business you are seeing more uncertainty at this stage? Are your customers actually handling their orders into the second half this year or even pushing on into 2026? Thanks.
We didn't see the customers planning to push the orders, so we still have quite a long term, I mean, more over three months of order visibility. I think our concern is mostly related to we don't know what kind of overall economic status. We also need to pay attention on the changes of the currencies. As you could see, normally equipment companies are pretty much tied up to US dollars.
Yes. Okay. Yeah. I think just on the mix, since first quarter is probably the first quarter that in the past few quarters that you have been seeing that your traditional power testing equipment business see a sequential recovery in a meaningful way, would you still comment that or would you still guide that the semiconductor business this year will be the key growth driver for the company? Or actually, it's going to be the other way around that traditional power testing is actually going to outgrow semiconductor?
Okay. Overall, we think this year the power business, our confidence level regarding the power business growth is getting higher as we did not see very much changes come from the especially China market. I think China market recently is quite aggressive to build out these kind of so-called AI infrastructures, and we just could generate that demand. Based on our current order on hand, I think we do have a very high level of confidence that we are able to cover whatever we have been declined for last year. Regarding the semiconductors, our customers did not plan to change very much with their orders, no matter you talk or you would like to discuss about system-level tests or methodologies or so ever. I think the key factor is we still need to wait until the customers further notice which quarter they are planning to deliver.
Okay. Just very quickly, two quick follow-ups on CoWoS-related expansion plans because there has been some discussion regarding the industry Co-WoS capacity expansion, so it's actually moderate. Are you seeing signs from your customers that we saw some of the equipment orders reschedule, some of the delivery of those metrology equipment? What do we think about first half versus second half regarding the pickup for your metrology business? Thank you.
Honestly, we started just like from first quarter, we already started to ship so-called probe mark metrology. And we also got informed by foundry to prepare the orders for the RDL. But we can't be very much sure which quarter they wanted to deliver. The fact is we already been informed about the units and also the plans regarding to the new factory, I mean, new capacity. The good sign is we do start to see the existing capacity that has gradually adopted our metrology equipment. We think this is quite a good move for our metrology business.
Okay. Yeah. Thanks, Jennifer. Before moving back to the queue, if I could sneak one more question, just regarding your metrology business, would you still be commenting that this year is going to be a few billion contributions to your overall sales?
If based on the numbers that they informed by the customers, I think we don't see the reasons to change.
Okay. Yes. That's very good. Thank you so much. I will be back in the queue now.
Yep.
Thank you. Next one, [audio distortion] . Go ahead, please.
Hey, Paul, Jennifer. Congrats on the great result. I have a question about the ATS or battery revenue to the U.S. I remember this year there's a tariff for your power business, which is the Panasonic battery line in the U.S. Any issues with that because of the tariff?
Not at the moment.
You guys are already starting shipping products for that production line?
For batteries, not yet. Yeah. I think originally we commented around maybe second quarter. I think if you elaborate, if you elaborate US technology, you probably got wave.
I see. Okay. I just want to confirm, for the metrology business, you said you are going to ship in the second quarter. Did I hear that right?
First quarter, we already started to ship probe mark, which is 7980. And then we already got informed by the customers regarding to the RDL.
Oh, I see. I see.
Yeah.
Okay. My final question is about the SLT competition. There is a US testing equipment company that just had an earnings briefing, and they expect to see some SLT revenue for AI accelerators this year. Do you start seeing direct competitors in SLT for GPU or ASIC this year or next year?
Which company you mentioned?
Teledyne. Teledyne.
I don't think so. Yeah.
I see. That is not related to your business. Okay. Great. Thank you. That is all from my side.
Thank you.
Thank you. Next we'll have Derrick Yang, Morgan Stanley. Go ahead, please.
Hi, Paul and Jennifer. Thanks for taking my question. I think my first question is that regarding your power testing business, I just want to make sure that I hear you right. You say that 40% of that is from 5G, and the majority of that is to China, not U.S.?
We think so because I don't know whether this is how much because power devices is not under restriction. I think, okay, you cover power. You probably know most of the power devices are manufactured in China. I only can tell you based on classifications, I mean, our sales revenue for ATS, the strong demand actually comes from those 5G specialty power devices for data center and servers. Yeah. How much could be detailed down to United States, we couldn't be very much sure. No doubt that the DeepS eek actually light up the China being so aggressive to develop AI infrastructures.
Okay. Okay. Yeah. So.
Because equipment company cannot take large orders because as I said, orders come with a lead time.
Yeah. Yeah. Sure. Sure. Because I was asking this question because apparently the AI-related server power demand has been very strong, and you are one of the key suppliers for the power testing equipment in this area. Are you saying that it is based on your destination of shipment instead of the end customer?
Yeah. I think this part is actually much better than we expected. We didn't expect such strong rent from these so-called AI infrastructures.
Okay. Got it. My second question is regarding your SLT and metrology and maybe also the power testing business, could you provide a little bit of preliminary colors regarding the outlook or your view into 2026? Any new customers in projects? I know it's going to be vague, but any colors will be much appreciated.
It's very difficult to comment 2026. It doesn't mean we don't have a confidence. Just we still very much concerned about economic status.
Okay. Maybe let me put it this way. Maybe more specifically for the SLT business because I think for the major SLT user, sorry, go ahead.
I couldn't comment in detail, but we could only comment on one thing. The Rubens is planning to sample in from second half this year. We are not surprised from last quarter, the H series has continued to, I think from customer side, has continued to decrease because the customer is planning to move on to next generation.
The shipment is likely to start.
I couldn't comment the shipment, but we could pretty much confirm that customers are planning to sample in the Rubens this year.
In second half this year?
Yes.
Okay. Okay. Good. Thank you. That's all my questions.
Yeah.
Thank you.
Next one, Nicole [audio distortion] . Go ahead, please.
Hi. This is Nicole from CTBC. I know that Chroma has multiple testing solutions for server power in BBU. I'm just curious that as server power racks evolve towards higher power and density, from Chroma's perspective, what are some of the peak power densities that you're seeing in these power racks? Does the complexity of testing higher power components translate to a higher ASP for your necessary testing solutions?
That's correct. Yes. We actually used to have, I think before last year, that two years, we sort of maintained about 20%-25% of the ATS that should come from this kind of 5G power related. As you could see, we start to cover general, I mean, specialty power devices for general server. So we have been doing this business for several years. This year is actually quite strong. I would say the 5G power devices demand is actually year to date, I would say, stronger than EV and ESS.
Okay. Maybe just for a follow-up question, if you could possibly answer, what is a common factor in terms of its power capacity in kilowatt that you're seeing now for, for example, in the power rack, the power supply unit and the PSU and the supercapacitor and the BBU, if you could possibly answer?
Because as I said, we're only dealing with the many, I mean, the equipment, we can't do a very detailed analysis.
Yeah. No problem. No problem. Thank you.
I wanted to say this year possible to reach up to over 40% of ATS actually come from these 5G power related because we actually see maybe power business from these applications in coming second quarter will be even stronger than first quarter.
Yeah. Okay. Thank you. Thank you.
Thank you.
Thank you. Next one, [audio distortion] , HSBC. Go ahead, please.
Hey, Jennifer. I just have one question. Hello. Hello. Hope you're all well. Yeah. Just my question on your comment that on SLT being driven by auto, I know you don't give percentage SLT contribution. I'm just curious to know, do you expect in the SLT contribution whether auto would be significant this year and next year? Material sales, say, is it 5%, 20% of SLT, not overall revenue? If you would just tell me if the customer is being aggressive despite weak end demand because auto is weak, but autonomous driving is coming in, right? Just wanted to hear your thoughts. Thanks. Yeah.
Sorry, we couldn't provide the system breakdown for percentage regarding to system-level testing because we don't like to give certain customers their order size. However, just like we got in February, I think if you look at the system-level test last year, I think it's kind of double last year. I think from the beginning, we already stated we don't expect the system-level testing would be the key growth driver for this year. It will not be very much different compared to last year, mainly comes from, I would say, close to half of the drivers actually come from non-AI portion include auto related and gaming related. If you look at the customer base, this year, besides Nvidia, we were also granting several orders coming from those ASIC makers, including Microsoft and partially AMD and Google.
If you could say last year, we probably had mostly comes from maybe Nvidia's GB series. This year probably is kind of mixed. I think this is a very typical pattern for equipment companies because we're dealing with CapEx spending, and the customers will not do exactly the same CapEx like components every year repeatedly. This is somehow we're able to comment on this system-level testing.
Just for a sec, Rachel, thanks, Jennifer. That's all I have. Thank you.
Yeah. Thank you.
Thank you. Next one has Hans Liu, UBS. Go ahead, please.
Yes. Hi. It's me again. I just have a few more follow-ups regarding your initial view into second half because maybe you could just share with us your view on how you gauge the second half micro uncertainty could potentially impact your business. Historically, you've also provided some of the seasonality for first half versus second half. For this time around, if you could share any view regarding that kind of seasonality, whether it will change meaningfully or if you can try to quantify it would be super helpful. Thanks.
I think it depends on personal choice. Okay. Basically, as I said, because our customers, they have no plan to change their CapEx for this year. And several new projects, for example, like Rubens and others, is still planning, and then it's pretty much unscheduled. I think we leave this kind of constant or change it just because it depends on the economic status. Yeah. Which is we already mentioned, for example, currency or we do not know what kind of U.S. new policies, etc. However, if you talk about tariffs, because first, we mostly dealing with customized equipment. Our pricing still depends on the customer's back. Second, I think this year overall, our customers still planning to build our CapEx outside the U.S. Maybe today, maybe we are not the right person to comment on the tariff impact.
Okay. Yeah. Just on the 5G power infrastructure buildup in China, which you are seeing much stronger than expected demand year to date and could actually sustain into second quarter, could you actually just provide some reference regarding how much this business has been contributing historically in the past couple of years? Because this year, you have a target for that 40% of the business will be coming from this part of the segment. How about in the past few years? Would you like single digits in 2024?
Single power business used to come from our bread and butter factors. We're always expecting a solar and steady and stable growth to support the, I mean, cash flow. Okay. The major growth momentum definitely comes from semiconductors because semiconductors normally tied up to new industries or new market penetrations. When we do the projection for power business, we normally like whatever rolled up digit things or okay, in spite of any kind of economic status. Come on to first quarter, first, we were quite surprised the demand is actually stronger than we expected. As you could see, first quarter, this is not yet move on to so-called new tariff issue. Second, initially, if you still remember back to February, we thought maybe legacy IC will probably have some declines, and we have pretty much concern.
Just like we comment, we didn't see legacy IC equipment declines as we expected.
Okay. Yeah. For the traditional power testing equipment business, I remember the last time you probably just guided low double digits growth. Is that guidance change at all based on what you are seeing right now?
I already said we have a very high level of confidence to offset whatever we decline last year.
Okay. Oh yeah. That's very helpful. I think just my last follow-up for this call is that I think for first quarter this year, that it is probably the first time your operating margins topped 30%. Do you think on a full year basis, based on your forecast right now, would you be able to keep that kind of level throughout this year, or you would expect some of the downside into second half with all the micro uncertainties?
I think operating margin just indicates the nature of the equipment company which is operating average. It still depends on the sales momentum. Yeah.
Okay. Okay.
I think second quarter will not be very volatile compared to first quarter. Even I think first quarter result was kind of impressive. Yeah.
Yeah. It was pretty impressive.
Yeah.
Okay. Thanks, Jennifer.
Thank you. Ladies and gentlemen, we thank you for all your questions, and that will be the end of this conference. We thank you for your participation in Chroma's conference, and there will be a webcast replay within an hour. Please visit www.chroma.com.tw/investor/index onto the investor relation section. You may now disconnect. Thank you and goodbye.
Thank you.