Earnings Call: Q1 2026

Apr 30, 2026

Slides

Welcome everyone to Chroma's 2026 first quarter earnings conference call. All line has been placed on mute to prevent background noise. After the presentation, there will be a question and answer section. Please follow the instruction 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 call is finished. Please visit www.chroma.com.tw/investor/index under the Investor Relations section. I would like to introduce our IR Director, Jennifer Chien. Ms. Chien, please begin. Okay. Thank you, Frank. Good afternoon, everyone. Welcome to Chroma First Quarter 2026 earnings conference. My name is Jennifer, and I will be your host for today's sessions. Today's agendas includes, our CFO, Paul Ying, will begin by presenting the financial results for the first quarter. I will then provide an overview of the product mix for the first quarter too. Afterwards, we will open the floor to questions and answers. All presentation material are available for download from the company website. With that, I will now turn the call over to our CFO, Paul Ying. Thank you, Jennifer. This is Paul Ying. I'm the CFO of Chroma ATE. Thanks for coming to this earning release of the first quarter of 2026. Let's go to the first quarter condensed consolidated income statement. We can start it from the 2026 first quarter net sales, which has reached to TWD 11.8 billion. This is a record high at the first quarter of 2026. Well, please keep in mind that normally first quarter is a low season in all 4 seasons every year. This is a quite exciting achievement for Chroma at the first quarters. From here, you can see that compared to last year, fourth quarters, Q over Q, we have a 38% growth. Compared to first quarter of 2025 last year, this is 73% of growth. If we look at the gross margin and the gross profit, it reaches approximately TWD 7.4 billion and reach at the 63% as the gross margin. This is, I think, the 2nd highest on a quarterly gross margin achievement. Compared to last year, fourth quarter, this is a 42% growth and another 79% growth compared to first quarter of last year. As to the operating expenses, if we look at the percentage, well, on a Q-over-Q base, it's approximately 17% growth. Compared to last year, first quarter, it's approximately 32% growth. That we reached an operating income by TWD 4.7 billion, nearly TWD 4.8 billion, and occupied like a 40% to the top line. This is a 61% growth on a quarter-over-quarter base and another 122 doubling the size compared to the last year, first quarter. Our net income reaches by TWD 3.9 billion and occupies 33% compared to the top line. This is a 49% growth compared to last year, fourth quarter. On a year-over-year base, compared to the first quarter of last year, it's a 83% growth. In there, you can see that we reached, somewhere, in, TWD 9.12 as the earning per share. Compared to last year, fourth quarter, it's a 51% growth and another 81% growth on a year-over-year base. This is the achievement on the bottom line. Let's go to the next page. On the slide number 6, you can see the balance sheet highlights and the financial ratios. Here you also can see that the consolidated balance sheet highlights. From here, you can see that, our cash and short-term investment, grows by 10% compared to last year-end. Inventory grows by another 14%. Total assets reach out by a TWD 54.6 billion. It's a 16% growth. On the inventory turnover days, is approximately less than the 6 months, reaching by 172 days, which is pretty much the expectation of the management. Accounts receivable turnover days is less than 80 days, which is 77 days. Net debt to equity is still net cash. Our return on assets is reaching 51% and compared to last year-end, 29% is a pretty good growth. For the return on assets, it's 30%. It's also another 10% growth compared to last year. For the cash positions, our EBITDA reached by TWD 5.3 billion, our cash flow from the operation is at approximately TWD 1 billion. Free cash flow due to the investment on the fixed income financial instruments, it reach out a negative TWD 825 million. This is the highlight for the balance sheet. Let's go to the operation highlights. Jennifer, I turn it to you. Okay. Thank you, Paul Ying. Please refer to slide 8 for details on our product mix for the first quarter. The key drivers. During the first quarter, the primary driver of growth was our test instrument in ATS sections, which has saw a remarkable increase of 105% quarter-over-quarter and 145% year-over-year. This surge was mainly contributed by AI server power applications. In addition to AI server power, we anticipate the battery cell project will start to contribute in sales revenue from second quarter. Move on to semiconductor testers performance. The semiconductor testers achieved revenue of TWD 3.4 billion in the first quarter, representing 19% growth quarter-over-quarter and 31% year-over-year. The main contributors to this growth were system level testers and the photonic testers ranked by sales revenue contribution. Looking ahead, we expect order to increase in the coming quarters. Currently, the world top 3 AI HPC companies have adopt our system level testers. In addition to NVIDIA, both AMD and Google are expected to make meaningful contributions this year. As the demand from the customers continue to increase, plus the cycle times also increase, we are considering revising our forecast upwards for the coming quarters. For photonics and the CPO developments, another area exceeding expectation is the photonics. The demands on the transceiver market, CPO will also make a meaningful contribution beginning this year. The CPO sections is now structured into 4 insertions. Insertion 1, PIC testing. Insertion 2, EIC testing. Insertion 3, optical engine testing. Chroma has already received the purchase order for these insertions. Insertion 4 break down into 2 processes. First one is Insertion 4.O, testing optical light in and out, 100% Chroma. The confirmed purchase order has been received. Another insertion is so-called Insertion 4E. It's a BER testing. It's kind of a signal testing. The customer is ready and plans to begin a pilot run from June of this year. The same optical engine will be applied for both scale out and scale up scenarios. According to recent customers who released their vendor list and PO. That is our highlights for this quarters. Now we move on to Q&A. Thank you. We'll now begin our question and answer section. If you have questions for any of today's speakers, please press star 1 on your telephone keypad, and you will enter the queue. After you are announced, please ask your questions. If you find that your question has been answered before your turn to speak, please press star 2 to cancel. Please press star 1 on your keypad if you would like to ask a question. The first question is come from Arthur Lai with Macquarie. Arthur, please go ahead. Hi, Paul and Jennifer. First congrats on the strong result. I have a very simple question, maybe to both of you guys. This quarter, we have a very good ATS revenue year-over-year up 145%. Is this sustainable or not? Based on our experience, you know, this sector actually is our strength, but usually we don't see so strong growth rate. This is the first question. If I may, can I have a second question on the gross margin? We also see your very strong gross margin as well. I personally believe it's a mix, right? Do you foresee any mix change in the second half or when the other semiconductor products, you know, impact your mix? My 2 questions. Thank you. Yeah. Hi, Arthur. A comment on your first questions. You mean the growth rate or the dollars? Growth rate. You mean that mean every quarter we need to present like 100%? We cannot to give the guidance like that, but I'm sure this year we definitely will have some very good results on the testing instruments and ATS. As regarding to the second quarter, we usually don't comment on gross margin, as you've already could assess this kind of number from our financial statements. Okay. Understand. Thank you. No more question. Yep. Thank you. The next questions come from Kevin Chen with Citi. Kevin, please go ahead. Hello, Paul, and Jennifer. Thank you for taking my question. I have 2 question also. The first one was for this quarter, in the semi and photonic division. Just wanna get a sense how much of that come from photonic related. I think so far this year, most of this photonic revenue was still driven by pluggable transceiver. I wanna get a sense of how much incremental opportunity can we expect from CPO ramp-up, starting with, say, second half this year and also into next year. Thank you. I think at the time we did our forecast for this year, we didn't include the CPO because at that time, the CPO was not very clear. You could think CPO is actually, you know, extra on top of the transceiver. Despite of we actually see very strong transceiver growth this year, yeah, at the time we make the forecast for 2026. Currently, our customers already finaled the scale out and scale up. They were using the same type and design of optical engines. Yes, I think customers already gave us the forecast, especially for insertion 3 for 2027. I think you could have some expectation from the carry around, second from second half this year. Okay. Got it. My second question is on the SLT. I think you just mentioned that we're seeing very strong demand increase as well as some cycle time getting longer. I was wondering what kind of incremental cycle time and or order size are we seeing? If I may, I was wondering how are we seeing the SLT upgrade cycle? Because I think in the past we usually see a 2 major upgrade driven by a power density increase. All the AI right now, the AI chip system are migrating faster and faster. Let's say next year's key customers upgrade. Are we going to see another round of faster upgrade next year as well? I think your thesis is based on NVIDIA solution, but I think please don't forget that this year we are also having the other two giants HPC companies. Like include AMD and Google's. We haven't really finished all the Rubin, all the delivers and, but AMD is coming up. AMD actually have a very heavy weight on, especially on system level testers. Based on their power density, AMD, the cycle time is started from, they design for 4 hours, and now it's actually running much more than 4 hours. Actually order is increased too. Okay. Okay. Understand. Thank you, Jennifer. Yeah. Thank you. Thank you. Our next question is come from Huss with Bank of America. Huss, please go ahead. Hi, this is Cathy on behalf of Huss. Thanks for taking our questions. Yes. The first question is regarding the burn-in. Would you be able to share more detail on your current engagement with customer on the burn-in solution, and how should we think about the long-term opportunity? Thank you. We already received one CS customer's placing order for our new burn-in systems. For the others, as you trial in a or you could say in the middle process, for adopting our burn-in systems. I think this will be one of the driver for coming years, for sure. Sure. My next question is related to power testings. Yes. Given the continued update in the AI power solutions, would you provide some updates on the backlog from your customers? Are you seeing more tractions across your long-term power solution partners, along with more requests from your ESS and battery customers? Thank you. I don't quite understand your question. You mean the AI power, AI server powers or you? Yes want to mix up everything? Because ESS is nothing. Um, AI- ESS is nothing to deal with AI server power. Both from the AI powers and also from the ESS and battery customers. Thank you. I guess everyone knows about AI server power, someone like Delta, Lite-On, AI photonics, and some Chinese makers. Yeah. Would you, like, provide some updates on the backlog you are seeing right now or. We comment on individual customers and their backlog. Thank you. Thank you. Got it. Thank you. My last question is related to system-level test. Yeah. Would you be able to provide, like, how do you think about the addressable markets into 2027 and 2028? Thank you. We'll let you know when we finalize the forecast for next year. Okay. Well noted. I'll be back to the queue. Thank you so much. Thank you. Thank you. Our next question is come from Alex Wang with Bernstein. Alex, please go ahead. Hi. Hey, this is Alex from Bernstein. Thank you, Jennifer and Paul. Great results. My 1st question is, I understand that in the past Yeah photonics normally represent 15% to 20% of your semi revenue. Looking at this year, what will be the ballpark of photonics mix, do you think? Honestly, I have no idea. That's too strong. First, as we just guide before, we didn't include the CPO as a part of projection for this year. We also do see the increasing demand come from Gen Zivo. I think please I only could say, please do not underestimate our contribution from CPO. Yeah. I see. I assume the mix will be higher than previously, like 15%-20%? Yeah, as we just mentioned, our system level tester, the orders also increased. Yeah. I see. We probably will only have this kind of idea about the breakdowns by end of this year. Okay. Okay. Fair enough. Second question is that, last quarter, you show a slide about your AI FPGA handler. I'm wondering if you have any update on that regarding client tractions, order size, et cetera. It's everything on schedule. You will see the result coming up. Yeah. Okay. I see. Maybe the, my last question is that, I understand equipment shipment is very lumpy every quarter, but you have so many types of equipment that might smooth out the seasonality. What do you see the quarterly sales trend in the remainder of this year? This is actually a very good question, you know, we do I wouldn't say it looks lumpy sometimes, but not that lumpy. Because sometimes we deliver like all in one just because to meet the customer's requirements, their schedule or ramping up schedule. You know, we do everything to maximize customer satisfactions. Based on our current order visibility is quite long. It's very hard for me to comment on seasonality pattern. I see. 'Cause I'm looking at your last year's seasonality. Yeah. The first few quarters were like TWD 6 billion-7 billion and jumped to TWD 9 billion. Yeah. This first quarter is too strong, TWD 12 billion. In the remainder of this year, should we expect something similar to first quarter number? I have no idea. Yeah. As you could see, we maybe just started because we have a window of not-nothing booked for the battery cell at the moment. We will not stop taking orders from today. Yeah. Yeah. I see. Okay. I understand. Yeah, that's all my questions. I will back to the queue. Yeah. Thank you. Yeah. Thank you. Our next question is come from Jerry Su with UBS. Jerry, please go ahead. Thanks for taking my question. First question on the SLT side. I think, Jennifer, previously you commented that you're potentially raised your forecast. Can any idea, you know, how much of your upside you are seeing right now for this SLT business? Hi, Jerry Su. We do seriously consider to revise up because first, we have not completed deliver for our big customers. They currently would like to increase the cycle time. They recently also add more orders. I really have to especially highlight that we are very strong in the liquid cooling, so that's why we glad to have this customer. Google is starting up, you know. I think maybe they will be locating the second half this year. Our big customers as well, which is NVIDIA, they're also planning to ramp out LPU. This is also one of the reasons we do consider to revise our System-Level Test, sure. Thank you. Any ballpark idea on, you know, comparing with the previous forecast, what kind of magnitude you're expecting right now? Since we are not releasing individual factors to forecast, we will not provide any further numbers regarding to that. Okay. Understood. On the metrology side, can you give us some, you know, update on this business? We do everything to support the TSMC foundry. Okay. The statement we're able to comment. Yeah. Okay. The outside of the main foundry, I think a lot of OSATs are also, you know, are helping, or you can say developing similar process as the foundry. Yes. Do we think that this should be your opportunities as well? Yeah, that actually happened. It started from last year. As you could see, we also design another metrology tool, which is ProMark. We do see the order continue to, you know, contribute from this year too. Yeah. All right. Okay. Got it. Thank you. I'll get back to the queue. Thank you. Yeah. Thank you. Our next question is come from Michael Hsu with Yuanta. Michael, please go ahead. Hi, Michael. Hi. Hi, Jennifer. Can you hear me? Yes, please go ahead. Yes. Thanks, congrats for the great result. First one, also want to follow up at transceiver and on photonics business. Because we also learn from supply chain that no matter transceiver or CPO, it has a really strong demand. Could we have more color about, like for CPO product, like the contribution for Insertion 4? Is there will be similar to the Insertion 3 or will be higher or lower? I think I would suggest analyst to break this CPO things into wafer levels and die level. Okay. If you look at the die levels according to current customers' forecast for coming out 2027, the volume ramp, I would say insertion 3 is a more higher addressable dollar overall. Oh. Oh, great. Congrats. Yeah. Thanks. Yeah. The other chip, is there likely for the CPO switch have a SLT test or is still uncertain? Depends on how you define it, because right now, as I just briefed, Insertion 4 right now break down into two sections. Yeah. Insertion 4.O and Insertion 4E. You also could consider, because, you know, in under Insertion 4.O, which is even is optical light in and out, this is also kind of concept of a system level testers. Okay. Just depends on how you define that. If you say this kind of real practice is also in line with the thesis of designs like a GPU system level tester, I would say this is some kind of optical type of the system level testers. Oh, great. If you say 4, Insertion 4E, it's just a signal testing, you know. It's not like a final testing, you know, back to Insertion 2. It just measure the signal, how it turn It's BER testing, which is, you know, turn the light, switching between light and electrical. That's like eye testing. Oh, great. It's helpful. Yeah. Very detailed. My second question is about could we have more color for the first quarter on the ESS and the power business for ATS? Yeah. Could we have a breakdown like it's more on Because you mentioned it's mainly driven by the AI power demand. Could we have a more color on power part and also ESS part, and could it sustain to the further quarters in 2026? First quarter mostly come from AI server power. You actually can expect the contribution from ESS from second quarter. It doesn't mean we don't have the AI server power in the second quarter. We do have the customers which is block out the whole year's orders. Oh, great. Whole year's capacity. You need to consider maybe some of the months, where you have to like, one shot regarding to this, you know, battery cell project. Got it. Well, no, thank you. Yeah. capacity plan, sorry. We saw the really strong demand for 2026 and even 2027. What's our plan for like 2027 or 2028? Will we have need to have more space in like the second half of 2027 or 2028? That's a very good question because actually regarding to our phase 2, originally we designed for 2 towers, you know, north and south towers. Due to the kind of strong visibility in the coming years, we decide not to sell any of the towers. We will keep it for our later's capacity ramped. We're supposed to be have a sufficient capacity in the coming maybe 3 or 5 years. Wow. Cool. Yeah. Thank. That's all. Thanks for the answer. Thank you. Thank you. Thank you. There are currently no more questions. Thank you for your participation in Chroma's conference.