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Amkor Technology(AMKR) - 2024 Q3 - Earnings Call Transcript
AMKRAmkor Technology(AMKR)2024-10-29 01:02
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Financial Data and Key Metrics - Q3 2024 revenue was 1.86billion,a271.86 billion, a 27% sequential increase, driven by advanced SiP technology [6] - Q3 EPS was 0.49 [6] - Gross profit for Q3 was 272million,withagrossmarginof14.6272 million, with a gross margin of 14.6%, constrained by higher material content [26] - Operating income increased over 80% sequentially to 149 million, with an operating margin of 8% [27] - Net income for Q3 was 123million,resultinginEPSof123 million, resulting in EPS of 0.49 [27] - Q3 EBITDA was 309million,withanEBITDAmarginof16.6309 million, with an EBITDA margin of 16.6% [27] - The company ended the quarter with 1.5 billion in cash and short-term investments, and total liquidity of 2.2billion[27]−Totaldebtstoodat2.2 billion [27] - Total debt stood at 1.1 billion, with a debt-to-EBITDA ratio of 1x [28] Business Line Data and Key Metrics - Advanced packaging revenue increased 6% year-to-date over 2023, driven by AI and high-performance computing [8] - Mainstream business revenue declined 24% year-to-date due to weakness in automotive, industrial, and consumer markets [8] - Communications end-market revenue increased 36% sequentially, driven by premium tier smartphone launches [11] - Automotive and industrial revenue remained stable, with a year-to-date decline of 17% [13][14] - Computing end-market revenue increased 6% sequentially and 23% year-on-year, driven by AI devices [15] - Consumer end-market revenue increased 70% sequentially, driven by a new wearable IoT device [17] Market Data and Key Metrics - Demand for AI devices remains strong, with 2024 revenue for 2.5D expected to quadruple versus 2023 [16] - Traditional server and networking business declined 33% year-to-date, with early signs of recovery in Q4 [16] - Automotive and industrial markets are experiencing prolonged weakness, with recovery timing uncertain [14] - The company expects a more-than-seasonal decline in Q4, with revenue guidance of 1.65billion,primarilyduetodynamicsinthecommunicationsendmarket[24]CompanyStrategyandIndustryCompetition−Thecompanyisfocusedonthreestrategicpillars:technologyleadershipinadvancedpackaging,globalmanufacturingfootprint,andstrategicpartnerships[9]−ProductionhasstartedinVietnam,andplansfortheArizonafacilityareprogressingwell,supportedbyCHIPSfunding[10][22]−StrategicpartnershipswithindustryleaderslikeTSMCandInfineonstrengthenthecompany′spositioninseculargrowthmarkets[10]−Thecompanyisdiversifyingitscustomerandtechnologyportfolio,particularlyinAIandhigh−performancecomputing[52]ManagementCommentaryonOperatingEnvironmentandFutureOutlook−Thecompanyexpectsagradualrecoveryinautomotiveandindustrialmarkets,withmodestgrowthinQ4andfurthergrowthin2025[42]−Thecommunicationsmarketisexpectedtodeclinesingle−digitsforfull−year2024,whileautomotiveandindustrialmarketsareexpectedtodeclinedouble−digits[24]−Thecompanyremainsconfidentinlong−termgrowthprospects,supportedbyitstechnologyportfolio,globalmanufacturingfootprint,andstrategicpartnerships[25]OtherImportantInformation−Thecompanyisinvesting1.65 billion, primarily due to dynamics in the communications end market [24] Company Strategy and Industry Competition - The company is focused on three strategic pillars: technology leadership in advanced packaging, global manufacturing footprint, and strategic partnerships [9] - Production has started in Vietnam, and plans for the Arizona facility are progressing well, supported by CHIPS funding [10][22] - Strategic partnerships with industry leaders like TSMC and Infineon strengthen the company's position in secular growth markets [10] - The company is diversifying its customer and technology portfolio, particularly in AI and high-performance computing [52] Management Commentary on Operating Environment and Future Outlook - The company expects a gradual recovery in automotive and industrial markets, with modest growth in Q4 and further growth in 2025 [42] - The communications market is expected to decline single-digits for full-year 2024, while automotive and industrial markets are expected to decline double-digits [24] - The company remains confident in long-term growth prospects, supported by its technology portfolio, global manufacturing footprint, and strategic partnerships [25] Other Important Information - The company is investing 750 million in CapEx for 2024, with two-thirds focused on expanding capacity for 2.5D and advanced SiP technologies [33] - The Vietnam facility started production in Q3, with expected volume ramps in Q4 [20] - The company is qualifying next-generation organic RDL interposer solutions for 2025 [20] Q&A Session Summary Question: Capacity additions and underutilization charges [36] - The company is fully utilizing its 2.5D capacity and plans further expansion in 2025 [37] - Underutilization is primarily in automotive and industrial lines, with gradual recovery expected in 2025 [38] - The Vietnam facility is expected to dilute gross margins by 50 basis points in Q3 and 100 basis points in Q4, tapering off in 2025 [40] Question: Automotive market dynamics [41] - The automotive market is stabilizing, with modest growth expected in Q4 and gradual recovery in 2025 [42] Question: Premium tier smartphone build plan and 2025 outlook [45] - Visibility into 2025 is limited, but the company expects a stronger cycle driven by AI functionality in premium tier phones [45] - The $100 million revenue range in Q4 guidance is primarily due to deviations in the phone build plan [46] Question: Business trends in the first half of 2025 [50] - The company expects headwinds in the iOS ecosystem but gradual recovery in Android, automotive, and industrial markets [50] - Computing and consumer markets are expected to show continued growth [50] Question: AI market and customer diversification [51] - The company is diversifying its customer and technology portfolio, with new customers onboarding for 2.5D technology [52] Question: Gross margin outlook for 2025 [55] - Gross margins are expected to improve in 2025 due to recovery in automotive, industrial, and traditional server markets [56] Question: Key growth drivers for 2025 [57] - The company expects growth in AI edge devices, automotive power modules, and continued strength in computing [58] Question: Vietnam and Arizona facility ramp-up [59] - Vietnam is ramping up SiP and memory production, with additional 2.5D capacity expected by mid-2025 [60] - The Arizona facility will run TSMC technology for joint customers, with additional Amkor advanced packaging technology [63] Question: Test business and CapEx for 2025 [64] - The company is pursuing investments in test business, particularly for AI devices [65] - CapEx for 2025 is expected to remain in the low-teens, with continued investment in 2.5D and panel-level packaging [66] Question: iOS phone ramp and substrate issues [68] - The company experienced a deviation in seasonality for iOS and Android phone builds, with a device changeover impacting Q4 [69] Question: Vietnam facility ramp impact on gross margins [70] - The Vietnam facility is expected to impact gross margins by 100 basis points in Q4, tapering off in 2025 [70] Question: Incremental investment in 2.5D capacity [73] - The company plans significant capacity expansion in 2.5D for 2025, similar to the expansion in 2024 [75] Question: HBM shortage and ramp timing [76] - The company experienced some HBM supply constraints in Q3, but overall 2.5D capacity expansion was fully utilized [76] Question: Automotive and industrial market recovery [79] - The automotive market is stabilizing, with inventory correction extending into Q3, but recovery is expected in 2025 [79]