ChipMOS(IMOS) - 2019 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company achieved a 10% revenue growth in Q2 compared to Q1, with total revenue reaching $158.2 million [8][15] - Gross margin improved to 17.1% in Q2 from 15% in Q1, with net earnings per basic ADS increasing to $1.13 from $0.17 in Q1 [9][15] - Net profit for Q2 was $41.1 million, compared to $6.3 million in Q1, reflecting a significant increase in profitability [15][16] - Cash generation increased, with a reduction in net debt by $38.1 million, resulting in a net debt-to-equity ratio of 26.6% [9][17] Business Line Data and Key Metrics Changes - Revenue from Flash products grew by 14.4% in Q2 compared to Q1, representing about 19% of total Q2 revenue, while DRAM accounted for about 16% [10] - Driver IC-related business products saw a 13% revenue growth compared to Q1, with TDDI product revenue growing by 24% [11][12] - The revenue breakdown for Q2 was 20.1% in testing, 24.7% in assembly, 36% in LCD driver business, and 19.2% in bumping [15][16] Market Data and Key Metrics Changes - The automotive and industrial markets represented about 9% of total revenue in Q2, while TVs accounted for 24% and smart mobile devices increased to 39% [12] - The company is experiencing strong demand from TDDI and NAND flash businesses, particularly from new customer programs [10][13] Company Strategy and Development Direction - The company is focused on diversifying its customer base and end markets, which is driving revenue growth [8] - There is an emphasis on improving product cost and capacity utilization, with a target to maintain CapEx under 20% of total revenue [9][25] - The company is optimistic about growth in NAND and NOR flash segments, with plans to ramp up production and engage with key players in the market [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for the second half of 2019, citing healthy inventory levels and strong customer demand [13] - The company expects continued revenue growth in Q3 and Q4, although Q4 may see slightly lower growth compared to Q3 [31][32] - Management highlighted the positive impact of trade tensions, leading to increased customer shipping capacity to Taiwan [10] Other Important Information - A cash dividend of $0.77 per ADS was approved by shareholders, reflecting the company's commitment to returning value to shareholders [9][14] - The company completed the sale of 9.1 million common shares of JMC, resulting in a disposal gain of approximately $31.7 million [16] Q&A Session Summary Question: Can you provide additional color on gross margin trends for the second half? - Management indicated that gross margins are expected to improve further, with Q2's actual gross margin at 18.6% after adjusting for the JMC sale [21][23] Question: What is the CapEx outlook for the remainder of the year? - The company aims to keep total CapEx for 2019 in the range of 20% to 25% of total revenue [25] Question: What is the expected free cash flow for the remaining quarters? - Free cash flow for the total year is projected to be in the range of $5 million to $10 million, with Q3 expected to show negative free cash flow due to bonuses and dividends [27] Question: Can you provide updates on the joint venture in China? - The joint venture is progressing, with Unigroup taking the majority stake, and the company is recognizing long-term investment gains [29] Question: What is the revenue outlook for Q3 and Q4? - Management forecasts good performance for Q3, with Q4 expected to show sequential growth but slightly lower than Q3 [31][32]