Tower Semiconductor(TSEM) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported Q2 2020 revenues of $310 million, meeting guidance, with EBITDA of $82 million and net profit of $19 million, reflecting a strong financial position with record shareholders' equity and total balance sheet [6][21][22] - Revenue increased from $300 million in Q1 2020 and $306 million in Q2 2019, with gross profit rising to $58 million from $53 million in the previous quarter [22][24] - Net profit for Q2 2020 was $19 million, up from $17 million in Q1 2020, but down from $21 million in Q2 2019 [23][25] Business Line Data and Key Metrics Changes - The Analog IC business unit, particularly silicon germanium optical, showed strength driven by 5G infrastructure and datacenter demand, with a projected 20% revenue growth year-over-year [10][12] - The mobile RF business is expected to grow 10% to 15% year-over-year despite a 20% market pullback due to COVID-19 [12][38] - The Power IC business anticipates 20% year-over-year growth, particularly in battery management for electric vehicles, despite some impacts from COVID-19 [14][62] - The Sensor business unit forecasts single-digit growth, with some segments adversely affected by COVID-19, particularly dental x-ray sensors [16] Market Data and Key Metrics Changes - Utilization rates in various fabs showed improvement, with Newport Beach at 70% and San Antonio also at 70%, indicating increased demand for silicon germanium [18] - The company is experiencing strong demand in the 5G and datacenter markets, contributing to overall growth despite challenges in other sectors [10][79] Company Strategy and Development Direction - The company is focused on capacity expansion, particularly in its 300mm facility, to meet increasing technology demands [6][10] - Continued investment in new technology and partnerships with Tier 1 customers, such as the collaboration with Infinera for advanced optical transceivers, is a key strategic focus [11] - The company aims to maintain its leadership position in silicon germanium and silicon photonics technologies [11][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the COVID-19 pandemic, ensuring business continuity and safety for employees [7][9] - The outlook for the second half of 2020 remains positive, with expectations of continued revenue growth driven by strong customer demand in key markets [10][19] - Management noted that while there is short-term caution in the mobile sector due to customer visibility issues, long-term growth prospects remain strong [13][54] Other Important Information - The company achieved a current assets ratio of 3.5x and record shareholders' equity of $1.39 billion, indicating a strong financial position [21][27] - The company has implemented currency hedging activities to mitigate risks associated with fluctuations in the Japanese yen and Israeli shekel [28][30] Q&A Session Summary Question: Organic growth rates - The company indicated that most organic growth was in silicon germanium for datacenters and 5G, with specific numbers to be provided later [32][34] Question: Capacity expansion - Management confirmed that capacity built out in 2018 and 2019 allows for a potential increase of 30% to 35% from current high start levels [36] Question: Mobile market growth - The company reaffirmed a 10% to 15% year-over-year growth in RF SOI despite a market pullback, attributing this to market share gains [38] Question: Sensing projects - Management noted multiple customers for fingerprint sensors and time-of-flight projects, with significant opportunities expected in 2021 [46] Question: Automotive exposure - The company has a solid automotive exposure through long-term agreements and anticipates a rebound in this sector [61][62] Question: RF SOI market share - Management stated that there is no natural limit to growth in RF SOI, with strong advanced flows and plans for further expansion [66][68]