ASE Technology Holding(ASX) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q3 2025, the company reported fully diluted EPS of $2.41 and basic EPS of $2.50, with consolidated net revenues of $168.6 billion, reflecting a 12% sequential increase and a 5% year-over-year increase [4][6] - Gross profit was $28.9 billion, with a gross margin of 17.1%, improving by 0.1% sequentially and 0.6% year-over-year [4][5] - Operating profit increased to $13.2 billion, up $3 billion sequentially and $1.7 billion year-over-year, with an operating margin of 7.8% [5][6] Business Line Data and Key Metrics Changes - The ATM business achieved record revenues of $100.3 billion, up 8% sequentially and 17% year-over-year, with a gross profit margin of 22.6% [8][10] - The EMS business reported revenues of $69 billion, increasing 17% sequentially but down 8% year-over-year, with an operating margin of 3.7% [12][13] Market Data and Key Metrics Changes - The company experienced a negative impact on margins due to foreign exchange fluctuations, estimating a 1.4% negative impact on holding company margins and a 2.1% impact on ATM margins sequentially [3][5] - The NT dollar strengthened by 4.6% against the US dollar during the quarter, affecting profitability [3] Company Strategy and Development Direction - The company is focusing on expanding its LEAP services, driven by AI demand, and expects to reach $1.6 billion in revenue for LEAP by the end of the year [17][20] - The company plans to increase capital expenditures to support growth in both AI and non-AI chip production, indicating a commitment to maintaining a competitive edge [20][21] Management's Comments on Operating Environment and Future Outlook - Management anticipates a more stable NT dollar environment in Q4 2025, projecting a 1% to 2% revenue growth quarter-over-quarter [4][19] - The company is confident in achieving over 20% year-over-year revenue growth in US dollar terms for ATM in 2025, driven by strong market recovery [20] Other Important Information - The company reported a net non-operating gain of $0.8 billion, primarily from foreign exchange hedging activities [6] - Total interest-bearing debt increased to $295.7 billion, largely due to a $50 billion syndicated loan for capital expenditures [15] Q&A Session Summary Question: Update on LEAP revenues and margin contribution - Management confirmed they are on track to reach the $1.6 billion target for LEAP this year, with strong momentum expected to continue into 2026 [24][26] Question: Pricing environment for advanced packaging - The company indicated that pricing remains resilient, with adjustments made based on current market conditions [30][31] Question: Update on US operations and competition - Management is evaluating investment opportunities in the US but has not made any decisions yet [34][35] Question: Final test business update - The company is expanding its test capacity and expects meaningful revenue from next-generation AI chips in late 2026 [38][39] Question: CapEx to revenue outlook - Management noted that while CapEx is increasing, the exact revenue generation timeline post-investment remains uncertain [94]