ASE Technology Holding(ASX)2024-04-26 05:20Financial Data and Key Metrics Changes - For Q1 2024, the company recorded fully diluted EPS of $1.28 and basic EPS of $1.32, with consolidated net revenues declining 17% sequentially but increasing 1% year-over-year [5][8] - Gross profit was $20.9 billion with a gross margin of 15.7%, which declined by 0.3 percentage points sequentially but increased by 0.9 percentage points year-over-year [5][6] - Operating profit was $7.5 billion, down $4.3 billion sequentially and down $0.2 billion year-over-year, with an operating margin decline of 1.7 percentage points sequentially and 0.2 percentage points year-over-year [7][8] Business Line Data and Key Metrics Changes - ATM business revenues were $73.9 billion, down $8.1 billion sequentially (10% decline) but up $0.6 billion year-over-year (1% increase) [9][10] - EMS revenues were $59.4 billion, declining $19.8 billion or 25% sequentially but improving $1.6 billion or 3% year-over-year [15][16] - The gross margin for the ATM business was 21%, down 2.4 percentage points sequentially but up 0.9 percentage points year-over-year [10][12] Market Data and Key Metrics Changes - The overall demand environment for services fell on a sequential basis due to seasonality, with higher and leading-edge services performing better than legacy services [4] - The NT dollar appreciated 2% against the U.S. dollar sequentially during Q1, impacting gross and operating margins negatively by 0.55 percentage points [8][9] - The company expects a slightly improved demand environment for Q2 2024, with ATM revenue projected to grow by mid-single digits quarter-over-quarter [22] Company Strategy and Development Direction - The company aims to double leading-edge advanced packaging revenues in the current year, tracking ahead of target [15] - There is a focus on increasing investments in R&D and expanding overseas operations, with a 10% increase in CapEx planned for the year [29][42] - The company is monitoring the potential for establishing a facility in the U.S. but currently does not see it as economically viable [52][53] Management's Comments on Operating Environment and Future Outlook - Management believes that most sectors are bottoming out, with expectations for gradual recovery in the second half of the year [25][34] - The company anticipates that the increase in electricity rates will negatively impact gross margins by approximately 0.8 percentage points in Q2 [21][58] - Despite challenges, management remains confident in reaching structural gross margin targets of 25% to 30% for the second half of the year [58][60] Other Important Information - The company reported cash, cash equivalents, and current financial assets of $83.5 billion, increasing by $11.5 billion [18] - Total interest-bearing debt increased slightly to $195.3 billion, primarily due to currency fluctuations [18] - The company is seeing increasing adoption of AI-related packaging services, which are expected to drive future growth [19][20] Q&A Session Summary Question: Overall end demand outlook and automotive sector - Management sees most sectors bottoming out in Q2, with automotive still expected to grow despite some softness [25][27] Question: Advanced packaging growth and long-term view - Strong growth momentum is expected in AI-related packaging and testing, with a 10% increase in CapEx focused on this area [29][30] Question: Utilization rates and pricing changes - Utilization rates are expected to improve above 70% in the second half, with overall pricing remaining resilient despite some pressure on legacy products [70][72] Question: U.S. expansion plans and SiP business growth - The company is monitoring the U.S. market for potential expansion but does not see immediate plans, while SiP business growth is expected to resume next year [56][52]