AMKR - Earnings call transcript Q3 2017

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Operator

Good day, ladies and gentlemen, and welcome to the Amkor Technology Third Quarter 2017 Earnings Conference Call. My name is Tyron and I will be your conference facilitator today. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Greg Johnson, Vice President of Finance and Investor Relations. Mr. ahead. go please Johnson,

Greg Johnson

and everyone. Tyron, good you, afternoon, Thank

Joining Chief our Executive are Steve Chief President and Kelley, our Officer; Officer. me today Financial and Megan Faust,

Our SEC with available was our earnings and on afternoon is the website. press release this filed

non-GAAP call, find you to U.S. use reconciliation our on measures GAAP and During this equivalent will website. financial conference the we can the

we We based on performance for Amkor's will future also make environment forward-looking currently as statements it. about our expectations see the

press I could our and these be factors, materially to results will different. results would Please discussed filings course, turn information other expectations. to the final Of results for Steve. financial our data to that be and SEC Please actual could uncertainties the today included refer and cause differ are release on risk now, exceptions from Form that like call note to over preliminary in And XX-Q. actual

Steve Kelley

call. quarter forecast. will thanks afternoon, I review joining quarter fourth Today, our third the our and Good for and results

progress In wafer automotive. addition, I’ll update China in some packaging, Greater level growth and including areas key our

X% quarter and up factory markets, well good were We benefited in strong all XX% as as sequentially robust end sales execution. nearly from Third demand year-on-year.

we result, dollars XX% a generated cash increased As free $XX quarter-on-quarter margin in and million gross flow.

phases we that with By cycle. flow, regions, performance Amkor and were year, pleased QX. our the across to our the by believe free all in expect million flow customers more cash $XXX engaging We growth. will For revenue multiple consistent third generate I of business in free over through cash consecutive year more broad-based deliver markets of growth

packaging customers. to more largely nine countries and level, package MEMS In four provides produced advanced for XXXX, level communications Our and business first market third mobile wafer grew into for XX% quarter manufacturing We were options flexibility, demand in these of year-on-year. wafer gives our the packages particularly which technologies. our system us strong, months shipments due the

level long Cooperation With wafer technology technology. and into well. has integration going lineup the Amkor has we in Our and between acquisition in volume and fan-in. are been The a fan-in fan-out. our NANIUM, technology fan-out is a Amkor leader been NANIUM of very teams of includes excellent. leader both volume also

performance fan-out to-date pleased include production in Porto Amkor's our at the lines the and in achievements the Our Asia-based sales fan-out option. in expansion successful fan-out quality to of and transfer fan-out an NANIUM's team, capacity engagements, our with increase of facility, KX We're and of the worldwide leveraging both technology very Porto giving facility manufacturing customers customer yield KX.

like in Now gains. sales to I where China on nine solid In Greater grew progress to first make XX% we're months would of the touch continuing customers to year-on-year. XXXX, our China Greater

in to heavily lot for of our and China. Shanghai investing even to business. are continues There factory attract upside China Amkor Greater our team sales in more We Greater be a and

revenue. months we're of in year-on-year for business been total X% nine to and Amkor's grew in customers. number IC grow years. move Amkor the XXXX, OSAT largest is Amkor understand automotive positioned of for decades market. let's revenue for Now thoroughly to and automotive We’ve the In coming the automotive strong and XX% roughly market for ICs the a proposition Amkor value accounted needs. has second automotive, well X first

for prefer stability. suppliers execution product place financial quality, We a Long the of mindset automotive necessary over maintain the and life has automotive on geographic and success Our created and premium upgrade long-term cycles customers that mean long-term. focus course who on factories the technology over decades.

choice. logical a is Amkor So

place primarily IDM's equipment in Traditionally Automotive wirebond their new business suppliers years investing factories. production IC has supplier in stable packaging. the automotive a continuously favored driven taking by been have the the XX available And need automotive We own were nearly IC and advance capabilities. IDM for with Today, for new important storage part environment changing. Many IC of sensing makers have commonly of ecosystem. functions advanced the produced fabless is in IC an these in capabilities, packages only factories. market which become advanced and are most processing, are less

is clean advanced environment move product KX of are packages highly newest high we in customers automotive machine and predict content, Another the the coming driven together. another. electronic reliability This number components facility as in the use and expensive the and factories increasing ICs one length of are Market growth interconnects. us. advanced automotive is increased attractive fully rates by trend type built market about customers. also years improved of should placing front opportunities and value we’re our growth excited from robots These by technology. single other summary, is In used our and improve forecasters of in and focused market the in performance automotive but given in automation Advanced SiP's reducing the system market valued and closer to expands. package proposition quality by for by automated position They digit benefit our very to

$X.X quarter revenue quarter. end outlook. company. quarter XXXX in approximately we for QX financial Moving our detailed over And The fourth XXXX and billion, and full based and record now demand now the will X% guidance, on increase year revenues will $X.X expect provide to fourth of be revenue solid the other Megan drive XXXX information. a markets to more our billion communications nearly and fourth a our

Megan Faust

full Today and quarter Steve, our year some will quarter provide afternoon activity. you, our fourth Thank good I about then results, review everyone. third and comments

a XX EBITDA $XXX earned and in of last in for second the KX billion $X.XX $X quarter. profitability of billion per the generated share increased the on We EBITDA quarter. significant of business. our sales total by the XX% excluding sequentially drove of quarter gain for which XX% QX year-on-year Operating were and grew was X% income Sales sale record. we over months. have $X.XX an million all-time Third the

margin gross quarter Third was XX.X%.

million plan, $XX in third consolidation approximately XXXX costs the As Japan of of part quarter. one-time our we incurred factory

impact elimination expect to expect XX% we QX This $XX expect of from savings fourth incurred structure. complete $XX cost the consolidation reduction quarter. our $XX the benefits in in the consolidation. this and the gross the under includes annualized we over in improved we one-time We initiative, estimate initiative from around you that of would of from cost the million been total manufacturing anticipated the give margin reflects favorable an of To million million including have the activities QX factory In cost. idea this

end million available QX. in $XXX Our around in and liquidity undrawn We is had million cash $XXX at solid. the loans of

has full million $XX cash flow. than We flow expect level free free at generated substantially higher in flow cash free capital and disciplined on be driven positive focus XXXX. expenditures a the year to improved cash for in Our QX

and on During using $X premiums the redeemed million full our savings during We we'll QX. million of in debt interest annualized quarter interest $XX we a QX $XXX in approximately will pretax The savings cash quarter hand. due realize start and notes incurred write-offs of XXXX deferred million. senior to be

than sustained debt September reflects is $X.X our XX free of X.X from billion cash and significant of growth times. to a we and of times As our EBITDA ratio two XXXX. had improvement flow less debt X.X This total of ago since years of

labor, will so expenses with XXXX the of will transition and production. to costs will for Operating to sold return around as and includes be I more these are $XXX in This fourth QX cost expected full some million R&D goods to our bring other The transition Next continue of expenses review traditional activities. to expense costs fourth quarter. we our KX. of and depreciation in year quarter begin lines levels. up operating associated

We year expenditures expect this million. full is and accomplishments expectations XXXX now XXXX around XXXX year a significant Amkor tax about effective for year one XX% capital our forecast year of transition. and to for is full remarkable our with for be rate $XXX

revenues. cost improve decline for We we the and Korea began exercised in as million. up questions. pretax transition record manufacturing cash. NANIUM cycle integrated over will CapEx Japan will for focused which meaningfully Korea resulted factory revenue. of significant call a and purchased structure. and complete in we We which in of during that, up delivering open discipline at closed and operating opened production percent We are are will factory your free KX KX We time our a expenses higher now level same cost as the state-of-the-art our $XXX on excluding in significantly We our and industry gain the Operator? qualified At wafer KX fan-out. plan our will sold significant we factory consolidation factory delivery our Portugal a With

Operator

is [Operator Sidney from Instructions] Bank. Our Ho question of first Deutsche

open. Your line is

Sidney Ho

of end that you is regards you the any the third that to the and high above with what So underperform for bigger guidance results, coming areas surprise expected? which range quarter

Steve Kelley

biggest assumed that the QX in we surprise of general the would quarter-on-quarter. market was strength be flat QX general market. I we the forecasted think When

In was was biggest so significantly fact it the up surprise. that

most strength but into We also in saw forecast. of that incorporated our was communications already

Sidney Ho

at X% that’s offset Maybe given the your guidance about? down that is supply QX are also the some think stronger look we delayed apple if increasing. as the and at a is into you price What QX content guidance, to a chain The that follow-up about revenue should midpoint. now your is little of

Steve Kelley

for say general smartphones. general When everything QX I I again So mean is a think market story. except I market

and networking - industrial So same will seasonal and roughly typical saying the the are at think basically in QX in be markets in XXXX consumer, levels. we we’re forecasting revenue we those segments the pattern as

have J-Devices the as the at But a very strong our the to connected we communications mentioned. also business. which you little for of QX weakening through We staying is that's reasons erosion to due yen look

Sidney Ho

next last consolidation a quarter if really gross depreciation the a then charges look increasing are of that lower? just question expense lower function in driving at volume your me, basis QX you factory XXX And or margin from maybe that down there points, is just other was for

Megan Faust

change really old expecting that we’re that I excluding really J-Devices. need to product from what our of one in but between there profitability we address other the what seeing quarters to a is Amkor the mix bit think quarter Yes, is we’re given the

that over margins. generated XX% For QX gross

So we’re with really pleased that.

Japan J-Devices So we’re what or seeing with addressing. an and is so our average that’s await plan experience consolidation still to gross our margin, down

Operator

from is of question Credit next Our Abrams Suisse. Randy

is open. line Your

Randy Abrams

on and basis? these you where also KX these run then changes OpEx wanted consolidation. OpEx out for quarters like back how when normal view the Maybe the a you rate levels Megan, couple May on may margin give Japan going ask is first on are target into and questions to be next ramping changes go we as a have we I gross the once look for run say rate made the expect year, costs mentioned should a to

Megan Faust

your address the first. margin gross target I’ll question on XXXX for

to up the respect get reduction greatly about with Japan corporate expecting we’re our respect full objective in had is annualized OpEx and in to question historical and been in that expected XXX consolidation million savings Japan's on manufacturing With activities NANIUM, expenses, run performance million to integrated the cost normal improve target gross year to after $XXX rates the margin model. to your to of is our cost for OpEx I then the mentioned and free XX% we’ve a we as and around So of $XX so that’s with going second million XXXX. operating would amount

Randy Abrams

how curious translates was, you second we am think next was a where industry areas are had seems XXX different And with times kind capacity for of lead good CapEx your and kind your packaging in stretching, just overall year of initial a crusher it like to had I target you’ve that of fairly now those maybe to then environment. business as advanced XXX stay the for a which how like question for I then your demand CapEx? target inventory if I but terms if

Steve Kelley

QX this in strong revenue QX. moving into and the very been Obviously has year particularly

spending so so some to format. One the of But target the There us would much strength but across crazy areas. moved migrate increase demand our it board are spending X-inch from that have to $XXX a year forecast in $XXX for XXXX. of the strength been actually years we much ago on bumping. capacity gone we the of we've year we that in an was haven’t many surprise but and we XX-inch in And CapEx has seen measurably stayed around for for million X-inch business expect this CapEx roughly million

in So better investing we're doing incremental we’re some that year. so there next shape

also investing other in areas. We’re advanced product

potential. to at we’re XXXX, I see going for $XXX going I As slightly invest next see north but discipline we'll think look and year to exercise again we million CapEx long-term where we're of

Randy Abrams

could the of I it where X-inch the tracking you if an where SiP follow-up sensors bumping end applications seeing and that, if strength for give the is rate could a maybe this ask growth tied the SiP If some on to is or and the that's on up maybe there? to run may update you're how the

Steve Kelley

then I primarily. these smartphones that's Megan global smartphones. to more bumping want and packaging requires variety are the on that to what’s healthy, packaging also really factors I’ll bumping on advanced form more is side demand than where but make in capabilities requires with very more SiP which two capabilities turn which also we’re big CSB the of so investing because over SiP bumping SiP advanced a it's numbers of comment smartphone to is driving and just

of and and that’s implement the to amount where performance are other function. We’re space memory or to seeking seeing improve SiP in trying automotive and also the to sectors board reduce area required they’re the area

Megan Faust

then SiP, are our question that. it your of business we was much and I understood how And if increasing is

XXXX expect $XXX about for will from up about make We million that million. our up $XXX XXXX of of business

Operator

[Operator question Citigroup. is from Atif next Instructions] Malik Our of

line is Your open.

Atif Malik

OSATs Can China. on the on help understand far catching the up in Chinese terms question with the of us behind you OSATs are have I leading Steve packages? advanced how

Steve Kelley

What on investing certainly but see others, share. I’ll more then position I'll to leave our OSATs the just Chinese we and the gain and to trying market comparisons comment

is we three execution, bond. is best strategy very we each one technology, need there So to the is head-to-head really and be the in China three those Chinese in way advanced quality, on packages. is is be wire to when second is do which in third We successful. the items very differentiate And simple of areas little our OSATs China competition compete to

expanded far months. in particular. we're Amkor the factory driving It's be anticipate that well, by XX the doing we’ll Last that that fill in growth factory I And in we now within Shanghai our and space think to able quite I facility what’s our largest additional XX%. so year that next second

think we're well our support and more in even add continuing I our today importantly factory Korea capabilities China supplemented very we're Taiwan, So China by in and competing with and to in people Greater China are and team. manufacturing sales with to and Shenzhen calling we we Shanghai the a on actually opportunities in did offices and ago people lot more a customers than have Beijing, years bringing who our few

Atif Malik

you the side, Does same you've about seasonality at revenues historically seasonal see what you're the in to as communication March than a be going QX on then communication sales? And that seen because level expecting talked better QX to quarter much QX. mean that you’re stronger

Steve Kelley

think means. I it that's what Yes,

dip, China. see supercycle QX QX we’ll out a QX think stronger largely anticipate to be think strong we but is we a will pushing this reasonably milder demand usually smartphone normal in we see And dip of because - also I than major demand the QX iOS continued we QX time because into continuing.

Atif Malik

in assuming? Megan, for or kind what target of you’re next year, XX% pricing for gross one last one assumption your goal And margin

Megan Faust

when another it look pricing, topline ASP you’re think about to way you're revenue. if I about talking the or talking at

Amkor at I from to we're think be more expect little looking if a within for it look we what the as we semi better. year-over-year, bit growth need not market would to total so

Greg Johnson

to back the remarks. more turn that ends the I'd no questions call. like Steve are it to There closing his Q&A portion so of for

Steve Kelley

like I recap our key to messages.

revenues third strong with sequentially. quarter We have up XX%

you our call and applications. customers fourth for revenue track, in key joining outlook are broader with growth the pleased driving today. on base a We’re our on initiatives quarter of Thank

Operator

conference. gentlemen today's and Ladies this concludes

now may disconnect. You

Amkor Technology (AMKR) 30 Oct 172017 Q3 Earnings call transcript