AMKR - Earnings call transcript Q4 2017

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and welcome to the Amkor Technology Fourth Quarter and Full-Year 2017 Earnings Conference Call. My name is Jimmy and I will be your conference facilitator today. At this time all participants are in a listen-only mode. After the speakers' remarks we will conduct a question-and-answer session.

As a reminder, this conference call is being recorded. to of call Finance like Johnson, to now President Vice and would turn over the Greg I Investor Relations. Mr. ahead. go please Johnson,

Greg Johnson

Thank afternoon, good you, Jimmy, everyone. and

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

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

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

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

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

Steve Kelley

thanks strong for Fourth quarter good Today our high our of factory sequentially. XX% forecast. quarter afternoon, year-on-year and Sales I'll first from guidance. end XXXX were benefited all experienced priorities and Good above performance, and our quarter fourth joining We end results the full-year and demand grew our across and discuss call. of our X% the markets execution.

Our sales performance free profitability and flow. drove healthy cash solid

& XX% XX% billion were markets of This year-on-year. with we of to flow sales coupled $XXX $X.X than of roughly sales. cash for in for generate $X.X year XX% accounted XXXX billion, of total us Industrial free all records Sales in X% full our Communications end delivered up sales. higher increased the CapEx growth million discipline into total to sales. For Automotive our accounting and were XXXX. good allowed X%

increased and technology XX% leading in to up total XXXX. products and most Advanced growth sales accounting the on the of dividends. for X% consistent contributing our of automotive XX% Computing X% pay focus total. ICs for Consumer reliable drove quality, continues our OSAT As was of execution

in for we and leader our integration NANIUM, talents investments level to complete. capacity, In XXXX Amkor acquiring capabilities now good the NANIUM is by of continued The technology. with returns fan-out Our enhanced engineering in capability generate wafer Amkor.

the have team the been and We impressed quality Porto of with of the factory. NANIUM with the capabilities and output

Over our KX and Portugal, expanded the manufacturing NANIUM in facility. to in two now fan-out Korea. one class past capacity of the eight we months, a have lines, process transferred Customers choice Porto world in one facility

our demand the sales of in $XXX largely totaled tested grew Packages. due Shanghai increase built China and most believe factory year-on-year. we sales our China. those OSAT Many advanced to Advanced year-on-year be packages status SiP the in initiatives, other to an of were greater in on which XX% X% to Moving million for factory Advanced of

similar engaging we based four to objective plan thinner just by to and growth We in modules front to the packages. XXXX packaging countries level over market. such all provide a Amkor now I made our They chip our Tier grew in are in level and Wafer density is packaging high within very in than would known the communications first gains way level a market like across Amkor. in as and packages results. the lines level ability customers. sales complemented level markets long wafer scale in XXXX. the color XXX as wafer be communications We regions best our two sparked the Wafer leader ecosystems. a high overwriting wafer and We technologies, OSAT improve by in has and volume automotive operate of revenue when to to smartphone wafer in major and volume. drive and packages, high that fan-in, substrate as manufactured SiP. packaging in continues a Balanced and basic multiple us enormous There XXXX serve Our by build level our also packages; has more are XXXX. broadly low RF smaller, Advanced modules space. level for gains in leader computing test yielding, financial market and end was wafer our XX% in types less complex reliable density CSPs little believe fan-out gains which it are grow of on fan-out. increased key XXXX been expensive the way three SiP a participation markets

recent We are our acquisition also of in by helped density NANIUM. low fan-out a leading

is Finally, space technology cutting high for fan-out edge SWIFT applications. Amkor ideally solution pin density performance oriented or constraint high a suited count

package. on which just a Now external up Today SiPs contain complex more, most or ICs two electrical some with let's components. define as to touch IC components in advanced SiPs our XXX we together advanced single more

offers smartphone automotive. improved together. applications the other below miniaturize. process combine In SiPs Although way in integration components the shrink They different for to improved many integration the package also vehicle geometries economical performance drive allows liability our cases edge number the volume, They level as interconnects. are including XX This leading Advanced package ICs nanometers. advanced other most moving of level we by in particularly applications which seen silicon nodes SiPs to most foundries. closer and of from length primary have by of and reducing was different customers adoption ICs true

valued factories performance KX, environments. are from one built move Our type product to in clean greatly used newest robots high machine This automated wafer customer. another. to by automation of very is with facility, advanced and At our automotive, and are packages SiPs smartphone, highly computing

quarter XX% trough be to quarter. $X over roughly words In $XXX revenues Now expect up than moving million year-on-year our in on guidance, up other be XXXX revenue to our first billion, we year-on-year. just will more

That's in the our of Amkor Amkor's is years time the to long XX That a business. trying to the XXXX for semiconductor Before closing, Founder that marks I'd Kim. and like is and determination anniversary talent now stable testament basics; very survived At and won't note XXth a of partner. its Megan the this detailed more quality, and on will Executive Jim Amkor long change. is We technology core, information. that a reliable execution, and by manufacturing focusing provide Chairman founding. service financial

Megan Faust

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

quarter all Looking records fourth were of of end billion margin above high drove $X.XX the gross at time the well and of guidance. XX.X% sales an

QX reforms. tax the quarter. or million factory in the share $XX tax share to also $X.XX Net $X.XX driven by the XXXX against the enactment consolidation is of of from one Our per completion benefit income tax We the due benefited earned reversal tax deferred the our results assets. of an net estimated valuation per quarter. U.S. The of includes certain benefit allowance Japan in time

In expect one-time addition to U.S. a the toll of owned taxes on repatriation we do earnings foreign not of our material subsidiaries. charge pay deemed any for

We of year the prudent multiple which delivered resulted we And is qualified wafer consolidation We levels of million the for We closed cash outstanding to We on efforts and pretax completed third integrated savings our flow sold factory XXXX was at management from of of produce expect tax [ph] million $X.X that credits. factory $XXX despite $XXX accomplishments. the with to and We We our a record we costs and CapEx revenues of our We flow due of in our free transition Korea the of senior estimated free even had year and with by of notable redeemed from opened, toll our charge XXXX application in million able income leader excluding factory cash with KX were projects. hand began asset With billion. million many NANIUM, discipline after $XXX Amkor maintain up over million fan-out industry in technology. Korea. KX Japan. incremental operating gain $XX notes production using XXXX. XXXX pretax factory, level transition $XXX million. offset consistent XXXX which in will a associated interest proceeds approximately state-of-the-art growth. in consecutive cash in sale of the the KX foreign and our $XX acquired of be expected

generated nearly guidance. of our billion EBITDA with and consistent million We $XXX in $X also were XXXX capital expenditures

XX, is December we to debt of had of total significant a ratio $X.X of As This our billion and two times. ago. debt of years from X.X X.X times improvement EBITDA

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

material a reflects our expect and on We review standard. change in recognition beginning to our I the this a will that I be new XXXX. for mention wanted expectations QX revenue accounting not annual do our for to guidance our change there have in quarter Before revenue first impact

XX% billion is revenues First quarter QX are up drive operating a year-on-year. $X.XX XXXX. XXXX be Revenue expected increase expected over to increase income in XX% to around

quarter first gross be XX% and between margin to expect XX%. We

of reflects impact XXXX when basis foreign XXX points QX QX unfavorable margin Our with gross XXXX. guidance currency compared about

year capital with KX. first be $XXX labor, around for for expense forecast Operating quarter. million. associated depreciation, other full includes XXXX the costs R&D to and million $XXX Our is around expenses expenditures expected are

fully continue goods of KX and to lines through operational. some in As will transition of This we transition bring up until began sold. costs cost production, is to these XXXX XXXX

of levels $XXX expenses Our then around to traditional million. more quarterly will operating return

expect XXXX tax to our be We full-year rates around XX%. effective

law Tax will change and for this additional Our new refine open initial impact of estimates With the now that, Operator? becomes guidance the our Act we of as could if call questions. Reform available. up any we the your financial analysis on U.S.

Operator

Deutsche [Operator Sidney Thank comes with from question Instructions] Our Bank. you. first Ho

line open. is now Your

Sidney Ho

Thanks, taking question. thanks my for

end may you talk about how from that region tracking also in growth And you getting talk seeing much especially some increase you can are you you ones, markets? get are generation content growth be to the fears do the within Given the for greater China smartphone smartphone generation? that and the high can about ballpark the the unit figures

Steve Kelley

address let Sidney, Okay, to me your yes question. try

content we're it's and combination the seeing in what phones, first unit a growth So of obviously growth.

mid with unit be year than virtual is are area of cameras. recognition, see single XG digits lot RF seeing better you voice know activity will recognition, finally course facial faster reality, activity of whoever a reality. seeing this again we're the in also sensor growth and more activity customers for I And We're going as bands. on that, content think our in preparing we

at of us, on it's towards helping we're our a and firm helping the So so which of which on inside focused potential the the packaging advanced the the taken to trend package Amcor, China. look mid we've There's package in advanced a when share that really from TAM close configurations for of integration. also TAM. so seeing to We're as lot us in favor and are packaging going there all we Greater X things particularly markets teens just market system

we're the far. pleased progress with So do

However, of we think north XX%. our share entitlement market is

half to China. So Greater we we're to be in where about we need think way

So in focusing Shanghai an we region have Shenzhen, we've with sales continued service to on and invest we people edge where products also enhance Taipei. focused our our over our the service competitors which is second and we continue and in sales offices now on largest over infrastructure have in local advanced Beijing factory. XXX think the now sales and Shanghai, But there factory to we in

So the bullish to in penetrate XXXX. to market continue pretty our we're ability on smartphone

Sidney Ho

you back, market the Great, a quite maybe if like to out? continuing segments time do an semiconductor any for a strength step followup I seen to rate standpoint are run now smartphone up how inventory for market you ago, more take be May issues – growth the others years helpful. that there you point can or a and broader the standpoint – worried that's build exclude very that from you follow than eight the of strong an quarter do nine you for couple some we've whether are let order me see that's can

Steve Kelley

years about You smartphone. market and a know bull it’s but a general are two market right, everything we're which semiconductors you're because into we're, good question,

think that cyclicality are the we are that offsetting so some working are know in almost you And that about our favor trends there thinking market. of

growth economic whole One for of worldwide this to just forecast that and year I course X.X% now helps reviewed fundamentals. year, is for the so X.X% think next Right I solid less the just trends the and content And other be all consolidation build industry of inventory. to and because tendency electronic gadgets. in We're helping the industry. seems is finally theirs to vehicles types seeing electronic the

the monitor channel that any pretty continuously we unable are then to and inventory So the so, healthy. market probations are is detect

Sidney Ho

can Okay squeeze more in. maybe, I one

I'm but look you currency as think guessing your X% last well. think market, market the mentioned term was do for automotive the this long like? I growth How potential For was year, a headwind you

Steve Kelley

We’re very about excited automotive.

in faster safety will being OSAT is area, is grow really in The of smart over position. tremendous, a automotive, than number drive we little X% at expect throughout X% be driver helping where a or that bit we And growing average great the by single sophistication vehicles, in the content the a we think OSAT the we story increase CAGR is as and the high it's but single and TAM lumpy. by digits one year, the certainly assistant systems starting processing and sensors by think. upwards. driven what the probably We automotive car, digits advance market XX% a We're have grew XXXX, XXXX; in on grow market we will the far X% high

many other The packaging. require functions the advance us of that trend new is good for

to And the of the package us still the less in there's wire capacity more mainstream packaging within so bond wire And OSAT. done and customers, so bond the available on a to tends there products. the be is TAM packaging IDM advanced lot

Sidney Ho

much. thank you Great, very

Operator

from question our Credit Randy And next you. Suisse. comes with Thank Abrams

now Your open. line is

Randy Abrams

just back guidance to give to yes, through where your the sales came to as weakness quarter just you and relative upside then the Okay, initial just first to And and question on the relative to for if year then could the you gets guess fourth second full view and just through? more if ask Amkor we then rebound take see relative quarter I Yes, could initial strength reiterate the the you. quarter looking wanted the I normal for you how year, forward, trends, thank and go for pickup industry? to

Steve Kelley

strong the Yes, ioS really very of upside quarter. quarter the continued end Okay. ecosystem. of a so the story They was fourth through

our fade We QX. in didn’t in ahead expect it up a so and, December midpoint that’s end a well little caused of to bit what of happen us guidance

we again you Smartphone off don’t is let see look to We a we QX, very is stay think at high going As strong. QX, market The there. general the quite any market down ’XX. up

look you Smartphone last of to this market QX the year is of if QX year However, significantly. up

quarter. over is so stronger that a our million than ’XX So was QX $XXX since with pretty it we’re happy QX, this is trough

better one going is going we that so year is this we seasonality, QX. better think than think of we And QX. believe be to be QX forward, normal Looking than QX will to be

of I is in minus It QX question think QX launches, the is think always out a that phone mark. I plus or depends on the was typically success but QX.

Randy Abrams

Okay, you. thank

right is this million of facility just it spending this if any is how flips is second The up? question priority – there $XXX up in CapEx for quarter

Steve Kelley

yes, going little you I Yes, CapEx your right, question do think heard so you just what is just I I’m to things, about - asked?

Randy Abrams

investments? up priorities Okay, for you split stand out, it’s on step the stand out like just CapEx, CapEx any like include whether yes on and

Steve Kelley

capacity and fan-out expanded built we we some we and the roughly XX% CapEx Yes, expansion regards also be the that as will XX% spend specifically initial and we’re so so And expanded capacity on capacity that on facilities. and ready new in in $XXX in to develops. other and demand and Porto XXXX maintenance in our XXXX of more capacity expand will to KX in the million, then R&D be

go is density of customers to if Dominion and low number qualification then a capacity. more have in the We they’re ahead fan-out [ph] who and successful fan-out the we’ll are process. expand spend This

so same density line efficient high fan-out makes KX everything on two equipment which us. more also the and share lines we building for between in the We’re

Randy Abrams

how get of latest more in into it’s view timeline into flip like still mainstream on needs it if on And just like in you feel to the the times technology it's or for it’s the have high I progressing, mobile fact time relative looks its just volume SiP, that if get it kind I'm it high terms fan-out, volume? a if just to market, more whether maybe commercial if followup really of or XXXX taking it’s your looks have cost to thinking

Steve Kelley

just level fan-out the Yes, size the the of is market wafer market. CSP fraction of a

is seen from flex on we iteration wafer on level next dye fan-out, what’s dye. that we’ve of fan-out the have the that see bumps designs as wafer doesn’t result the what the is area opportunities the design level depending room service a what customer. put Generally if However, in migrate speaking, out happening CSP customer the shrinks to and to enough

make economic doesn’t higher if fan-out it. slightly to And is, to save basic so equation level do I and the money for package sense shrink wafer hey could pay enough dye

customers The customers by within capacity. multiple will options for And other that have the so Amkor of has I we demands. turn with I Amkor capacity meet expansion purchase stay we and NANIUM think that can demand reassured up, have been goes they them if of their with we been lack the the so think locations, have

Randy Abrams

over Okay. you last free opportunities is you'd your Megan, cash improving from generated Amkor, view debt the rising and flow cash of to the $XXX industry free of use paydown is kind now for the flow? for the continue year another it use outlook just good million, the that question that And

Megan Faust

Yes Randy.

continue down in business we to be our priority XXXX invest will opportunity the our So increased always flow take to pay de-lever build then and and $XXX did our of cash cash, as cost ways debt. with continue we to in capital as look will our highest we first to noted fund expenditures for you million to and opportunistic that

into priorities. we forward keep move those we as will So XXXX,

Randy Abrams

great, you. thank Okay,

Operator

of And you. comes question from next from our Thank Goshko Ana Bank America.

open. now line Your is

Ana Goshko

questions. few a have I much. very thanks Hi,

followup So, just on question. a the previous

so do wanted that sale be XXXX look free I XXXX clear you in cash free without I even sales flow expect to still into any included to think as proceeds we this KX, proceeds? achieve some flow cash from So just

Megan Faust

Hi Ana, yes.

flow, So although XXXX KX guide to free be do flow but our the we from normally have cash in free free cash flow don’t we positive. proceeds expect cash XXXX do we

Ana Goshko

Great, tuck-ins free successful of the the those added capabilities at opportunities M&A? along lines for other there wondering potential looking cash that acquisition you’re other then any via okay, to back of And be uses just NANIUM flow, on the on thanks. if of or are

Steve Kelley

we’ve Yes, for tuck-in acquisitions where Ana, we’re always the good track a on record. lookout had

very J-Devices in out that’s XXXX facility we we purchased out Toshiba and of years ago two well a purchased also from NANIUM working Before course worked And financially. power for that's us discrete well.

look cost always for look-out, we we’re expand So and on our business. looking the opportunistic ways effective to

Ana Goshko

And XX% then that past margin you believe Okay. onset company target gross on I the understand was target, achievable? the I the for know an inspirational year, that’s to said wanted had if in

Megan Faust

XXXX as Ana, Yes target back reached be our performance our margin the both from in of to efforts. and that far perspective margin after the target XX%, just QX does gross continue one-time consolidation gross Japan and a for looking would cost objective we as corporate that XX% QX at exclude

performance. really pleased our with we’re So

forward to So now XXXX put the we’ve that achieve Japan ourselves in completed position consolidation a we better looking in activities that goal.

manufacturing And that incremental so expecting cost offset we to with on as have we’re other will to well help XXXX the as expect savings incur KX headwinds. ramp FX in including those any to costs that will

Ana Goshko

question I Final great. promise. Okay,

interest and bonds? for So them that relatively have to we levered rate these these a one-time you days, you given which that’s sitting rising to bonds X% be been had have those in given high environment have is seem coupons that refinancing thought with company on

Megan Faust

Yes, of course.

optimize foreign taking of look to structure we for that will and we XXXX also corporate versus U.S. debt. our so be in look cost our top consider So and capital debt ways continue and our a at the to evaluate

Ana Goshko

much. you Okay, great. so Thank

Operator

our Citigroup. comes Malik you. next And Atif from Thank from question

Your line is open. now

Atif Malik

my taking thanks Hi, for question.

of question near to seen about have just can The on talk auto the term than auto results near some what first just market, analog you lower talk you the expected Renesas industry could the about Microchip auto seeing? term we health from you’re side,

Steve Kelley

near industry is Yes the automotive term Atif, flat. I relatively think

down So fits it much. automotive The again this very and part grows really starts. in goes market nice about

periods I this again off later and then we’re things think take through those going one will So flat of year.

Atif Malik

for packages density then assigned low performance And for can or packages are applications high on to these you and Okay. your about mostly density use using the fan-out high just fan-up Data Center for these you these computing. and talk Smartphone

Steve Kelley

interest so for in Yes, fan products the these require package. data you basically the bulk be Smartphone by high that a automotive that But we’re with Smartphone applications it of those seeing type also can be could could size. customers the volume has intelligence performance using lot products from they’re it are applications driven artificial they of performance center, so be fan-out Smartphone could using out factor and applications it other applications, only doing get the of

Atif Malik

assuming Megan. consolidation year-over-year year-over-year for Okay, talk for benefits $XXX just the March the the were about and they’re and up the and March Megan, are much or gross guide the quarter can last one Japan billion sales up how quarter? mentioned in down you margins

Megan Faust

as Sure, mentioned estimated more basis revenue so year-over-year our an and about currency looking in so if guidance, our that gross does margin headwinds, improved. profitability to impact point due to has at XXX have foreign exclude $XXX were also QX so our QX million

where the our start restarted And to benefits really from see and enjoy that’s that is to XXXX performance Japan and QX so activity. good the we expected consolidation

Atif Malik

Great, thank you.

Operator

Instructions] [Operator

Greg Johnson

ends you closing to Okay, I’d for That turn it to the Q&A call. his of Jimmy. remarks. the like back over Steve thank portion

Steve Kelley

Yes, to messages. like I’d recap our key

revenue good Thank you cash finally will for operating year-on-year First objective flow drive X% grew today. which call reduced and while joining Amkor XXXX is XXXX roughly our XX% for January investments the growth in primary ’XX and our in capacity was very capability. QX, revenues healthy be will a revenue cash profitability. balanced significant and We Technology. making We debt flow. to year good up

Operator

today’s conference call. gentlemen Ladies and concludes this

great now disconnect. a have may day. You Everyone

Amkor Technology (AMKR) 12 Feb 182017 Q4 Earnings call transcript