AMKR - Earnings call transcript Q1 2020

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Operator

Good day ladies and gentlemen and welcome to the Amkor Technology First Quarter 2020 Earnings Conference Call. My name is Chris and I'll be your conference facilitator today. At this time, all participants are in a listen-only mode. After the speakers' remarks, we will conduct the question-and-answer session and instructions will follow at that time.

As a reminder, this conference is being recorded.

the Relations. to turn President Keenan, now Investor of would call Vincent over Vice I Mr. go please Keenan, ahead.

Vincent Keenan

XXXX Chris. thank us quarter you you, for conference Thank Good joining for afternoon Amkor's everyone and earnings call. first

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

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

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

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

Of course actual results could be different.

to release Form to financial XX-Q. final today are that our could Please our Please materially SEC data refer exceptions risk results discussed will results actual expectations. press the differ filings on for that and information in cause and preliminary from other included uncertainties be factors, these and note

would And Steve. to now, turn over I the call like to

Steve Kelley

call. and our for review Today, joining will afternoon. second Good our the Thanks I performance quarter quarter first outlook.

I'll call we that near growth how coronavirus or industry. the of to also how today's virus the believe will quarter. impacting demand long-term During a have the impact not negative on the Fundamentally, affect the and while expect it second we first we business term dealt in significant the in quarter with our discuss medium semiconductor the

deliver technology, high our and end long-term XG and unmatched balanced will computing, our customers shareholders. of quality, remain the achieve growth to drivers digital performance believe In to positioned to we're service our well delivering We revenue including and expect for growth execution an to continue market's a to intact. growth. combination value strategy secular by that automotive We

just grew of for first quarter packaging quarter in and consumer Now, results, year-on-year billion. best demand largely Revenue history, the to nearly $X.XX completed to quarter first on communications advanced record due to XX% strong our first the the Amkor's markets. in we

safe hygiene, new manufacturing a density operating has virus, factory been to execution exceptional. In continues be protocols throughout we our These response health allowed our implemented network. tempo. challenging protocols employees people maintain monitoring, to to environment, team's the and their us and a kept In and high have

issues first governments Our Philippines on first in few the most weeks factory began output last Malaysia quarter of of late restrictions our in two and after supply imposed of in and employees. the constrained related virus movement April. the people, the including during significant March These restrictions weeks the

has that from factories The Malaysia the recovered. good and news output our is largely the Philippines in

have a a done our an job operating teams environment. tempo back excellent both countries factories Our to maintaining bringing in near normal safe while

communications down. first strong were quarter, sales were by Sales Automotive mobile spring the and computing solid. into industrial phone the sales and In consumer market launches. were markets the driven into

quarter the in revenue SiP than advanced Our doubled more year-on-year.

and technology, moderate growth customers. and good a SiP match advanced performance standpoint, we long-term nicely for business with needs solid requirements. yield SiP advanced with From cash that investment is Amkor's a up the manufacturing company capital flow quality of the engine our believe

SiP advanced in leadership which modules smartphones, and antenna in XG end built position for expertise and Amkor modules for modules XG that a the of a We first establish been our long on supplier ramped to packaged including volume quarter. has leading front phones. the

advanced sided quality our or longtime and SiP used includes high benefit consumer modules. technology all And advanced double cores RF shielding customers and customers an automotive by molding which our also assembly, yield experience building technologies. SiP being toolkit, access to have high RDL advanced Amkor's who is from

not demand quarter, a uncertainty, quarter. Moving this to level our of second typical term outlook for the given is the near

strong. factories, our Supply In has of XX% our been than demand April. in which far so account reasonably revenue, minimal. overall more happened what advanced stayed Here's packaging constraints for have

sluggish, remained of has demand demand over overall factories, that expected indications customers bond a past received is the near weeks, similar first weaken the to from have the to number we In quarter. a of wire result coronavirus. term two our In as

these our related of second demand is virus the included forecast. in reductions quarter Our impact estimate

believe the revenue quarter be At year-on-year down XX% about and X% second midpoint, we will about sequentially. up

term I said coronavirus before, a as see As the we industry Amkor. for and near semiconductor the challenge for

quite term outlooks medium remain long-term Our and strong.

to in growth invest execute We for will continue disciplined our way. and a strategy

up flow produced down years. each past have cash of free positive both five years, and strong the years We in and

$XXX we debt. the result, strongest with balance a roughly in and in now $X history, billion have Amkor's cash sheet around As net in billion

detailed more provide now will information. financial Megan

Megan Faust

afternoon Thank our our and only continued of strength balance on second record also mobile delivered $X.XX review quarter provide We X% billion. revenue and in communication. was outlook results, I QX our to comments will Today, the market quarter strength sheet. the everyone. good Revenue and due Steve you, consumer first than first XXXX, of primarily quarter lower some in

XXX basis and chip. margin than higher the product Gross SiP of nearly prior a flip in was quarter. year XX.X% higher change to mix a packages reflects at margin advanced like points gross bill QX materials

lower Operating travel spending as lower well discretionary primarily charges expected, expenses Japan. as expected in than million is other $X than this and were around restructuring lower due to

the $XX from Operating basis X.X%. record XXX The operating year and spending disciplined points to resulted of margin revenue QX discretionary prior in quarter million. income increased

per over diluted for improvement the for first significant earnings profitability and and $X.XX, last share ago XX million the the a quarter was in last income represents was This quarter. Net best years. the the quarter $XX year

from the and $XXX EBITDA ago EBITDA million to XX% margin quarter increased was XX.X%. over year

in and guidance range current macroeconomic between between be and Moving We $X.X quarter to XX.X% second reflecting the X.X% made widened to our predict more has market to billion. product demand. this quarter, margin it our Gross revenue be mix. changes outlook, as billion expect end environment difficult we to expected is $X

Our estimates for we for other guidance also costs to incremental incur action. includes virus and supplies expect labor for containment

costs for QX in operating Japan. estimate $XXX expect around million, restructuring an We which expenses of includes

minimum dependent on to not taxes level income. annual be rate our we expect tax to Generally, our XX% of effective around subject a

QX of $X.XX share income $XX line loss of or in share. expect or be bottom We the net million $X.XX net to million $XX a to range of per per

XXXX expenditures capital million. at remains Our $XXX for forecast

Our areas, advanced on investment flip and focuses SiP, technology. strategic capacity chip growth and in primarily fan-out plan capability

Our capital flexibility light, which push gives them first relatively should was the quarter CapEx us in spend worsen. XXXX to conditions macro-economic into

drawing Moving steps on we a cash Out $XXX entered sheet. revolvers. we up abundance of sheet, our to to from balance our balance caution facilities available QX strong of credit position, with million took an approximately and shore

access it liquidity to worsen. have no we in for event to While these prudent ensure macroeconomic flexibility conditions lines these funds, the we have felt available credit immediate and need we

quarter As and the a we of $X ended cash result, billion investments. with short term

XX net years. model. strong addition, is direct million our of financial in resilient of been and In debt result has our is our it a generation on business lowest This $XXX focus free flow the position cash over

in a free business, operating a industry, cost flow priority. fixed cyclical top cash As is the high generating

You can see performance. the in impact XXXX focus of our that

declined XXXX, flow. Even industry of as $XXX generated the over we correction, our to revenue inventory due in cash X% million free

This our results, progress consecutive have free was sixth we year of flow. meeting goal QX with And our cash year. our a towards made significant of fifth consecutive

withstand to financial well our positioned challenges. Given we near potential are flexibility, term

and We able invest are for growth. medium strategically long-term also to

now for the call Operator? will that, With we up your question. open

Operator

the of Thank Suisse. Credit line Randy Abrams you. with [Operator Instructions] comes question And from our first

open. line is now Your

Randy Abrams

maybe if the question, second the could and resilience. bit you profile, some details they're relative your on also could comment you which a you when be outlook, to some quarter resilient foundry to thank Yes, of of yeah, might adjustments it? good bit about And bit still evening. difference guiding but guidance, reported. Wanted first talk if some if be of more seasonal could is a different might ask fairing? on there like today, seems And curious across the demand how there's you are advising, just if it it timing in Okay. But seems the trends, the later. the a foundries discuss, I'm segments

Steve Kelley

give forecast specific address Sure. background QX and our Randy. little you into me just Yeah, I'll a your questions, let

because on run in forecast look books. April that with First part what shipments QX to April par about could the And rate. I X is that's actual our was our are say our of at thinking

with of markets that things lead know end in to start contraction. also But we the we will a happening So lot are that there that.

our about that indicated the customers pulled reviews were that those there in of many we so on imminent. So customers June, demand were May changes in

our So rolled with we basically up changes those came forecast for and up imminent QX.

of question, impact, answer your segments. in Most three to first is the

First is automotive.

be would communications industrial. is and the second The third

a where fair we're in through well pretty We markets quarter. guidance adjustments amount of than made. decided widen the QX there's are uncertainty holding and bit The more to that's the average the because seeing consumer most computing up QX. a of range So

up of $XX ended midpoint. either the we with how So that's on swing million side a

and anywhere lead four time. weeks, three difference months. final foundries the the an your the their product, To two to OSATs, could say I Typically lead weeks let's time is, with answer whereas from foundries complexity at like the Amkor on a two depending think the question of maybe is the the or OSAT about foundries biggest months it five be

to So up I the for a demand perturbations think filter the chain. while takes it

Randy Abrams

margin And – on if the the changes mix are helpful. the going think with if could the in of you Megan, that's discuss some guidance. No, impact margins, talk, mentioned with you could Okay. gross gross you shifts I to

Megan Faust

Sure, Randy.

just our Advanced outlined like shifts more from And we percent mentioned, gross QX, general bit of as Steve advanced experiencing has pressure revenue, is really mix products as year SiP product significantly. the QX, on grown some issue our which for percentage amount come bill rata and pro of the that. drives are is to what Steve to that higher would doubled cost in relate than a guided back material it's to quarter. specifically SiP the further ago which material putting a So we've margin

and beneficial our is our this it's at as in $X.XX been Amkor the record and you've So revenue QX actually as and revenue seen as very $X.XX. QX technology record well fastest EPS growing

diluted although like of margin are accretive while percentage, earnings. material cost and QX SiP QX they show that higher gross So bill advanced to and exist products that they're to

and those those second The as the fairly issue in QX volume a of manufacturing result staying QX give are flat. are in of increases and function a the costs offsetting other merit quarter, the costs reduction. to labor are is the some in then tendency that's we And experiencing

Randy Abrams

talk about some of with AiP, you the up ramp normal expect on in And Okay. I you the advanced continue guess to, If I follow you consumer SiP, how additional and up see ramp if a pipeline you of additional if or phone pipeline, for second where you're up flagship up its if could half kind ramp then expect if you projects. maybe the a products could towards could talk volume, the volume lunches.

Steve Kelley

me let take Sure, a Randy. at one just them time

So consumer steady, we getting stronger products, see XXXX. on throughout that holding the

So we In we primary we on is And on projects. like what called SiP what general have Korea, to backlog actually our SiP, see of for in our in like and for consumer. like of we adding manufacturing. KX factory that we Excellence we're end, which Centre our to pipeline today the

So an floor our additional expanding in for We're our module in capabilities Incheon, SiP. out expanded and fitting space we're advanced factory also there. Korea, KX specifically new

we're on we're So see wave would the a the With did in needs the – we'll forward. how QX. wait we to to moving customer and But AiP and moving module, millimeter market regards bullish are we develops, package the I whatever antenna forward. segment. nice particularly and it satisfy ramped ramp have say SiP ready the well, to

Randy Abrams

I No, great, more one can Okay. if question. do

look, now seasonal and factoring better you first much some you're a it's quarter because As different profile, we're than much impact.

implications the There's believe ramp. multi little second bit I get normally some you you of where about the some bit also, be if get could you later. where If this it's a correction be on discuss quarter kind ramp, launches talk potentially know you the might half flagship But seasonal could early. a of seasonal

some on go as I it So some of holding notice second the ahead? to half. projects also if these the you're we timing CapEx, And moving you're year, does views this some towards also so different seeing of tie

Steve Kelley

that CapEx performance holding optimistic going are fact are automotive smartphone the the we contents in Yeah, year, in the our also second half and because high of particularly about the demand we computing. up this in and about

will in question, started the term QX. obviously, QX we to back some which second issues recovery. and I the your we're is current first really few but We're half with is through that the a think going strong coronavirus, in near going things second XXXX, going catalyze see half, to a connected probably demand in So

flagship of launch phones. is first The the

is recovery the And of tempo. exit to very the consumer automotive is second going a I think at XXXX The a I release we'll in some And demand. we're market. third think operating up pent high see

banner So we think a be is for Amkor. XXXX going year to

I thing long We keep just in started of XXXX other in process, inventory correction. QX quarters. months The XX to spent think the we 'XX it is better for a this industry, of of an it's six a going as back an part correction was mind part better important and through

this into lot a going out demand excess So coronavirus there's not perturbation, inventory there. of

And so chip is that quickly. generally fairly when industry, what least recover at the we recover, means should you in

Randy Abrams

great. at a from and if discuss if normal that at No, appreciate delay semiconductor schedule I it's pretty there's shift stage. perspective, or could Okay, or timing you timetable any this least the

Steve Kelley

phones? You you're the flagship referring to

Randy Abrams

phones. flagship the for Yeah,

Steve Kelley

definitely that I the us, really to when. happening it's know It's for don't in exactly think down. But half. we second difficult pin

the and we our their get So just respond we lead. customers to from inputs follow we

Randy Abrams

Thanks great. Megan Okay, lot Steve and a

Operator

comes with of And our the you. Thank next Sidoti. from question line [indiscernible]

Your open. is line now

Unidentified Analyst

thank and about Steve Yes, is clarification think on Hi. mentioned the is you are Megan all strong capacity, a and correct? up. almost you a facilities quarter. first clarification follow running just at I that I a The the maybe have congrats Steve, a that full and

Steve Kelley

definitely to capacity. full No, no, we're not running

more running we're of advanced rates some our very think I in good factories.

So we packages, saw a QX lot particular products. and system package is demand for what advanced in of

the lines, rest level getting full. company, well, to So particularly bond as in for wire to segments. of the we're the we're but those full our close of In wafer some lines, in close running

for growth have our a room lot capacity. within of We installed

Unidentified Analyst

if it pegs And next for holding because Okay, over mostly maybe impacted? hold advanced in XX% XXXX. And some the you. in quarter second would off packaging. that's making be we which even of the be be you I clear. invested mention the on be the wondering part also would about CapEx, Thank one would for of some last remember half, – would CapEx I'm said, course, kind

Steve Kelley

wire spend things Yeah, our you're IT and for and million for remains that's call XXXX. again, the R&D, keeping advanced for packaging, were improvement, split. XX% so we XX% like CapEx, $XXX the quality guided at essentially, facilities, roughly that And last earnings XX% guide split we then for bond right, other

point, XXXX, million think But yes. any some it? flexibility we're expecting think a to we robust because that I that half. answer we next do expectation that your in And flexibility spending don't year. changes, question into recovery we to the second push the is the more have to of reasonably push that is to do need at CapEx If $XXX we do have in for this

Unidentified Analyst

That's you. me. for thank Okay, all

Operator

with question Ho you. the from And comes our Deutsche next Bank. of Thank Sidney line

Your now line is open.

Sidney Ho

your about in QX and few, my Thanks a headwind first are committed related cost assuming margin, in for down incremental guidance specifically taking may that I quarter? that revenue of for the of of the in in constraints? X% you all to questions. you you virus that how revenue, containing, much costs can to And supply guidance have talk quantify reverse gross to related impact again following terms supply related

Steve Kelley

us because first Yeah, of and let million I much let like and shortages supply and QX. And things, we incremental few most the the there's that. Philippines would old of for but answer the weeks that substrates them today, are we're question will not me $XX the in take constraints major But cost constraints QX, around things Malaysia from Megan There had recovered But and in as us and pretty capacitors classify of of supply on to April. things in probably in I'll answer is constraints cost your question. revenue. question constraints the

Megan Faust

can regarding then And that the we're then not as QX they the I level incremental tell of your of Sidney, giving included you They modest. quantifying in QX. costs, were recurring as far were and that question level in they're detail cost.

Operator

the question line next Company. our Cowen Krish And with from Sankar you. Thank comes and of

open. Your now line is

Krish Sankar

thanks more half? in Megan, recover Number to a Steve Yeah. for question. expect couple what one. the that kind you customers expect second had my auto are the on a said you that your that you big? follow and auto taking of saying? Steve, function that Is I them. is of so kind add of then of Or curious given Do more fact rebound, of a ups. it been a cyclical has and couple Hi,

Steve Kelley

What I optimism, so first for automotive, lot basically, automotive gives the a me market. the in about automotive commentary market. Yeah, obviously, what there's our see is position in reason been of

SiP automotive or it's in the So chip thereof. the flip whether of parts packaging strong we're some require or very advanced that digital variant

seeing we're mid-range just the mid-range. into vehicles, end, high so what so technology And the quickly migrating the also that is not but

a the we And so market very benefit have disproportionately expect as there. we to car And making good resumes. share

is that happened take to I points to chalk cars, me happen if into optimistic likely give people – be government considering other efforts buy XXXX, you The at during in sell last the they reason automotive they'll the about were incentivize again. a past, look what think to the

car a sell the control cars that And your cars assuming know finally, distancing Personal how cut think buy social personal cars. they thing. to way cars people deals and environment. to I great to makers a are to I remains incentivize believe

see you'll enthusiasm think for personal a I So and resurgence cars.

Krish Sankar

say And should phones Steve. the it, in Got target question that that might half? for of on just flagship be some you, how the on envision you that's did segment it smartphone a improve. then helpful really the second quick do communication You so

we should think of fair through you're slow it Or second now into exposure? improve and that kind segment of assume So should to a how is patch it half? going the that

Steve Kelley

roughly you're think right. I

different go our continues for up with XG phones of advent I phones. faster. flagship it the year. this And up And us seasonal, in content What's are right? even to comes always these different think won't content be these the is

phones, happy lot So to happy the see range, see market of a with automotive. in we're our the we're pretty In similar the advanced we to also migrate what happening into phenomena share. and features

next the looking out in production that second year, we forward will wave know So ramps. of of the we're to come phones those half supporting this and

Krish Sankar

about final for Megan, from you Got that. then a it thanks and spoke the and on question color CapEx

bond push macro CapEx it If would of board? be because it the have would would be out wire be to Catholics weaker it do second into or the you across the packaging in advanced the or XXXX half,

Megan Faust

dependent but really the to be environment be could demand board. upon what it's going Yeah, the broad looks across like, it

Krish Sankar

Got it, Thank thanks Megan. a lot. you, Steve. you, Thank

Operator

Thank you. Ho follow We with from Deutsche have of one do up Bank. the question line Sidney

Your line open. is now

Sidney Ho

ask me when I up. I a letting unmuted question for Thanks was a follow again. asked

So here, here they are.

up think that the your I side. What thoughts shut about is? are that about most was business first and that the the geographical that a on past automotive XX% So run just at automakers maybe rate, mix but business on year in for us of issue? point. remind follow talked Krish is the are production given this, still asked worldwide facilities mostly business this down growing of I you the kind know

Steve Kelley

or market. I a in lumps QX. say downdraft first Yeah, in status a the it's world We think there's could of variation in in further a the We're of talking you're saw don't I as regions. China depending a within taking What the really breakout Europe of the even a it's we're I picture factories, Sidney. QX. you, whether mixed far as on seeing that the what downdraft I region US, the lot geographical and is or our think for automotive about, have half

these I'm a the half me, in a really come think the position that ultimately. of of second the and To it's will that's because optimistic in in factors automotive demand, So back. question fact market about I why recovery our

can so I to we that. vehicles? we And for able personal do ways to find will think stimulate demand And be

Sidney Ho

down guys Okay, Q&A, guys, is, out to strip to semiconductor a compare right a bit market second that but the talked If to about range are working Maybe about the TSMC your the on, reference the answered you maybe think can year. we slightly business about that's earlier to that I great. consumer question that year? some us fair. if last SiP half being My full is little to this you last ex give will flat just you be this the memory for in project think you

Steve Kelley

a look really Yeah, a time. much or Sidney, the We're half, with taking we second dealing revised near uncertainty. We're so one a taken haven't yet. at term at quarter

Sidney Ho

Okay, that's all have. Thanks. I

Steve Kelley

Sidney. Thanks

Operator

have And you. Thank we do –

Vincent Keenan

Chris. Thanks

Operator

you. thank Okay,

Vincent Keenan

sorry. I'm more question. there Is one

Steve Kelley

Yes.

Operator

Yes, Merrill of with more have the do Goshko one Lynch. of Ana Bank question we America line from

Your now open. is line

Ana Goshko

great. Hi, you Thank very much.

that a kind mentioned billion, could you enhance some of facilities you with draw X lot cash. Megan, just and your of wondering rationale balance, that So provide you have if for cash do about to credit cash maintaining amount of more, thought the so you

downside seems a downside free us, if do making addition in Secondly, or of be would side? cash potentially as cash flow remind to in facilities scaling any scenario burn preserve you it have in kind minimize sure other you scenario. that you're of covenants have the needed flow, any you covered like your then facility credit finally, on you're to the could you a And what CapEx, in levers back free any

Megan Faust

take I'll our debt do the have not facilities. any Anna, We probably your – take one first. last covenants Sure, in I'll significant

then potential with those thought We'll demand, and take imminent balance, we With we pay the need, – So really an of not Steve's an that's especially to of we with our respect when but don't evaluate that we're continue did one. those see down the worsening abundance out respect to on an levels we'll to easy remarks, caution cash view environment to with for actions. comfortable. cash future

as this are was felt level that just we And near the was prudent. – this in investing term. conservatism We well those of

we flow. we were environment in I'll question ensure your to XXXX, that to and we'll in how in So free with exercise cash to flow flow even to pull and reduce addition about CapEx you cash about million and other we cash in were we under reducing note those. could discretionary we through levers that what being that incentive costs generated we pressure and just how respect XXX positive successfully and was maintain over spend reducing ensure comp, to preserved that disciplined able

et as cash to respect actions on we'll with take we'll eye weakens, needed. keep So cetera, burn any and that as our demand

Ana Goshko

Okay.

you. great. helpful. That's Thank Okay,

Operator

you. Thank

Vincent Keenan

Thank ends for you, our portion now This to the question-and-answer remarks. Chris. I call of call. will the Steve his closing back turn

Steve Kelley

messages. would like our key I to recap

the First, we near We today. in with margin very markets. just in Amkor's our output. demand. are In first in the target in history long-term, completed production first the strongest all effectively revenue, solid term, joining at while you the EPS quarter, operating and with will grow employees coronavirus medium quarter profits call expectations. safe And to high and virus end dealt positioned maintaining Thank keeping the of the of navigate we through all revenues we and for of the well impact the on the

Operator

call. concludes conference this gentlemen, and today's Ladies

disconnect. You now may

Amkor Technology (AMKR) 27 Apr 202020 Q1 Earnings call transcript