ASE Technology Holding Co., Ltd. - Q1 2018 Financial Summary
Business Context and Reporting Period
This Form 6-K filing, dated April 27, 2018, reports the unaudited consolidated financial results for Advanced Semiconductor Engineering, Inc. (ASE) for the first quarter of 2018 (ended March 31, 2018). ASE is a global leader in semiconductor packaging, testing, and electronic manufacturing services (EMS).
Key Financial Metrics
- Revenue: Total net revenues were NT$64,966 million, a 2% decrease year-over-year (YoY) and a 23% decrease sequentially from Q4 2017.
- Profitability: Net income attributable to shareholders of the parent was NT$2,096 million. Basic earnings per share (EPS) were NT$0.25 (US$0.042 per ADS), compared to NT$0.33 in Q1 2017 and NT$0.74 in Q4 2017.
- Margins: Gross margin decreased 1.6 percentage points to 16.0%. Operating margin declined to 6.6% from 9.2% in the prior quarter.
- Cash Flow & Liquidity: Capital expenditures totaled US$209 million. As of March 31, 2018, the current ratio was 1.55, and the net debt-to-equity ratio was 0.09. Total unused credit lines amounted to NT$154,291 million.
- Debt: Total liabilities stood at NT$150,853 million, with short-term borrowings of NT$17,381 million.
Material Changes vs. Prior Period
- Revenue Decline: The 23% sequential revenue drop was driven primarily by a 34% sequential decline in EMS operations (NT$28,691 million vs. NT$43,289 million) and a 12% sequential decline in IC ATM (packaging and testing) operations.
- Margin Compression: Gross margin for IC ATM operations fell 5.2 percentage points to 20.8%, while packaging operations specifically saw a 5.1 percentage point drop to 18.8%. Conversely, EMS gross margin improved slightly to 9.4%.
- Non-Operating Items: The quarter included a net foreign exchange gain of NT$502 million due to the depreciation of the U.S. dollar against the NT dollar, partially offset by a loss on valuation of financial assets of NT$379 million and a net loss on equity-method investments of NT$444 million.
Guidance, Outlook, and Risks
- Q2 2018 Outlook: Management projects IC-ATM business in USD terms to be above Q2 2017 levels but below Q4 2017 levels. Excluding foreign exchange impacts, IC-ATM gross margin is expected to be similar to Q2 2017. EMS business is projected to be between Q2 and Q3 2017 levels, with gross margins improving slightly from Q1 2018.
- Risks: Forward-looking statements are subject to risks including semiconductor industry cyclicality, competitive pressures, regulatory changes, geopolitical tensions between the Republic of China and the People's Republic of China, and foreign currency fluctuations.
Investor Verification Checklist
- Verify the sustainability of the sequential revenue decline in EMS operations and its impact on full-year guidance.
- Confirm the drivers behind the significant gross margin compression in IC ATM and packaging segments.
- Assess the impact of the NT$444 million loss on equity-method investments, specifically the share of loss from Siliconware Precision Industries Co., Ltd.
- Review the capital expenditure allocation (US$146 million for packaging) against the projected demand recovery in Q2.
- Monitor foreign exchange rate fluctuations, as the NT$502 million gain in Q1 was a material non-operating item.