ASE Technology Holding Co., Ltd. - 2Q17 Financial Summary
Business Context and Reporting Period
This Form 6-K filing reports the unaudited consolidated financial results for Advanced Semiconductor Engineering, Inc. (ASE) for the second quarter of 2017, ended June 30, 2017. ASE is a leading global provider of semiconductor packaging, testing, and electronic manufacturing services (EMS).
Key Financial Metrics
- Revenue: Total net revenues were NT$66,026 million, up 5% year-over-year (YoY) but down 1% sequentially.
- Profitability: Net income attributable to shareholders of the parent was NT$7,847 million, a significant increase from NT$2,559 million in 1Q17 and NT$4,302 million in 2Q16.
- Earnings Per Share (EPS): Basic EPS was NT$0.97 (US$0.160 per ADS); Diluted EPS was NT$0.89 (US$0.148 per ADS).
- Margins: Consolidated gross margin improved to 18.3% (up 0.3 percentage points sequentially). Operating margin remained flat at 7.9%.
- Cash Flow & Liquidity: Capital expenditures totaled US$213 million. As of June 30, 2017, the current ratio was 1.30, and the net debt-to-equity ratio was 0.24. Unused credit lines totaled NT$175,681 million.
- Balance Sheet: Total assets were NT$356,623 million. Cash and cash equivalents stood at NT$43,891 million.
Material Changes vs. Prior Period
- Non-Operating Income: The primary driver for the surge in net income was a one-time gain on the disposal of a subsidiary, contributing NT$5,684 million to non-operating income. Total non-operating income for the quarter was NT$6,171 million.
- Segment Performance:
- IC ATM (Assembly, Testing, Material): Revenue was NT$39,048 million. Gross margin improved to 23.1%.
- EMS: Revenue was NT$28,248 million, down 4% sequentially. Gross margin improved to 11.1%, though operating margin dipped slightly to 4.0%.
- Packaging: Represented 46% of total revenue. Gross margin was 20.6%.
- Cost Structure: Cost of revenue decreased sequentially to NT$53,910 million. Raw material costs represented 47% of total net revenues.
Guidance, Outlook, and Risks
Management Outlook for 3Q17:
- IC ATM Business: Projected to be a notch or two lower than 3Q16 levels.
- IC ATM Margins: Expected to be similar to 2Q16 levels.
- EMS Business: Projected to be similar to the average of 3Q16 and 4Q16 levels.
- EMS Margins: Expected to be similar to the average of 1Q16 and 2Q16 levels.
Risks and Contingencies: The filing includes a Safe Harbor notice regarding forward-looking statements. Key risks include cyclicality in the semiconductor industry, regulatory changes, competitive pressures, foreign exchange fluctuations, and geopolitical tensions between the Republic of China and the People's Republic of China.
Investor Verification Checklist
- Verify the sustainability of net income given the NT$5,684 million one-time gain from the disposal of a subsidiary.
- Confirm the impact of the US dollar appreciation against the NT dollar on future foreign exchange gains/losses.
- Monitor the sequential decline in EMS revenue and the projected lower business levels for IC ATM in 3Q17.
- Review the status of the joint share exchange agreement with Siliconware Precision Industries Co., Ltd. (SPIL) mentioned in the risk factors.
- Assess the capital expenditure plan of US$213 million against the projected revenue outlook.