ASE Technology Holding Co., Ltd. - 3Q18 Financial Summary
Business Context and Reporting Period
This Form 6-K reports unaudited consolidated financial results for the third quarter ended September 30, 2018. The results reflect a full quarter of combined operations following the April 30, 2018 merger between Advanced Semiconductor Engineering, Inc. (ASE) and Siliconware Precision Industries Co., Ltd. to form ASE Technology Holding Co., Ltd. (ASEH). The company is the leading provider of semiconductor manufacturing services in assembly, test, and electronic manufacturing services (EMS).
Key Financial Metrics
- Revenue: Total net revenues were NT$107,597 million, up 46% year-over-year and 27% sequentially.
- Profitability: Net income attributable to shareholders of the parent was NT$6,257 million. Basic earnings per share (EPS) were NT$1.47 (US$0.096 per ADS).
- Margins: Gross margin improved to 17.1% (up 0.9 percentage points sequentially). Operating margin increased to 7.8% (up 1.4 percentage points sequentially).
- Cash Flow: Net cash generated from operating activities was NT$17,274 million. Net cash used in investing activities was NT$5,456 million, primarily due to capital expenditures.
- Debt and Liquidity: Total assets were NT$535,971 million. The current ratio was 1.04, and the net debt-to-equity ratio was 0.68. Unused credit lines totaled NT$165,108 million.
- Capital Expenditures: Total CapEx for the quarter was US$290 million.
Material Changes vs. Prior Periods
- Revenue Growth: Driven by strong demand in packaging and testing operations, which contributed approximately 50% and 10% of total revenue, respectively. EMS operations contributed 39%.
- Net Income Decline: Net income decreased to NT$6,257 million from NT$11,463 million in 2Q18. This decline is largely attributed to a significant reduction in non-operating income, specifically a drop in "Other net non-operating income" from NT$7,681 million in 2Q18 to NT$448 million in 3Q18.
- Cost Structure: Cost of revenue increased to NT$89,216 million. Raw material costs represented 49% of total net revenues.
- Customer Concentration: The top five customers accounted for 41% of total net revenues (up from 39% in 2Q18). In the EMS segment, the top five customers accounted for 80% of revenues.
Outlook, Risks, and Management Commentary
The filing includes a Safe Harbor Notice regarding forward-looking statements. Management highlights risks associated with the cyclicality of the semiconductor industry, regulatory changes, environmental liabilities, and geopolitical tensions between the Republic of China and the People's Republic of China. The company noted that 3Q18 results may not be fully comparable to prior periods due to the recent merger structure. No specific quantitative guidance for future quarters was provided in this text.
Investor Verification Checklist
- Verify the sustainability of the 46% year-over-year revenue growth given the high concentration of top customers (41% of revenue).
- Assess the impact of the significant drop in non-operating income (specifically "Other" items) on future earnings stability.
- Monitor the current ratio of 1.04 and net debt-to-equity ratio of 0.68 for liquidity risks.
- Review the capital expenditure plan of US$290 million per quarter against future cash flow generation.
- Confirm the comparability of financial metrics given the April 2018 merger and the specific accounting treatment of the combined entity.