ams Osram (AMS) Q2 2024 Fixed Income earnings summary

Executive summary

• Q2 2024 revenues reached €819 million, at the midpoint of guidance, with adjusted EBITDA of €135 million (16.5%), and H1 2024 revenues totaled €1,665 million with adjusted EBITDA of €259 million (15.5%).

• Profitability improved due to cost savings from the 'Re-establish the Base' program, with €60 million realized to date and €6 million in structural savings, driving margins near the top end of guidance.

• Major restructuring of microLED activities followed project cancellation, with significant one-time costs and a strategic refocus on automotive LEDs.

• Design-win momentum continued, with €2.5 billion in new business (lifetime value) secured in H1 2024, supporting future growth ambitions.

• Adjusted EBIT margin rose to 6.8% in Q2, up from 5.2% in Q1, with absolute EBIT up €12 million quarter-on-quarter.

Financial highlights

• Q2 2024 revenues declined 4% year-over-year and 3% sequentially; gross margin improved to 29.7% (adj.).

• Free cash flow in Q2 was -€119 million, impacted by elevated CapEx and annual dividend payments, but expected to improve in H2.

• CapEx in Q2 was €176 million, elevated due to carryover invoices and construction services.

• Cash and cash equivalents at end of Q2 were €900 million, down €176 million from Q1.

• Net debt at Q2 end was €1,576 million (€1,977 million including SLB), up from Q1 due to CapEx and dividend.

Outlook and guidance

• Q3 2024 revenues expected between €830 million and €930 million, with adjusted EBITDA margin guidance of 17–20%.

• H2 2024 revenues anticipated to improve over H1, but industrial and medical segment rebound now expected only in 2025.

• Full-year CapEx guidance is €450 million, but may rise to €500–550 million if government grants are delayed.

• Positive free cash flow (pre-interest) targeted for 2024, with intent to achieve positive all-in free cash flow in 2025.

• Run rate savings of €75 million from efficiency program on track for 2024.