ASE Technology (ASX) Q1 2019 earnings summary

Executive summary

• Pro forma Q1 revenue was NT$88,861 million, up 6% YoY and down 22% QoQ; softer-than-expected EMS demand drove a steeper-than-seasonal decline.

• Pro forma operating income fell 43% YoY; net income attributable to parent shareholders was NT$2,043 million, up 178% pro forma YoY but down 3% on the reported basis.

Financial highlights

• Pro forma gross margin was 12.8%, down from 14.5% YoY and 16.4% QoQ; operating margin was 2.6%, versus 4.8% and 7.5%.

• Reported operating income was NT$2,293 million, down 47% YoY; reported parent net income was NT$2,043 million, versus NT$2,096 million in Q1 2018.

• Excluding PPA expenses, pro forma net income was NT$3,501 million, up 60% YoY; basic EPS was NT$0.82.

• Reported basic EPS was NT$0.48 and diluted EPS NT$0.46; EBITDA was NT$16,523 million, down 22% QoQ and up 39% YoY.

• Net cash from operating activities was NT$16,023 million, versus NT$18,535 million in Q4 2018 and NT$8,732 million in Q1 2018.

Outlook and guidance

• Q2 ATM business in NT-dollar terms and gross margin were projected near their respective H1 2018 quarterly averages; EMS revenue and operating profit in US-dollar terms were projected near Q2 2018 levels.

• EMS softness was expected to persist in Q2, with stronger seasonal recovery in H2; management expected FY 2019 top-line growth in both ATM and EMS while remaining cautious.

• Q2 ATM loading was expected in the high-70% range, versus ~70% in Q1, with an ATM revenue uptick anticipated.

• Annual OpEx ratio increase was targeted below 30 bps; Q1 was expected to be the peak, with quarterly ratios trending down.