ASE Technology (ASX) Q2 2018 earnings summary

Executive summary

• Reported Q2 revenue was NT$84.5B, up 28% YoY; parent-attributable net income was NT$11.463B, including a NT$7.6B one-time SPIL revaluation gain.

• Pro forma revenue rose 6% YoY and 9% QoQ to NT$91.8B; pro forma net income was NT$3.5B, down 55% YoY.

• SPIL became a subsidiary on Apr. 30, 2018; reported results reflect different consolidation periods, while pro forma results combine both businesses retrospectively.

Financial highlights

• Reported gross profit was NT$13.710B and operating income NT$5.387B; basic and diluted EPS were NT$2.70 and NT$2.69.

• Pro forma gross margin was 16.1%, down 0.9 percentage points YoY; operating income was NT$5.7B, relatively flat YoY.

• Excluding the prior-year real-estate disposal gain, pro forma net income was NT$3.5B, down 2% YoY; excluding PPA expenses as well, net income was NT$5.0B.

• Excluding PPA, pro forma gross margin was 17.4%, operating margin 7.8%, and EPS NT$1.17.

Outlook and guidance

• Q3 ATM capacity was expected to rise 3%–4% QoQ and utilization 2%–3%; ATM gross margin was expected to approach Q3 2017 levels.

• Q3 EMS business in USD terms was expected to be similar to Q4 2017, with operating margin approaching Q2 2017 levels; sequential growth was expected to continue into Q4.

• The effective tax rate was expected to be ~20% in H2 2018; OpEx as a share of revenue was expected to decline, with a 9% holding-level expectation for the rest of 2018.

• 2018 CapEx was expected to exceed 2017 but remain below depreciation, at ~TWD 45B excluding PPA-related depreciation.