ASE Technology (ASX) Q2 2019 earnings summary

Executive summary

• Legal-entity Q2 revenue was NT$90.741bn, up 7% YoY and 2% QoQ; pro forma revenue declined 1% YoY.

• Parent-attributable net income was NT$2.690bn, down sharply YoY; Q2 2018 included a NT$7.572bn SPIL remeasurement gain.

• ATM and test recovered sequentially as EMS faced lower loading and elevated costs; H1 SiP, test and advanced packaging grew.

• Management expected H2 growth and full-year revenue growth in ATM and EMS, while citing trade and consumer-demand uncertainty.

Financial highlights

• Legal-entity Q2 revenue was NT$90.741bn, up 7% YoY; gross profit was NT$13.969bn, up 2%, and operating income was NT$4.143bn, down 23%.

• Pro forma Q2 revenue was NT$90.741bn, down 1% YoY; gross profit was NT$13.969bn, down 5%, operating income NT$4.143bn, down 27%, and parent-attributable net income NT$2.690bn, down 23%.

• Basic and diluted EPS were NT$0.63 and NT$0.62; parent-attributable net income was NT$2.690bn, versus NT$11.463bn in Q2 2018 and NT$2.043bn in Q1 2019.

• Excluding PPA expenses, gross profit was NT$15.174bn (16.7% margin), operating profit NT$5.601bn (6.2%), net income NT$4.148bn and basic EPS NT$0.98.

• H1 revenue was NT$179.602bn, operating profit NT$6.436bn and parent-attributable net income NT$4.733bn; operating cash flow was NT$27.641bn.

Outlook and guidance

• Q3 ATM revenue and gross margin in NTD terms were expected to be similar to Q3 2018; full-year ATM revenue growth was targeted.

• Q3 EMS was expected to run slightly ahead of Q3 2018 and near the H2 2018 average; EMS was expected to grow YoY, with 2019 operating margin below the 4% goal and a goal of reaching or exceeding 4% in 2020.

• ATM OPEX ratio was expected to remain similar in Q3 and decline in Q4; EMS OPEX was expected to fall in H2, with the consolidated OPEX ratio lower in 2020 than 2019.

• Full-year tax rate was expected near 24%; H2 effective tax rate was expected to be lower.