Novatek Microelectronics (3034) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue reached TWD 27.87 billion, up 10% quarter-over-quarter but down 3.7% year-over-year, meeting guidance.

• Gross profit for Q3 was TWD 11.07 billion, up 6.7% sequentially but down 9.4% year-over-year.

• Operating income for Q3 2024 was TWD 6.24 billion, up 13.4% sequentially but down 12.6% year-over-year.

• Net income for Q3 2024 was TWD 5.26 billion, down 2.4% quarter-over-quarter and 17.4% year-over-year.

• EPS for Q3 2024 was TWD 8.64, down from TWD 8.86 in Q2 and TWD 10.46 a year ago.

Financial highlights

• Q3 2024 gross margin was 39.7%, down from 41.14% in Q2 and 42.25% a year ago, but within guidance.

• Operating margin for Q3 2024 was 22.4%, up from 21.82% in Q2 but down from 24.69% a year ago.

• Nine-month 2024 revenue was TWD 77.53 billion, down 6.9% year-over-year; net income was TWD 15.54 billion, down 13.6% year-over-year.

• Cash at end of Q3 2024 was TWD 41.997 billion, down due to a TWD 32 per share cash dividend.

• Inventory at Q3 was TWD 9.36 billion, down 0.5% quarter-over-quarter; inventory days dropped to 63 from 67 in Q2.

Outlook and guidance

• Q4 2024 revenue is guided at TWD 24-25 billion, with gross margin expected in the 37%-40% range and operating margin at 17.5%-20.5%.

• Q4 revenue expected to decline due to weak consumer electronics demand and off-peak seasonality.

• 2025 outlook is optimistic, driven by AI-related product demand and new product launches.

• Gross margin stabilization targeted for 2025 through new products and cost control.

• Management expects continued market volatility and is monitoring demand trends in the semiconductor and display sectors.