Advanced Semiconductor Engineering, Inc. Reports Unaudited Consolidated Financial Results For The First Quarter of 2018

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TAIPEI, Taiwan, April 27, 2018 — Advanced Semiconductor Engineering, Inc. (TAIEX: 2311, NYSE: ASX) (“We”, “ASE”, or the “Company”), among the world's leading companies in semiconductor packaging and testing, today reported unaudited net revenues[1] of NT$64,966 million for the first quarter of 2018 (1Q18), down by 2% year-over-year and down by 23% sequentially.  Net income attributable to shareholders of the parent for the quarter totaled NT$2,096 million, down from a net income attributable to shareholders of the parent of NT$2,559 million in 1Q17 and down from a net income attributable to shareholders of the parent of NT$6,246 million in 4Q17.  Basic earnings per share for the quarter were NT$0.25 (or US$0.042 per ADS), compared to basic earnings per share of NT$0.33 for 1Q17 and NT$0.74 for 4Q17. Diluted earnings per share for the quarter were NT$0.24 (or US$0.041 per ADS), compared to diluted earnings per share of NT$0.29 for 1Q17 and NT$0.71 for 4Q17.

RESULTS OF OPERATIONS

1Q18 Results Highlights – Consolidated

  • Net revenue contribution from packaging operations, testing operations, EMS operations, substrates sold to third parties and others, each represented approximately 45%, 9%, 44%, 2% and 0%, respectively, of total net revenues for the quarter.
  • Cost of revenue was NT$54,578 million for the quarter, down from NT$69,193 million in 4Q17.
    • Raw material cost totaled NT$31,396 million for the quarter, representing 48% of total net revenues.
    • Labor cost totaled NT$9,028 million for the quarter, representing 14% of total net revenues.
    • Depreciation, amortization and rental expenses totaled NT$6,860 million for the quarter.
  • Gross margin decreased 1.6 percentage points to 16.0% in 1Q18 from 17.6% in 4Q17.
  • Operating margin was 6.6% in 1Q18 compared to 9.2% in 4Q17.
  • In terms of non-operating items:
    • Net interest expense was NT$357 million.
    • Net foreign exchange gain of NT$502 million was primarily attributable to the depreciation of the U.S. dollar against the NT dollar.
    • Loss on valuation of financial assets and liabilities was NT$379 million.
    • Net loss on equity-method investments was NT$444 million, including NT$282 million of the share of loss from our investment in Siliconware Precision Industries Co., Ltd.
    • Other net non-operating income of NT$138 million were primarily related to miscellaneous income.  Total non-operating expenses for the quarter was NT$540 million.
  • Income before tax was NT$3,776 million for 1Q18, compared to NT$7,879 million in 4Q17.  We recorded income tax expenses of NT$1,420 million for the quarter, compared to NT$1,085 million in 4Q17.
  • In 1Q18, net income attributable to shareholders of the parent was NT$2,096 million, compared to net income attributable to shareholders of the parent of NT$2,559 million in 1Q17 and net income attributable to shareholders of the parent of NT$6,246 million in 4Q17.
  • Our total number of shares outstanding at the end of the quarter was 8,750,192,164, including treasury stock owned by our subsidiaries.  Our 1Q18 basic earnings per share of NT$0.25 (or US$0.042 per ADS) were based on 8,479,197,895 weighted average numbers of shares outstanding in 1Q18. Our 1Q18 diluted earnings per share of NT$0.24 (or US$0.041 per ADS) were based on 8,673,141,782 weighted average number of shares outstanding in 1Q18.

1Q18 Results Highlights – IC ATM[2]

  • Cost of revenues was NT$29,371 million for the quarter, down by 5% sequentially.
    • Raw material cost totaled NT$8,704 million for the quarter, representing 24% of total net revenues.
    • Labor cost totaled NT$7,739 million for the quarter, representing 21% of total net revenues.
    • Depreciation, amortization and rental expenses totaled NT$6,290 million for the quarter.
  • Gross margin decreased 5.2 percentage points to 20.8% in 1Q18 from 26.0% in 4Q17.
  • Operating margin was 9.2% in 1Q18 compared to 14.4% in 4Q17.

1Q18 Results Highlights – EMS

  •  Cost of revenues for the quarter was NT$25,991 million, down by 34% sequentially.
    • Raw material cost totaled NT$22,733 million for the quarter, representing 79% of total net revenues.
    • Labor cost totaled NT$1,268 million for the quarter, representing 5% of total net revenues.
    • Depreciation, amortization and rental expenses totaled NT$454 million for the quarter.
  • Gross margin increased to 9.4% in 1Q18 from 9.2% in 4Q17.
  • Operating margin decreased to 3.3% in 1Q18 from 4.3% in 4Q17.

LIQUIDITY AND CAPITAL RESOURCES

  • Capital expenditures in 1Q18 totaled US$209 million, of which US$146 million were used in packaging operations, US$54 million in testing operations, US$7 million in EMS operations and US$2 million in interconnect materials operations.
  • As of March 31, 2018, total unused credit lines amounted to NT$154,291 million.
  • Current ratio was 1.55 and net debt to equity ratio was 0.09 as of March 31, 2018.
  • Total number of employees was 68,985 as of March 31, 2018, compared to 68,753 as of December 31, 2017.

BUSINESS OVERVIEW

Packaging Operations[3]

  • Gross margin for our packaging operations during the quarter was 18.8%, down by 5.1 percentage points from 4Q17.
  • Capital expenditures for our packaging operations amounted to US$146 million for the quarter, of which US$81 million were used in purchases of wafer bumping and flip chip packaging equipment, and US$65 million were used in purchase of common equipment, SiP equipment and wirebond packaging equipment.

Testing Operations

  • Depreciation, amortization and rental expense associated with our testing operations amounted to NT$1,535 million during the quarter, down from NT$1,645 million in 4Q17.
  • In 1Q18, gross margin for our testing operations was 30.7%, down by 5.9 percentage points from 4Q17.
  • Capital expenditures for our testing operations amounted to US$54 million during the quarter.

EMS Operations

  • In 1Q18, gross margin for our EMS operations was 9.4%, up by 0.2 percentage points from 4Q17.
  • Capital expenditures for our EMS operations amounted to US$7 million during the quarter.

Substrate Operations

  • PBGA substrate manufactured by ASE amounted to NT$2,061 million for the quarter, down by NT$65 million, or by 3.1% from 4Q17.  Of the total output of NT$2,061 million, NT$1,009 million was from sales to external customers.
  • In 1Q18, our internal substrate manufacturing operations supplied 25% (by value) of our total substrate requirements.

Customers

IC ATM consolidated Basis

  • Our five largest customers together accounted for approximately 34% of our total net revenues in both 1Q18 and 4Q17.  No customer accounted for more than 10% of our total net revenues in 1Q18.
  • Our top 10 customers contributed 48% of our total net revenues for the quarter, compared to 49% in 4Q17.
  • Our customers that are integrated device manufacturers or IDMs accounted for 46% of our total net revenues for the quarter, compared to 45% in 4Q17.

EMS Basis

  • Our five largest customers together accounted for approximately 76% of our total net revenues in 1Q18, compared to 82% in 4Q17.  One customer accounted for more than 10% of our total net revenues in 1Q18.
  • Our top 10 customers contributed 87% of our total net revenues during the quarter, compared to 90% in 4Q17.

OUTLOOK

Based on our current business outlook and exchange rate assumptions, management projects overall performance for the second quarter of 2018 to be as follows:

About ASE, Inc.

  • In USD term, IC-ATM 2Q18 business should be above 2Q17 levels but below 4Q17 levels;
  • Excluding foreign exchange impact, IC-ATM 2Q18 GM should be similar to 2Q17 levels;
  • EMS 2Q18 business should be between 2Q17 and 3Q17 levels;
  • EMS 2Q18 gross margin should improve slightly from 1Q18 levels.

ASE, Inc. is among the world's leading companies in semiconductor packaging and testing, including front-end engineering testing, wafer probing and final testing services.  With advanced technological capabilities and a global presence spanning Taiwan, China, Korea, Japan, Singapore, Malaysia and the United States, ASE, Inc. has established a reputation for reliable, high quality products and services.  For more information, please visit our website at http://www.aseglobal.com.

Safe Harbor Notice

This press release contains “forward-looking statements” within the meaning of Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended. Although these forward-looking statements, which may include statements regarding our future results of operations, financial condition or business prospects, are based on our own information and information from other sources we believe to be reliable, you should not place undue reliance on these forward-looking statements, which apply only as of the date of this press release. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and similar expressions, as they relate to us, are intended to identify these forward-looking statements in this press release. Our actual results of operations, financial condition or business prospects may differ materially from those expressed or implied in these forward-looking statements for a variety of reasons, including risks associated with cyclicality and market conditions in the semiconductor or electronic industry; changes in our regulatory environment, including our ability to comply with new or stricter environmental regulations and to resolve environmental liabilities; demand for the outsourced semiconductor packaging, testing and electronic manufacturing services we offer and for such outsourced services generally; the highly competitive semiconductor or manufacturing industry we are involved in; our ability to introduce new technologies in order to remain competitive; international business activities; our business strategy; our future expansion plans and capital expenditures; the uncertainties as to whether we can complete the share exchange contemplated by a joint share exchange agreement between Siliconware Precision Industries Co., Ltd. and us; the strained relationship between the Republic of China and the People's Republic of China; general economic and political conditions; the recent global economic crisis; possible disruptions in commercial activities caused by natural or human-induced disasters; fluctuations in foreign currency exchange rates; and other factors.  For a discussion of these risks and other factors, please see the documents we file from time to time with the Securities and Exchange Commission, including our 2017 Annual Report on Form 20-F filed on March 28, 2018.

Supplemental Financial Information

IC ATM Consolidated Operations

Amounts in NT$ Millions

1Q/18

4Q/17

1Q/17

Net Revenues

37,072

41,794

38,385

Revenues by Application

Communication

46%

48%

50%

Computer

13%

13%

11%

Automotive, Consumer & Others

41%

39%

39%

Packaging Operations

Amounts in NT$ Millions

1Q/18

4Q/17

1Q/17

Net Revenues

30,313

34,226

31,061

Revenues by Packaging Type

Bumping, Flip Chip, WLP & SiP

32%

34%

31%

IC Wirebonding

58%

55%

58%

Discrete and Others

10%

11%

11%

Capacity

CapEx (US$ Millions)*

146

103

120

Number of Wirebonders

16,015

16,076

15,963

Testing Operations

Amounts in NT$ Millions

1Q/18

4Q/17

1Q/17

Net Revenues

5,679

6,556

6,365

Revenues by Testing Type

Final test

78%

78%

81%

Wafer sort

19%

19%

15%

Engineering test

3%

3%

4%

Capacity

CapEx (US$ Millions)*

54

28

31

Number of Testers

3,801

3,760

3,782

EMS Operations

Amounts in NT$ Millions

1Q/18

4Q/17

1Q/17

Net Revenues

28,691

43,289

29,363

Revenues by End Application

Communication

42%

42%

49%

Computer

17%

14%

15%

Consumer

24%

32%

22%

Industrial

9%

6%

7%

Automotive

7%

5%

6%

Others

1%

1%

1%

Capacity

CapEx (US$ Millions)*

7

7

3

* Capital expenditure excludes building construction costs.

 

Advanced Semiconductor Engineering, Inc.
Summary of Consolidated Statement of Comprehensive Income Data
 (In NT$ millions, except per share data)
(Unaudited)

For the three months ended

Mar. 31

2018

Dec. 31

2017

Mar. 31

2017

Net revenues:

Packaging

29,368

33,045

29,806

Testing

5,679

6,553

6,365

Direct Material

1,009

922

892

EMS

28,686

43,285

29,355

Others

224

181

133

Total net revenues

64,966

83,986

66,551

Cost of revenues[4]

(54,578)

(69,193)

(54,576)

Gross profit

10,388

14,793

11,975

Operating expenses:

Research and development

(2,775)

(3,046)

(2,763)

Selling, general and administrative

(3,297)

(4,041)

(3,987)

Total operating expenses

(6,072)

(7,087)

(6,750)

Operating income

4,316

7,706

5,225

Net non-operating (expenses) income:

Interest expense – net

(357)

(318)

(435)

Foreign exchange gain (loss)

502

780

2,891

Gain (loss) on valuation of financial assets and liabilities

 

(379)

 

(216)

 

(3,964)

Gain (loss) on equity-method investments[4]

(444)

29

(171)

Others

138

(102)

299

Total non-operating income (expenses)

(540)

173

(1,380)

Income before tax

3,776

7,879

3,845

Income tax expense

(1,420)

(1,085)

(886)

Income from continuing operations and
 
before noncontrolling interest

2,356

6,794

2,959

Noncontrolling interest

(260)

(548)

(400)

Net income attributable to
 
shareholders of the parent

 

2,096

 

6,246

 

2,559

Per share data:

Earnings (losses) per share

– Basic

NT$0.25

NT$0.74

NT$0.33

— Diluted

NT$0.24

NT$0.71

NT$0.29

Earnings (losses) per equivalent ADS

— Basic

US$0.042

US$0.123

US$0.053

– Diluted

US$0.041

US$0.118

US$0.047

Number of weighted average shares used in
  diluted EPS calculation (in thousands)

8,673,142

8,632,469

7,931,315

Exchange rate (NT$ per US$1)

29.33

30.08

31.20

 

Advanced Semiconductor Engineering, Inc.
Summary of Consolidated Statement of Comprehensive Income Data - IC ATM
(In NT$ millions, except per share data)
(Unaudited)

For the three months ended

Mar. 31

2018

Dec. 31

2017

Mar. 31

2017

Net revenues:

Packaging

30,313

34,226

31,061

Testing

5,679

6,556

6,365

Direct Material

1,050

989

935

Others

30

23

24

Total net revenues

37,072

41,794

38,385

Cost of revenues[4]

(29,371)

(30,932)

(29,552)

Gross profit

7,701

10,862

8,833

Operating expenses:

Research and development

(1,865)

(2,125)

(2,000)

Selling, general and administrative

(2,418)

(2,736)

(2,850)

Total operating expenses

(4,283)

(4,861)

(4,850)

Operating income

3,418

6,001

3,983

Net non-operating (expenses) income:

Interest expense – net

(407)

(394)

(498)

Foreign exchange gain (loss)

685

822

2,868

Gain (loss) on valuation of financial assets
  and liabilities

 

(502)

 

(577)

 

(4,072)

Gain (loss) on equity-method investments[4]

40

1,245

601

Others

167

2

325

Total non-operating income (expenses)

(17)

1,098

(776)

Income before tax

3,401

7,099

3,207

Income tax expense

(1,250)

(776)

(570)

Income from continuing operations and
 
before noncontrolling interest

2,151

6,323

2,637

Noncontrolling interest

(55)

(77)

(78)

Net income attributable to
 
shareholders of the parent

 

2,096

 

6,246

 

2,559

 

Advanced Semiconductor Engineering, Inc.
Summary of Consolidated Statement of Comprehensive Income Data - EMS
(In NT$ millions, except per share data)
(Unaudited)

For the three months ended

Mar. 31

2018

Dec. 31

2017

Mar. 31

2017

Net revenues:

Total net revenues

28,691

43,289

29,363

Cost of revenues

(25,991)

(39,287)

(26,249)

Gross profit

2,700

4,002

3,114

Operating expenses:

Research and development

(926)

(936)

(780)

Selling, general and administrative

(832)

(1,208)

(1,101)

Total operating expenses

(1,758)

(2,144)

(1,881)

Operating income

942

1,858

1,233

Net non-operating (expenses) income:

Total non-operating income

63

454

217

Income before tax

1,005

2,312

1,450

Income tax expense

(160)

(324)

(303)

Income from continuing operations and
  b
efore noncontrolling interest

845

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Jasmine Petters

Jasmine Petters

Jasmine hails from the city of Nizams, Hyderabad, and is currently pursuing her M.D. from there only. She is an internet wizard and has keen passion in All Things tech. She is a regular Comment contributor for The Daily Telescope and writes a Web column, in which she covers war, sports, and everything in between.
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