XFAB.PA FY2025 Q1 Earnings Call Transcript
Date: 2025-04-24
Source: Financial Modeling Prep

Operator: Hello and welcome to the X-FAB First Quarter Results Conference Call. My name is Laura and I will be your coordinator for today's event. Please note, this call is being recorded and for the duration of the call, your lines will be in listen-only mode. However, you will have the opportunity to ask questions at the end of the call. [Operator Instructions] I will now hand you over to your host, Rudi De Winter, CEO to begin today's conference. Thank you.
Rudi De Winter: Thank you, Laura. Welcome to the conference call to comment on the X-FAB first quarter results. In the conference room today with me is Alba Morganti, CFO. Let me start. In the first quarter, X-FAB recorded revenues of $204 million, down 6% year-on-year and up 8% quarter-on-quarter, which is well within the guidance. First quarter revenue in core markets, automotive, industrial, medical was at $188.6 million, up 4% quarter-on-quarter and now represents 93% of our total revenue. The quarterly bookings were $175 million, a 26% increase quarter-on-quarter. This growth is primarily related to strong bookings in automotive and industrial end markets. In general, customers are still placing orders later than usual in reaction to the currently shortened lead times. The backlog for the first quarter amounts to $387 million compared to $414 million at the end of previous quarter. The backlog is still high compared to the situation pre-COVID. The average backlog used to be around three months revenue or less, and I expect the backlog to further come down a bit gradually to stabilize maybe around 4.5 times monthly revenue due to the improved cycle-times from our operations. The automotive revenue was $135 million, up 5% sequentially. Main drivers for the automotive growth in the first quarter were EV-related applications. Industrial revenue in the first quarter came in at $39 million, up 9% quarter-on-quarter and the industrial business is particularly -- is benefiting from increased demand following the last-time-buy announcements on our 150-millimeter CMOS. The revenue in the medical end markets amounted to $14 million. X-FAB recorded a sequential revenue increase across all technologies. The CMOS revenue went up 2% quarter-on-quarter, the silicon carbide 5%, and the microsystems business, 14%. The silicon carbide order intake increased 17% sequentially compared to previous quarter, and it is the second consecutive quarter in a row that we see a significant increase in the bookings, signaling that the markets gradually recover on the silicon carbide. The main growth driver for the silicon carbide bookings were data center applications. The megatrends electrification of everything and sensing everywhere will drive sustainable demand for the comprehensive set of specialty technologies that we offer, enabling solutions that contribute to the mitigation of climate change and more efficient digital health care for the aging population. With the phaseout of inventory corrections and the expected gradual recovery of demand in the course of 2025, we reiterate full year guidance with a revenue range of $820 million to $870 million and an EBITDA margin in the range of 24% to 27%. The geopolitical tensions and the related customs regulations do not currently impact X-FAB business directly as X-FAB is selling its goods ex-works. The indirect effect of these tensions can be either positive or negative and it's hard to estimate right now. The guidance accounts for all identified effects as we know right now. On the operations side, we progressed well with the expansion of the 180-nanometer CMOS capacity, which is crucial for supporting our CMOS and microsystems business. During the first quarter, all tools for the newly constructed clean room in Malaysia were delivered, installed and they are now being qualified. This marks the approaching completion of our global $1 billion expansion program. The associated capital expenditures are anticipated to be finalized within the first half of 2025. In the first quarter, capital expenditures totaled $102 million. As previously announced, the total CapEx for the full year will be just below $250 million, of which 75% will fall in the first half year. I would like to pass the word to Alba now for the financials.
Alba Morganti: Thank you, Rudi. Good evening, ladies and gentlemen and now we will go through the financial update. I would like to start the financial section by highlighting that the first quarter, we succeeded to increase quarter-on-quarter our gross profit by more than 22%, and we almost doubled our operating profit. And our EBITDA grew by more than 23% while our revenue increased by 8%, totalizing $204.1 million, as Rudi said, which was in the upper part of our guidance of $195 million to $205 million. More specifically, our EBITDA was $49.1 million with an EBITDA margin of 24%. If we exclude the impact from revenues recognized over time, the EBITDA margin for the first quarter would have been of 23.8%, also within the guided range of 22% to 25%. For the net financial result in the first quarter, we recorded a loss of $7.2 million, which includes unrealized foreign exchange effects totalizing $3.4 million negative. Our profitability remains unaffected by exchange rate fluctuations as our business remains naturally hedged. The aforementioned unrealized foreign exchange losses are mainly coming from the reevaluation of our euro-denominated loans. At a constant euro -- USD/euro exchange rate of 1.08 -- sorry, of 1.09 as experienced in the previous year's quarter, the EBITDA margin would have been 0.1 percentage points higher. Cash and cash equivalents at the end of the first quarter amounted to $157.2 million, which represents a decrease of 27% compared to the previous quarter. This is well in line with the CapEx expenditure plan, which we kept under control. As stated previously, by end of second quarter, we should finalize our major CapEx plan and we will come back to a more normalized level of cash and related to the investments, so the cash out will be normalized as from Q3 onwards. And to conclude this financial section, I would like to share our next quarter's guidance. In Q2 2025, we expect to reach revenues in a range of $200 million to $210 million and an EBITDA margin in the range of 22.5% to 25.5%. This guidance is based on an average exchange rate of 1.08 USD/euro and does not take into account the impact of IFRS 15. We also keep our full year 2025 guidance unchanged with annual revenue expected in the range of $820 million to $870 million and an EBITDA margin in the range of 24% to 27%. And now I would like to give the word back to Rudi.
Rudi De Winter: Thank you, Alba. I'm pleased to present the first quarter results reflecting X-FAB's resilient business with an 8% sequential increase in revenue and a robust EBITDA margin of 24%. X-FAB is a lot more resilient than in the previous down cycle in 2019. Although geopolitical tensions pose challenges for the semiconductor industry, they are also offering new opportunities for us due to our global presence across all major continents. I'm confident in the capacity to navigate these challenges as our specialty technologies address societal megatrends, and they will continue to be in demand. With this, I would like to close the introduction. And Laura, I'm open now for questions.
Operator: [Operator Instructions] Thank you. We will take our first question from Guy Sips of KBC Securities. Your line is now, please go ahead.
Guy Sips: Yes. My question is related to the press release of Melexis, one of your biggest clients of this week or end of last week related to their, let's say, new China fab. Yes, what would be the impact for you? I saw in your 2024 annual report that your shipments to China are $102.5 million. What is -- what portion of that is coming from Melexis? And how do you see that evolving related to their recent press release? Thank you.
Rudi De Winter: Thank you, Guy. Well, first of all, the $102 million China revenue is not from Melexis, these are all other customers. So, typically, this China business is with Chinese headquartered companies. With respect to this press release of Melexis, you need to know we are maybe producing now around 500 different products for Melexis. So, it's -- I think on the one hand, we encourage -- we want to not further increase our dependence on Melexis. We see this maybe more as a positive that Melexis also uses commodity technologies from other foundries if they can. As X-FAB, our mission is to focus more on specialties where we have unique features and so forth. So, we do not -- this is not coming as a surprise. This was well known to us, this is all also factored into our long-term plans.
Guy Sips: And then coming back to this $102 million, it was not growing year-over-year, although we can assume that China business in automotive and medical semiconductors should have grown. How do you see that evolving over time? So, your X-FAB's China exposure, excluding -- and not having this impact of Melexis, how do you see that evolving? $105 million in end of 2023, I presume.
Rudi De Winter: Yes, that's possible. Now, the evolution is also driven by the fact -- so the underlying business in this $100 million now is a lot more automotive than it was the year before. And if we go back three, four years, X-FAB revenue in China for automotive was zero. We expect this to grow to about -- up to 60% of our revenue in the next couple of years will be automotive revenue in China with Chinese companies. And -- so -- but what fell away is -- so the silicon carbide last year did not drop a lot. In 2023, there was quite some silicon carbide also for Chinese customers, so there was an effect. And there was also an effect on the RF SOI. We used to do quite a bit of legacy RF SOI that was sold globally, but in particularly also to Chinese customers that also dropped a lot in 2024. And it was all replaced by more and more automotive business.
Guy Sips: And then a last question before I leave the floor to my colleagues is on silicon carbide, how do you see that evolving? Do you expect that we could expect some recovery by the end of this year also in silicon carbide? Or is it one of the most difficult markets to predict?
Rudi De Winter: Yes. So, as I told, the bookings are developing very well. Although maybe in dollar value they have not reached the levels where we were historically, the quantity of wafers, we are at a very decent level again, not yet exceeding the peak in the past, but very close. But the model has changed. Now, we're doing a lot more -- or almost all the revenues with consigned wafers. The revenue per wafer that is generated is less because the substrates are not charged to the customers, but the value add per wafer is still in the same range than previously. And so the main applications that drove recently the business is for data center power management. But we see also with our new technology that we brought to the market in December 2024. We see very good results with our customers having top-notch performance of -- with respect to -- on resistance. That's an important measure of merit. We are on the leading edge with our newest technology, and that will put us also again on a good track for growth and the prototypings with customers are also going well. So, many customers are preparing for new device launches, and we expect that it gradually will recover.
Guy Sips: And perhaps a last final question is on the recent contract you signed with IQE on gallium nitride. Yes, how important could it be? And then as from when could this generate revenues for X-FAB?
Rudi De Winter: Well, the main purpose of this was to establish a European supply chain all the way from substrates to finished products. That's -- with respect to revenue, I believe that maybe it generates revenue on developed. Today, we mainly have development programs with customers and production, I expect that it starts in 2026.
Guy Sips: But it will be for power devices?
Rudi De Winter: It is for -- we have various developments ongoing. The first to go in production is more consumer type of power management, but we also have developments for automotive and what we call digital energy and things like that. But the first thing I expect in 2026 to go to the market is AC/DC type of power management.
Guy Sips: Okay. Thank you.
Operator: Thank you. We will now move on to our next question from Robert Sanders of Deutsche Bank. Your line is open, please go ahead.
Robert Sanders: Yes, hi, good evening. Thanks for taking my question. I guess the first one would be around IDMs that are closing 200-millimeter. It seems like companies like STMicro are expediting the process of migrating customers away from 200 to 300. Are there customers that you could potentially win that may not be as interested in moving up to a larger diameters? Is there an opportunity here from IDM outsourcing if this is a wider trend? And I have a couple of follow-ups. Thanks.
Rudi De Winter: Well, this is maybe a possibility. However, for X-FAB, we are not so interested in this outsourcing business. We have done that for the RF SOI in the past. We prefer to have customers designing products on our technologies and that we produce. But yes, if there is end of life of products and then they want to continue on 200-millimeter, that could be the case, but that's not -- I think outsourcing definitely is not the business model for X-FAB to produce for other companies on their technology.
Robert Sanders: Got it. And on 300, I know you've had a vague plan to do 300. Is there a scenario where you would co-invest with another player maybe to take a corridor of capacity? Because obviously, when you look at the landscape, NXP have got a partnership with Vanguard. ST is building a fab and onsemi tried to buy Allegro, presumably to bring them to 300. There seems to be a general trend to do 300. Is there not a danger of you not being able to compete without 300?
Rudi De Winter: Well, for the type of business we are in for many products, it's not needed because the volumes are not justifying 300-millimeter. Another important reason not to go to 300-millimeter is our integrated microsystems where the microsystems itself is on 200 millimeter. It's important to have 200-millimeter base wafers on CMOS wafers. But yes, I do not exclude that over the long-term, maybe we have a plan or we could -- such a relationship could develop, but that is not on the agenda today.
Robert Sanders: Got it. Last couple of questions would just be at the Capital Markets Day, you talked about more than $1 billion of revenue in 2026. It looks a bit of a stretch now. Is that still in place as a target? Or is that now off the table?
Rudi De Winter: That's still a target. This is based on two things. First, new products and that are adding to the top line as well as a recovery of the base business, in particularly the automotive, the 350-nanometer technologies where today we're not definitely not fully loaded, where we think that will recover in 2026 as well as the silicon carbide that we expect also to further develop in 2026.
Robert Sanders: Just last question, just on the end markets. TI talked about industrial picking up. STM talked about it picking up in Asia. That's after sort of 10 quarters of downturn. Is industrial picking up a little bit while auto is still under a lot of pressure? Or is that now easing?
Rudi De Winter: Well, what we see is that gradually, things are picking up also in -- I'm not saying in a great way in automotive yet, but we see here and there pockets where things are recovering. We see in the first quarter, gradually more and more positive news than negative news. So, I think that looks promising. Now, all this is, yes, before tariffs. It's hard to predict what the tariffs that will impact us. There will be definitely things that move around to maybe people trying to avoid tariffs. And -- but that could as well be positive for us with our supply chain in Asia and Malaysia, very close to China and the possibility also to deliver to the U.S. So, I think we -- it does not necessarily need to be negative. There could be also a lot of positive, maybe also for our silicon carbide because there's not so much silicon carbide processing in the U.S. We are one of the few next to Wolfspeed. Yes, it's hard to tell how that will turn out.
Robert Sanders: Okay. Thanks a lot.
Operator: Thank you. We currently have no questions coming through. [Operator Instructions] Thank you. There are no further questions coming through. I will now hand it back to Rudi for closing remarks. Thank you.
Rudi De Winter: Thank you, Laura and thanks, everyone, for your questions. I think we can close the call now and I hope to hear you all together again on July 31st for the first half year results. Thank you and have a great evening.
Alba Morganti: Thank you. Good bye.
Operator: Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.