XFAB.PA FY2025 Q3 Earnings Call Transcript
Date: 2025-10-30
Source: Financial Modeling Prep

Operator: Hello, and welcome to the X-FAB Third Quarter 2025 Results Conference Call. My name is George. I'll be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions]. I'd like to hand the call over to your host, Mr. Rudi De Winter, CEO, to begin this conference. Please go ahead, sir.
Rudi De Winter: Thank you. Welcome, everyone. In the conference call today, we also have Alba Morganti, CFO. In the third quarter of 2025, we recorded revenues of $229 million, up 11% year-on-year and 6% quarter-on-quarter, which is well above the guidance of $215 million to $225 million. We also progressed well in our core markets: automotive, industrial, medical with a revenue of $216 million, up 14% year-on-year and 5% quarter-on-quarter. Our core business now represents a share of 94% of the total revenue. Now breaking it down by end markets. In the third quarter, the automotive revenue was $147 million, up 1% year-on-year and 2% quarter-on-quarter. The third quarter industrial revenue was $48 million, up 51% year-on-year and 1% sequentially, reflecting the overall recovery of our industrial end markets. The gradual recovery of the silicon carbide business contributed to this positive evolution. Now for the medical business, the revenue in the third quarter hit a record high of $21 million, up 74% year-on-year and 40% quarter-on-quarter. The growth was mainly driven by contactless temperature sensor, DNA sequencing and echography applications that altogether did very well in the past quarter. Now looking at it by technology. In the third quarter, the CMOS revenue recorded a growth of 10% year-on-year and 4% quarter-on-quarter, mainly due to the extra capacity that came online for the 180-nanometer BCD-on-SOI and 35-nanometer CMOS node demand was weaker. Microsystems revenue was up 27% year-on-year and 9% sequentially. This is based on a broad set of customer-specific microsystem technologies that we co-created with our customers. Also, demand for new developments in the micro systems remain strong, and this is an area where we will continue to see above-average growth. Our silicon carbide business continued to recover and revenue grew strongly by 30% year-on-year and 20% -- 21% quarter-on-quarter. The number of wafers produced in the third quarter more than doubled compared to a year ago. The revenue did not follow the same way due to the product mix and also the ratio of consigned substrates that was much, much higher last quarter than a year ago. The positive trend in the evolution of our silicon carbide business is underpinned by increasing bookings attributed to sustained demand from data center, electric vehicles and renewable energy applications. We also see good traction on our new technology platforms that we released at the end of 2024. Many customers are developing their new generation products based on this platform that will give improved performance and lower system cost. The fact that we offer full supply chain for silicon carbide in the U.S. is well perceived by our U.S. customers that are designing in products for high value-added assets such as data centers, industrial equipment and electric energy systems. Quarterly prototyping for the past quarter was $20 million, down 16% year-on-year and 6% down quarter-on-quarter. The order intake for the third quarter amounted to $163 million, down 25% year-on-year and down 21% compared to the previous quarter. The booking in the industrial segment was good. The weakness is primarily due to inventory corrections by automotive customers as well as broader macroeconomic uncertainties resulting from geopolitical tensions and trade disputes. These factors have led to a more cautious ordering patterns while customers also take advantage of shorter cycle times, placing orders later than usual and with reduced lead time. As a result, feasibility is still restricted. The backlog for the third quarter came in at $347 million compared to $413 million at the end of the previous quarter. Let's now move to the operations update. In September, we had the inauguration of the new cleanroom in Malaysia, which will increase the site's manufacturing capacity from 30,000 to 40,000 wafer starts per month. Production at the new facility is being scaled up progressively with the full increase in capacity anticipated by the fourth quarter of 2026. The expansion will effectively double our capacity for the popular 180-nanometer BCD-on-SOI technology, which is particularly suited for applications such as smart motor drivers various drivers such as piezo actuators, LED drivers and battery management systems. The recovery of the silicon carbide business is supported by the existing capacity at our Texas facility. The current installed capacity will enable us to do more than double the wafer starts. The capital expenditure for the third quarter was $23 million, bringing total year-to-date CapEx to $179 million, and the full year capital expenditure is projected to be less than $250 million. Let me now pass the word to Alba for the financials.
Alba Morganti: Thank you, Rudi. Good evening, ladies and gentlemen. We will now go through the financial update. I would like to start this section by highlighting that the third quarter, we succeeded in increasing our sales by 6% quarter-on-quarter, which were the highest since almost 2 years, totalizing USD 228.6 million and which is well above the guided $215 million to $225 million. Our EBITDA grew by 4% quarter-on-quarter and 7% year-on-year, being the highest this year. Our EBIT was almost $24 million, down 5% year-on-year, but increasing by 10% if we compare it to Q3 last year. Third quarter EBITDA was almost $354 million with an EBITDA margin of 23.6%. If we exclude the impact from revenues recognized over time, the EBITDA margin would have been 24.2%, within the guided range of 22.5% to 25.5%. Our profitability remains unaffected by exchange rate fluctuations as we continue to be naturally hedged. At a constant U.S. dollar euro exchange rate of 1.10 as experienced in the previous year's quarter, the EBITDA margin would have been unchanged at 23.6%. In the third quarter, we reported a financial result of minus $5.6 million, mainly due to interest result of $4.3 million and realized foreign exchange losses arising from the reevaluation of the euro-denominated debt amounted to $800,000, but of course, it's a noncash item. Cash and cash equivalents at the end of the third quarter amounted to $174.2 million, which means an increase of $16.5 million compared to the previous quarter while net debt decreased by $21.1 million quarter-on-quarter. Despite the peak of CapEx expenditures payments in the first half of '25, our financial situations remain solid. As anticipated and now visible, our CapEx are now significantly decreasing which translates into an improvement of our net debt position, which trend is inversely for the first time since a while. Especially in the current context of uncertainties and geopolitical tensions, it's important to keep our financials strong. And to conclude this financial section, I would like to share our next quarter's guidance. Our revenue is expected to come in within the range of $215 million to $225 million with an EBITDA margin in the range of 22.5% and 25.5%. This corresponds to a full year revenue in the range of $863 million to $873 million for the full year 2025. This guidance is based on an average exchange rate of USD 117 to euro, and does not take into account the impact of the IFRS 15. And now I would like to give the back -- the word back to Rudi.
Rudi De Winter: Thank you, Alba. I'm glad about the solid increase in revenue for the third consecutive quarter amid a challenging macroeconomic environment. This is a significant interest or there is significant interest in our specialty technologies. Our silicon carbide business has made measurable progress with growing design activity on our latest silicon carbide technology platform. Additionally, our microsystems division continues to advance with collaborative co-creation projects enhancing our growth pipeline, while visibly continues to be limited, I'm confident in X-FAB position that supports sustained long-term business expense. Besides the third quarter results, I announced today that I will be passing on the CEO role to Damien Macq, today, COO; on the 6th of February 2026 after the full year results call. Damian is very well prepared and the Board of Directors and myself have full trust. He is the right person to lead X-FAB. I will make sure there is a smooth transition. I will be supporting him in my role as a member of the Board and of course, further future. Operator, we are now ready for taking questions.
Operator: [Operator Instructions]. Our first question this afternoon or this evening, will be coming from Mr. Michael Roeg of Degroof Petercam.
Michael Roeg: Yes, Well, first of all, congratulations on taking the next step and well, spending a bit more time in the Board of Directors, looking down on your successor and guiding him. But of course, I will leave you with a couple of tough questions. So the first one, bookings have come down strongly, and prototyping sales has also come down based on the chart in your PowerPoint presentation. So should we expect a slow start in 2026?
Rudi De Winter: Well, first of all, the prototyping is something that fluctuates. There are milestones on projects and so forth that -- so I think the prototyping is at a good level. Remember, this is discussed from 0 every quarter, and it's all about new contracts and new activities. So it's still a substantial business development activity ongoing, so on. Quite happy about that. The production bookings, they indeed are weak, that we still have quite a good backlog. That represents roughly almost to our 2 quarters. So it's a bit less -- it is, of course, too early to say, but it's a sign of weakness in the market. So our guidance for the Q4 is still good. It's in the range of where we were now Beyond that, visibility is low. And yes, so we could see maybe a weaker start from next year.
Michael Roeg: Okay. And is there a decent amount of backlog for way deep into 2026? Or is most of it typically scheduled for Q1, Q2?
Rudi De Winter: This backlog is -- so customers, they order now typically, when they need the goods. So typically, all this backlog is mostly to execute on deliveries in the quarters to come.
Michael Roeg: Okay. That's reassuring at least. Then I have a question. If I compare your sales in Q3 with those of Q2, then they've grown by $13 million, yet the sequential trend in gross profit is minus $2 million. And this is not explained by depreciation and amortization because that was the same in the 2 quarters. So something was in your cost of sales, something strange. Can you explain that?
Rudi De Winter: Yes, there is an effect that -- of inventory. So the work in progress, I mentioned we have shorter cycle times because we have improved capacity. The cycle times come down in the -- in the fab that is very much appreciated by our customers, so we can deliver faster. But as a result, the work in progress is lower and that has -- in the quarters where we decreased this WIP as a negative effect on the profitability.
Michael Roeg: Is that something that only hits your P&L wants to the lower work in progress level and then if it remains at that level in Q4, and then you will not have that cushion?
Rudi De Winter: Yes. yes. So this is -- this is an effect that we have when the WIP -- so this is a typical effect when the activity in the factory decreases or the cycle times as short and the valuation of the WIP decreases when the valuation is -- when we come back to a steady state, then this effect is not there. But you can also have the opposite effect if bookings go up, loading in the fab goes up, you have the opposite effect where the revenue is not yet there, but the WIP increases and the WIP is valued and therefore, it has a positive effect -- could have a positive effect on the margins.
Michael Roeg: And if I do the calculations, it's around $4.5 million to $5 million impact in the quarter. This is above average, I guess, normal trends, correct?
Rudi De Winter: Yes. So this is -- if we look at the full year, it's even bigger. So we also have inventory or WIP corrections in the previous quarter. I think it is coming to a stabilization in -- by the end of the year.
Michael Roeg: Okay. Then my next question is about Texas. You mentioned in the press release that there will be capacity expansion in 2026 towards the end of the year. How much CapEx is there involved with this particular expansion program?
Rudi De Winter: There is no CapEx involved. What is mentioned there that these equipments that are already delivered and paid for that will be qualified and will be added to the operating and the production lines.
Michael Roeg: Okay. So this is part of the existing program that has just been completed. So there is no additional expansion program currently planned?
Rudi De Winter: For now, there is no expansion with additional cash out planned.
Michael Roeg: Okay. And during the Capital Markets Day, you mentioned that there would be discussions about further automation of 4 of the 6 fabs. Is there anything that came out of that or a midterm plan for that?
Rudi De Winter: Well, this is an ongoing process that we're working on more automation. This is mostly labor and IT and that kind of thanks to a lesser extent, related to CapEx. There might be some CapEx that is minus compared to the equipment investments.
Michael Roeg: Okay. Then my final question, a very quick one. There was $2 million of other income in the OpEx. Can you explain what that was for?
Rudi De Winter: There was a sale of $2 million.
Operator: Next question coming from Emmanuel Matot of ODDO BHF.
Emmanuel Matot: I have 3 questions. First, already, could you comment about your decision to step down from your role of CEO, what are the motivation behind that very important decision for you? Second, too early to guide for next year, for sure. But with the churn you have and the ramp-up of significant production capacities, are you confident at this stage for further sales growth next year? And third, I wanted to know if you compete in some spaces with GlobalFoundries because it has just announced a significant capacity expansion in Germany, and I wanted to have your view on that.
Rudi De Winter: Yes. So first of all, with respect to the organizational change and me stepping down as CEO. So as we as a manager or as the founders of the company, we always, yes, have in mind that, yes, it's important to grow succession and then move on. I think while the team is very well prepared and Damien Macq is ready to take that role in my view. And therefore, I decided or started thinking about this a while ago. And I think now it's the right moment to for him to take over. And I think this is very well placed to do it. Second question, so I didn't -- now the question was GlobalFoundries. It was a question on GlobalFoundries Dresden. So GlobalFoundries Dresden, they're in different -- I don't see this as a competition to X-FAB. They're maybe also doing automotive first, but that's more into ECU type processors and FD SOI for further applications. It's a different type of SOI. So X-FAB is also doing a lot of SOI and we are very successful in SOI, but it's high voltage SOI. That's different characteristics and FD SOI is more used for lower voltage systems and lower power applications. And the third question was?
Emmanuel Matot: It's about the visibility you have now, which seems to be limited, but also we can expect significant production capacity next year on products, you are fully loaded. So growth next year or Gary, you don't want to comment at all.
Rudi De Winter: Well, today, the capacity, we are not in allocation anymore as compared to a year ago. So the revenue, the output is mainly driven by the demand in the market that we are following 1:1 now. And so if demand is there, we'll be growing if -- so we will follow the demand. So we're able to -- if demand is there, we're able to anticipate only take advantage and grow. If it's not there, of course. So we are now dependent on the market and, of course, all the new projects that we are in the pipeline, and we gradually rolling out.
Operator: We'll now move to Robert Sanders of Deutsche Bank.
Robert Sanders: Best of luck with your next role and welcome to Damian. I just had a question about Nexperia. So you're in the European automotive supply chain. There's been a lot of warnings around line stoppages from both European and non-European OEMs talking about significant risk weeks of inventory. Can you just give us your take on how severe and serious the situation is based on what you can pick up? And then I have a few follow-up questions.
Rudi De Winter: Yes. I'll following this, of course, also closely, but I also -- most of it is what I also pick up in the press. So what I know is that Nexperia is indeed in it's more -- seems like low tech components, but they're very good at it, and they're producing that in very high quantities. And so they're having some areas of significant market share. And I think for most of those components, there are replacements, but ask the question whether these -- if there are shortages, whether the replacements can be ramped up quickly enough. I have no to my knowledge, it is not yet line stops, but I cannot tell how far it is of.
Robert Sanders: Yes. I mean, based on your experience, I mean, what they do is they do small signal logic components like diodes and BJTs and stuff like that, but they are used in like body, comfort, lighting, BMS, interfaces, sensors, safety, just a lot of low-value components. As you say, they have very high market share. I mean based on what you've seen in your previous job, I assume you would be looking at 6 to 9 months to requalify on a competitor. Is that the sort of time line?
Rudi De Winter: Well, I think that also, if you look back at the COVID situation, normal -- the market is normal, then all these things take time. However, if there is a threatening line stop things can -- things can change quickly, and there is a lot of agility and creativity. So I think it is more -- I think it's not so much a matter of qualifying it. I think there is -- most of the cases, people are very agile and flexible to move if it's really needed. But it's more a matter of the components in sufficient quantity there from alternative sources. Now I also typically see there have been cases in the past also when Sumitomo plant was blown up years ago. That was producing 50% of these particular chemicals that were absolutely needed everywhere in the semiconductor industry. We had 50% market share. But -- also there, the dynamics, the agility of the whole market, then that came in motion. And finally, it's sourced it out. So let's see how this will turn out.
Robert Sanders: Right. And then just a question about China. Obviously, since we last spoke China has turned downwards. There's been production cuts at BYD and Li Auto and all these other guys, too much unsold inventory. How have you seen that manifest in your business, whether it's direct with Chinese customers or indirect through Melexis?
Rudi De Winter: I think that's too early, too early to say with somewhat further in the supply chain. It's difficult. We don't have a good visibility, except that we see our bookings in the third quarter that were lower than the previous quarter, in particularly in the automotive segment a bit across the board. As I mentioned, the bookings in industrial, they were good. Yes. So it seems to be more on the automotive side, as I see the weakness.
Robert Sanders: And just one last one on OpEx. How should we think about the impact on OpEx of all these various different expansions, whether it's on G&A or just on your cost base more generally?
Rudi De Winter: That we do not expect an effect except to the fact that once these expansions are active and producing, then they come into the depreciation. So it will have an effect on our depreciation.
Operator: [Operator Instructions]. We will now go to Guy Sips of KBC Securities.
Guy Sips: Most of my questions were already answered. There were also experience-related. I have one question on the data center. Do you see there the positive trend, you see that accelerating? Or is it just on a continuous pace as it was over the last quarters? Or do you see a real improvement since, let's say, the Capital Market Day?
Rudi De Winter: Well, I think it's -- in the revenues, we see a gradual progress. So in the beginning of the year, we saw strong activity in data center that continues, but it is complemented now also with better demand for industrial and renewable so inverters for renewables and also a bit of automotive. So it's the silicon carbide activity is broadening. And I think that a lot of the data center -- yes, growth still has to come. So it's not yet -- so first of all, the architectures architectural change that uses more silicon carbide in data centers still is coming. And I think also all the announcements on CapEx and so forth start to build buildings and they're not yet installing the infrastructure yet.
Guy Sips: And can you put a kind of a time frame on this?
Rudi De Winter: No, I cannot answer. It's -- I think some of the customers of us who have announced activities with the data center companies on 800-volt architectures and so are rather talking about 20 -- real ramps in '27.
Operator: Next question will be coming from Mr. [indiscernible] who is a private investor.
Unknown Attendee: My question is actually the following. If AI is applied, let's say, on the development of prototypes, is it possible to substantially reduce the throughput time for the development and the prototyping.
Rudi De Winter: It's a good question. I don't -- not really -- that's not really the case. So there is -- in digital -- in the digital world, there is more activity on automating design environments and so forth. So I think there, it could have an effect on the analog mixed signal design that we're doing so far, there are people looking at it at research institutes, but nothing that is practically usable to my knowledge.
Unknown Attendee: Okay. And then I've got a second question. Is it the automotive business part of it? Is it coming to end of life, and that has to be replaced by new products, new components or in which stage are we?
Rudi De Winter: Not particularly. So we -- there is, of course, a continuous flow of innovation, but we have existing products that are -- that exist already a couple of years that will -- that are also being designed in, in electric vehicles in certain functions. So that continues. But -- it's not that there is an abrupt end of life of certain components. Of course, if combustion engines are used to a lesser extent, if you have like applications like lambda sonda or pressure sensors that go into an exhaust system of a combustion car, that will gradually phase out. But yes, as you hear, there is push in Germany to extend lifetime of combustion engines and so forth. So I do not see an abrupt change in the next cities rather as a gradual change over the next 10 years.
Unknown Attendee: Okay. And could you elaborate a little bit more on the Chinese market for our business?
Rudi De Winter: Yes. So as X-FAB, we have direct Chinese business. It's around 10% of our business. But indirectly, we have also customers are selling into China. So I think the direct and indirect business of X-FAB, it's maybe closer to 35% or so of our revenue that goes into China. Now what our customers do have less that's a bit further away, as I would have to refer to the conference call of our customers. What we sell directly in China are predominantly technologies that are, to a lesser extent, available in China. So that's typically our BCD on SOI for high-voltage smart systems, like motor drivers, battery monitoring systems and so forth. And there, we see continued interest also for new designs with our customers because this technologies are not immediately available in foundries in China.
Operator: [Operator Instructions] We'll now move to Trion Reid of Berenberg.
Trion Reid: Trion Reid from Berenberg. Just also wanted to add to my best wishes really for whatever you're going to do in the future. I had 2 questions on the results. The first was just around the fact that you talked about the results being strong, but the order intake weak. I'd be interested if you have any comments around the pattern of orders through Q3. You saw a sort of any trend or you're just seeing more lumpiness or short-term ordering? Just be interested to get any more color on that. And then my second question was just on the CapEx, which was pretty low in Q3, but your Q4 guidance seems to suggest it will actually ramp up quite significantly in Q4, just to understand why that is and what that sort of implies for next year as well.
Rudi De Winter: Yes. So your first question with respect to the bookings yes. So the -- yes, that is what it was in the third quarter. So far, if you ask what happened in October, yes, that's somewhat a continuation of the Q3. The peak or the low amount of CapEx in Q3 is indeed less than what we forecasted. This has to do rather with -- we're not pushing the throttle on our expansions in Malaysia. So the -- this is just a delay. So the cap -- we have not canceled anything. It's just that there is a slower rollout and therefore, also the invoices come in slower and so the cash out is also somewhat less. So the -- in Q4, we expect that it will increase. This is not new CapEx, but it's just a shift of things from Q3 and Q4, we'll have to see maybe there will be some shift from Q4 into Q1 next year. But the increase that you -- that we can expect in Q4 is not a sign for next year. It is just the balance from Q3 that shifted in Q4.
Trion Reid: Okay. Great. And just to follow up on the order intake. You're suggesting that there was not a decline through the quarter that the quarter was weak for order intake in all 3 months.
Rudi De Winter: No, it was somewhat flat over the quarter. It's not that there was a sudden effect at the end or so. It was somewhat flat over the 3 months.
Operator: We have a follow-up question. This one coming from Mr. Robert Sanders of Deutsche Bank.
Robert Sanders: Just on the Kuching ramp and the EUR 1 billion expansion that you've done. Is the idea to continue to push that ramp, even though the demand is not really there just to sort of get the economics going because of -- right now, it's a lot of tools but not a lot of revenue? Or is the idea to basically free that plan until the demand is there?
Rudi De Winter: The plan is to continue with the rollout of the equipment and to install it, qualify it to be ready for demand that can come. So the -- the equipment is mainly for our 180-nanometer BCD-on-SOI and there, we have good design wins. We have a unique position in the market. So we have -- we feel confident that this will pick up, and we want to be ready.
Robert Sanders: Got it. And is there any plan to reduce or exit any legacy facilities? I think you've already said you're going to end-of-life effort by the end of '26. So I'm just trying to understand how much of your capacity that's quite old now is sort of going to get wound down as part of this upgrade.
Rudi De Winter: Well, this is an effort we're making the transition from already for many years, we're transitioning to more micro systems business. and gradually exiting the CMOS there. The end of life that we announced there was for 0.6 micron CMOS signal. CMOS is also a in there and that will run until end '26, a little bit in '27 and then there will be one cleanroom there that we -- there are 3 cleanrooms on the site there, and there will be one cleanroom that will be closed.
Robert Sanders: Got it. And maybe a question for Alba. What is the France run rate annualized at the moment for revenue in just Corbeil?
Alba Morganti: So yes, Corbeil is currently at $54 million per quarter at the moment. So yes, it was the highest quarter that we recorded now in Q3. So it's ramping up significantly. We also invested there in additional tools, as you know, and we are now running only X-FAB technologies since a while. So the efforts start to pay off.
Robert Sanders: Got it. And what's the EBITDA of that facility?
Alba Morganti: We don't give EBITDA breakdown, as you know, because we don't produce everything on one side. Some of the products are shifted from one side to the other. And -- so it's quite difficult to -- it's misleading to give EBITDA breakdown by site. You know that we start -- some products we start in one factory, then we continue in other factories and so on and so forth. So yes, as I said, it's misleading.
Robert Sanders: Got it. And just last question. If Melexis is able to get BCD-on-SOI processes from 8-inch Grays in China. What does that mean for you? Does that mean that you will lose 30% of Melexis business? Or is that something you don't think is a likelihood?
Rudi De Winter: Yes. I don't know if grays has BCD-on-SOI, I think definitely not in the quality and the features that we are offering. Anyhow, it's this -- if a customer designed a new product in another fab, it takes a lot of time to qualify and transition. In the meantime, all the existing business typically stays until the products are really end of life. So I don't see an immediate effect.
Operator: As we have no further questions at this time. Mr. De Winter, I'd like to turn the call back over to you for any additional or closing remarks. Thank you.
Rudi De Winter: Yes. Thank you very much, everyone. So I'm looking forward to hearing you again on the 6th of February for the Q4 results. That will then be together with Damien and I will be then handing over to Damien. Yes. Thank you very much, and have a nice evening.
Alba Morganti: Thank you. Goodbye.
Operator: Thank you. Ladies and gentlemen, that will conclude today's conference. Thank you for your attendance. You may now disconnect. Have a good day and a good night.