Siliconware Precision Industries (SPIL) Management on Q1 2016 Results - Earnings Call Transcript

| About: Siliconware Precision (SPIL)

Siliconware Precision Industries Company, Ltd. (NASDAQ:SPIL)

Q1 2016 Results Earnings Conference Call

April 28, 2016, 08:00 AM ET

Executives

Jack Wong - IR Manager

Eva Chen - VP, Financial Division

Mike Ma - Spokesperson & VP, Corporate Research and Development Center

Janet Chen - IR Director

Bough Lin - Chairman

Analysts

Ve Heung - VNT

Operator

Welcome, everyone, to Siliconware Precision Industries Company 2016 First Quarter Earnings Conference Call. All lines have been placed on mute to prevent background noise. After the presentation, there would be a question-and-answer session. Please follow the instructions given at that time if you would like to ask a question. Today's host will be Jack Wong, the Investor Relations manager of SPIL.

Now I'm going to hand it over to Jack for opening. Jack, please proceed.

Jack Wong

Thank you very much. Good evening, ladies and gentlemen. Welcome to Siliconware Precision Industries Company first quarter 2016 earnings conference. My name is Jack Wong. I'm the manager of the Investment Relations, and I will be the host of today's session. Before we begin, I would like to introduce to you our speakers for today. The first would be our chairman, Mr. Bough Lin.

Bough Lin

Thank you, good evening.

Jack Wong

And then our Chief Financial Officer, Vice President, Ms. Eva Chen

Eva Chen

Hello. Good evening

Jack Wong

Following up by our Spokesperson, also the Head of our Corporate Research and Development Center, Vice President Mr. Mike Ma.

Mike Ma

Hello, everybody. Good evening.

Jack Wong

And lastly, our Investor Relations Officer, Director, Ms. Janet Chen.

Janet Chen

Hi, good evening, everyone.

Jack Wong

Throughout this session, our Investor Relations officer, Ms. Janet Chen, will be presenting the results and summary report of our first quarter of 2016 consolidated financial status. Then our Spokesperson, Mr. Mike Ma, will give us the industry outlooks. Lastly, we will proceed to the Q&A session.

And now I will hand the floor over to our IR Officer, Ms. Janet Chen, for the consolidated financial status of the first quarter of 2016.

Janet Chen

Good evening, ladies and gentlemen. We are now presenting SPIL first quarter 2016 consolidated operational results and the summary report. With regarding to the statement of the forward-looking on this report, please see the Safe Harbor notice on page 2. Please go to page 3.

For the Q1, 2016 consolidated operating results and the summary report, the revenue was NT$19.3 billion, which decreased by 7.1% compared to NT$20.63 billion for the previous quarter.

The revenue decreased by 7.2% compared to NT$20.18 billion for the corresponding quarter of the previous year. The net income was NT$1.6 billion, but that was minus NT$0.01 billion last quarter. The net income decreased by 38.6% compared to NT$2.61 billion for the corresponding quarter of the previous year.

The basic EPS is NT$0.51. The diluted EPS was NT$0.39 and diluted ADS was US$0.06. The depreciation for this quarter was NT$3.18 billion. Capital expenditure was NT$3.08 billion. EBITDA was NT$5.18 billion and annualized ROE was 9%.

Next page. Comparison of the Q-o-Q between Q1 and Q4 last year. The revenue decreased by 7.1% compared to the previous quarter. The gross profit for this quarter decreased 27.1% compared to the previous quarter.

The gross margin for this quarter was 20.6%, while the gross margin for the previous quarter was 26.2%, which decreased by 5.6 percentage points. And the main reason was the impact of the price reduction was 4 percentage points and the impact from the product mix change was 1.9 percentage points.

The operating results for this quarter decreased 42.1% compared to the previous quarter. Operating profit margin for this quarter was 9.8%, while the operating profit margin for the previous quarter was 15.7%, which decreased by 5.9 percentage points.

The non-operating revenue was NT$0.23 billion, which has decreased by NT$0.17 billion compared to NT$0.4 billion for the previous quarter. ECB valuation gain on fair value for this quarter was NT$0.16 billion. And non-operating expenses was NT$0.22 billion, which has decreased by NT$3.44 billion compared to NT$3.66 billion for the previous quarter.

In the last quarter the impairment loss of financial assets on Unimicron Technology Corporation was NT$1.86 billion, and the ECB valuation loss on fair value was NT$1.42 billion last quarter. The net income in this quarter was NT$1.6 billion, which has decreased by NT$1.81 billion compared to minus NT$0.21 billion for the previous quarter.

The ECB valuation gain on fair value in this quarter is NT$0.16 billion. The influence on net income is approximately NT$0.12 billion and the impact on EPS is approximately NT$0.04.

A comparison of the year-over-year between the Q1 in 2016 and the Q1 2015. The revenue decreased by 7.2% compared to the corresponding quarter of the previous year. The revenue for this quarter was NT$19.3 billion, while the revenue for the last year was NT$20.81 billion.

The gross profit decreased by NT$27.1 billion compared to the corresponding quarter of last year. The gross margin this quarter was 20.6%, while decreased by 5.6 percentage points compared to 26.2% for the corresponding quarter of the previous year.

The operating profit decreased by 45.6% compared to the corresponding quarter of the last year. The net income was NT$1.6 billion, which decreased by 38.6% compared to NT$2.61 billion for the same quarter last year. The value to the EPS is NT$0.39, which decreased by NT$0.44 compared to NT$0.83 for the corresponding quarter of the previous year.

Please go to the next page. Cash and cash equivalents on March 31, 2016, was NT$25.4 billion, which increased NT$0.21 billion compared to NT$25.19 billion by end of the previous quarter.

Long-term investments was NT$8.38 billion, which increased NT$0.33 billion compared to NT$8.05 billion by end of previous quarter. The shareholder equity was NT$72.41 billion, which increased NT$1.81 billion compared to NT$70.6 billion by end of the last quarter.

Please go to next page. The gross margin and operating margin for Q1, 2015 has decreased compared to the Q4 of last year. Please go to the next page. In terms of the revenue analysis for customers in different area, the revenue decreased from 43% to 41% in North America, and increased from 43% to 49% in Asia, and decreased from 13% to 9% in Europe.

Please go to page 8. Fabless maintained at 95% of the total revenue and IDM maintained at 5% of the total revenue. Please go to page 9. In terms of the application breakdown, the communications sector stood for 66% [ph] Consumer section was 22% and the computing sector was 10% and the memory was 2%.

Please go to page 10. Bumping and the flip chip slightly decreased from 45% to 42%. The substrate based wirebonding slightly increased from 27% to 30%. The lead frame wirebonding base maintained at 17%, and the testing maintained at 11%.

Please go to page 11. In the Q1 of 2016, we had a wirebonder increase 270 units and disposed nine units to total amount of 7,584 units. The 8-inch bumping maintained at 113,000 pieces per month. The 12-inch bumping also maintained at 130,000 pieces per month.

The flip chip EGM maintained at 29 million pieces per month. Flip chip CSP increased to 102 million pieces per month. The wafer level CSP maintained at 140 million pieces. The tester increased 15 units to a total of 562 units.

This is the summary of the operating results. I'll hand over to Mike Ma.

Mike Ma

Hi, this is Mike Ma. Results of 2016 outlook statement. China just reported this week a Q1 GDP of 6.7%, which was not unexpected, but definitely an indicator of slowing economy.

The US economy remains the exception to the rule, with the continued expectation of static growth in 2016. However, US GDP growth has not proven robust in split of its ongoing claim.

Even the ongoing slump in the world economy is not surprise, the semiconductor revenue remains subdued. The year-over-year growth forecast for Gartner was minus 0.6%; for FIA 0.3%; TSMC 1%, WSTS 2%; and IC Insights 4%. In generally from a little bit negative to single digits - low single digits.

The smart phone market continued to exhibit signs of maturity up here with the unit growth. The year-over-year unit growth position was ITC, 5.7% to grow to 1.5 billion units handsets. Gartner, 7%, also grew to 1.5 billion too. TSMC predicts 7% and QUALCOMM predicts 8%.

Expectation are not optimistic for PC unit demand in 2016. Gartner and IDC reported Q1 2016 PC units fell about 10% year-over-year. The tablet market probably already hit its peak and is shrinking as shown by April's own data, which indicated iPad unit shipment reached over 70 million in 2013, but has declined to only about 15 million in 2015.

With the maturing growth rate of smart phones and unit declines for PC and tablets, semiconductor companies are hunting for the next big thing. But it may take some time for any of them to reach any significant volume. Wearable technology has gained some traction, but near-term volume growth to be relatively low.

Looking further out, virtual reality headsets and automotive for infotainment, self-driving vehicles, and all-electrical vehicles, communication and so on, could prove to be sort of growth for semiconductors.

The first half of 2016 may prove to be sluggish for the semiconductor industry. However, there are some signs of - as noted by TSMC, that its customers are restocking their inventories. The foundry also stated its expectation for higher growth in second half of 2016 during its quarterly financial disclosures.

If this trend continues and end demand returns, semiconductor revenue may rebound after mid-year and 2016 may still finish with modest growth levels, likely supported by anticipated high single digit year-over-year growth in smart phone units.

Okay, that's all. Thank you.

Bough Lin

To the market expense in all segments. The communication in the first quarter is slightly down and computing is slightly up. Compute is down, memory is down. As for the second quarter forecast, communication is up; computers, slightly up; computer for us; memory, down.

I assume the guarantee of all the three segments, the wirebonder in the first quarter the utilization rate is 73% and the rigid bond is 63%. TET is 61%. When we predict that the second quarter is in a run rate [indiscernible] the wirebonder will be 79% to 83%, rigid bond will be 64% to 68%, TET is 63% to 67%.

Jack Wong

Thank you for all your speakers for their remarkable presentation. And now we would like to open the floor to questions from all our guests and investors.

Question-and-Answer Session

Operator

Yes, thank you. [Operator Instructions] The first question is coming from Ve Heung, VNT. Go ahead please.

Ve Heung

Hi. Two quick ones for my side. The first one is housekeeping one. What was the flip chip for CSP revenue for Q1? Hello?

Eva Chen

Yes. Okay. The flip chip CSP revenue in the first quarter was NT$2.5 billion.

Ve Heung

Okay. All right. Thank you. Second one, Chairman actually guide this year's second revenue industry growth to be around 7% to 8%. How should we expect, especially to perform relative to the industry?

Bough Lin

They will be able to outperform.

Ve Heung

Outperform, okay. So we should be – probably it should be 2 percentage point higher than that? Hello?

Janet Chen

Ve, what is your last question? What is your previous question?

Ve Heung

So we should expect the CSP perform better in the industry, right? So that's what the Chairman indicates.

Bough Lin

This is an industry forecast from the organization. I think we are trying our best to reach that – it’s been on the strangled situation. So we should outperform with the same, as the older company. And (inaudible) for the good performance comparing to the same company.

Ve Heung

Okay. All right. Thank you very much.

Operator

[Operator Instructions]

Jack Wong

Thank you for your participation in our first quarter of 2016 earning conference. Thank you for your participation in our first quarter of 2016 earnings conference. This meeting is hereby concluded. As a kindly reminder, you may find our conference materials at our corporate website for more information and details.

You may also have access to the audio records of this conference online on our corporate website as well. Once again, we sincerely thank you for your presence and we wish you a wonderful evening and a lovely rest of the week. Thank you.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. You may disconnect now. Goodbye.

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