CHROMA — Call Transcript 2017

Nov 13, 2017

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CHROMA ATE INC.

2017.3Q Earnings Conference Call

30[th] October, 2017

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Disclaimer

This presentation contains some forward-looking statements that are subject to substantial risks and uncertainties. Typically, these statements contain words such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “plan”, “forecast”, “project”, “predict”, “potential”, “continue”, “may”, “should”, “will”, and “would” or similar words. You should consider these forward-looking statements carefully because such statements are only our expectations or projections about future events, and actual results may differ materially from those expressed or implied by such statements. The forward-looking statements in this presentation include, but are not limited to, growth rates for various markets estimated by third party sources, future products and technology development, widespread market acceptance of the hosted delivery model, future revenue growth and profitability. You should be cautioned that the forwardlooking statements are no guarantee of our future performance. The forward-looking statements contained in this presentation are made only as of the date of this presentation and we undertake no obligation to update the forward-looking statements to reflect subsequent events or circumstances, except as required by law. This presentation and the information contained herein are the property of Chroma Ate Inc.

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Agenda

• Corporate Profile

• • Financial Review

• • Operation Highlights

• • Q&A

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CORPORATE PROFILE

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Corporate Profile

• Chroma Group founded in 1984, a world leading own brand turnkey test & automation solution provider, specialized in electronics test and measurement instruments and ATS (auto test system). Businesses cover test and measurement instruments and ATS for various industries, and a turnkey solution as an integration of Test and Measurement , Automation and MES (manufacturing execution system).

• Key success: Precision, Reliability, Innovation

• Chroma group encompass business unit of Chroma Ate Inc., Modular Assembly System (MAS) and Chroma New Material Corp (CNMC).

• 2016 Consolidated Sales : NT$ 11.6 billion

• 2016 Net Income: NT$1.7 billion

• Chroma Group total of 2,749 employees (as September, 2017)

• Chroma Wins Fifth National Innovation Award – Distinguished Enterprise Innovation Award.

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Consolidated Chroma Ate Sales Others Consolidated CNMC Sales Consolidated MAS Sales

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11,644 11,624
5% 3%
10,171 10,307
9,692
7% 20%
15%
13%
48%
29%
24%
34%
44% 47% 60% 58% 74%
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2012

2013

2014

2015

2016

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Financial Performance

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Sales Revenues Gross Margin
Consolidated Sales
R&D Expenses
Gross Margin Consolidated R&D Expenses in % of Sales Revenues
Parent Only
7,233
11,644 11,624
10,171 10,307
9,692
56%
47% 55%
54% 54%
52%
5,135
39% 44%
4,539
37%
4,174
3,926
29%
16% 17%
15% 15%
13%
755 784 937
637 631
Chroma Employees ： 1,679  (R&D 38%)
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
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Financial Performance

ROE

Dividend

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EPS Cash dividend
Payout ratio
4.53
17%
15%
3.51 3.30
14%
3.28
3.21
13%
12%
2.52 2.60
2.50
2.40
2.00
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2012 2013 2014 2015 2016

2012 2013 2014 2015 2016

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Chroma Global Network

Global Employees ： 2,749  , Branch Offices x 24, Distributors x 96

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Europe :
Netherlands
Germany
US :
Irvine/
Foothill Ranch, CA
Hong Kong :
Neworld
SE Asia: Singapore
India / Thailand / Vietnam Japan: Shin-Yokohama
Malaysia / Philippines /
Indonesia
China : Beijing / Nanjing / Shanghai / Suzhou
Chongqing / Xiamen / Shenzhen / Dongguan
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FINANCIAL REVIEW

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Year 2017.1~3Q Condensed Consolidated Income Statement

	Condensed Consolidated P&L (In Million NTD, except for EPS in NTD)		2017.1~3Q %		2016.1~3Q % YoY %
	Net Sales		9,687 100%		8,849 100% 9%
	Consolidated Sales of Testing Equipment Business		7,242 75%		6,640 75% 9%
	Consolidated Sales of MAS		600 6%		264 3% 127%
	Consolidated Sales of New Material		1,528 16%		1,658 19% (8%)
	Others		317 3%		287 3% 10%
	Cost of Goods Sold		(4,893) (51%)		(4,732) (53%) 3%
	Gross Profit		4,794 49%		4,117 47% 16%
	Operating Expenses: Selling and General & Administration Research & Development		(1,903) (20%) (899) (9%)		(1,729) (20%) 10% (762) (9%) 18%
	Operating Income		1,992 21%		1,626 18% 23%
	Non-Operating Income (Expenses), net		52 -		(26) - n/a
	Income (Loss) Before Tax Income Tax		2,044 21% (385) (4%)		1,600 18% 28% (290) (3%) 33%
	Net Income		1,659 17%		1,310 15% 27%
	Other Comprehensive Income (Losses)		(167) (2%)		(177) (2%) (6%)
	Comprehensive Income		$ 1,492 15%		$ 1,133 13% 32%
	Net Income (Losses) Attributable To: Shareholders of the Parent Noncontrolling Interests		1,670 17% (12) -		1,338 15% 25% (28) - (57%)
			$ 1,658 17%		$ 1,310 15% 27%
	EPS (Basic)		$ 4.23		$ 3.54 19%
	EPS (Diluted)		$ 4.07		$ 3.31 23%

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Basic EPS is based on weighted average outstanding shares of 395 million in 2017 and 378 million in 2016.

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Balance Sheet Highlights & Financial Ratio

	Consolidated (In Million NTD) Balance Sheet Highlights Cash & Short Term Investments Inventory Short Term Debt Long Term Debt Shareholders Equity		2017. Sept 6,761 2,401 3,201 874 12,350	2016. Dec 5,829 1,906 1,012 2,765 10,788	+ / - % 16% 26% 216% - 68% 14%
	Total Assets		21,667	18,633	16%
	Inventory Turnover (Day) AR Turnover (Day) AP Turnover (Day) Net Debt to Equity (%)		119 96 111 Net Cash	104 88 101 Net Cash
	ROE (%)		19%	17%
	ROA (%)		11%	10%
	Cash Position EBITDA Cash Flow from Operation	2017.3Q 1,145 686	2017.2Q 715 638	QoQ 60% 8%	2017.1~3Q YoY 2,295 22% 1,089 11%
	Free Cash Flow	(290)	1,544	n/a	777 n/a

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All ROE + ROA has been annualized.

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Free Cash Flow = Net Cash Provided by Operating Activities + (Net Cash used by Investing Activities)

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Quarterly Highlights

2017.3Q Key Points

• Sales Revenue: $ 2,285 million,

• up 21% QoQ, down 4% YoY

• Gross Margin: 53%

• Operating Margin: 26%

• Net Income: NT$ 866 million,

• up 68% QoQ, up 51% YoY

• 2017.3Q Highlights:

• The major growth driver is coming from Semiconductor Testing

Solutions and Turnkey Solutions, presented a growth of 44% and

137% QoQ respectively.

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Sales Revenues Gross Margin
Operating Margin
2,373
2,285
1,890
1,797
1,654
1,617
1,589
55%
54% 53% 53%
52%
50%
50%
25% 26% 26%
23% 23% 22%
21%
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2016.1Q 2016.2Q 2016.3Q 2016.4Q 2017.1Q 2017.2Q 2017.3Q 12 12

Year 2017.3Q Condensed Income Statement

	Condensed P&L– Parent Only (In Million NTD, except for EPS in NTD)		2017.3Q %		2017.2Q % QoQ %	2016.3Q % YoY %
	Net Sales		2,285 100%		1,890 100% 21%	2,373 100% (4%)
	Cost of Goods Sold		(1,064) (47%)		(908) (48%) 17%	(1,186) (50%) (10%)
	Gross Profit		1,221 53%		982 52% 24%	1,187 50% 3%
	Operating Expenses: Selling and General & Administration Research & Development		(331) (14%) (290) (13%)		(296) (16%) 12% (261) (14%) 11%	(327) (13%) 1% (251) (11%) 16%
	Operating Income		600 26%		425 22% 41%	609 26% (1%)
	Non-Operating Income (Expenses), net		383 17%		182 10% 110%	55 2% 596%
	Income (Loss) Before Tax		983 43%		607 32% 62%	664 28% 48%
	Income Tax		(117) (5%)		(90) (5%) 30%	(90) (4%) 30%
	Net Income		$ 866 38%		$ 517 27% 68%	$ 574 24% 51%
	Other Comprehensive Income		12 -		(2) - n/a	(79) (3%) n/a
	Comprehensive Income		$ 878 38%		$ 515 27% 70%	$ 495 21% 77%
	EPS (Basic)		$ 2.15		$ 1.30 68%	$ 1.52 43%
	EPS (Diluted)		$ 2.08		$ 1.27 64%	$ 1.42 46%

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100% owned subsidiaries’ income - New Material: 7m (QoQ ↓ 30%, YoY ↑ 17%), MAS: 150m (QoQ ↑ 285%, YoY ↑ 241%).

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Year 2017.1~3Q Condensed Income Statement

	Condensed P&L– Parent Only (In Million NTD, except for EPS in NTD)		2017.1~3Q %		2016.1~3Q % YoY %
	Net Sales		5,971 100%		5,616 100% 6%
	Cost of Goods Sold		(2,822) (47%)		(2,728) (49%) 3%
	Gross Profit		3,149 53%		2,888 51% 9%
	Operating Expenses: Selling and General & Administration Research & Development		(904) (15%) (804) (14%)		(817) (14%) 11% (686) (12%) 17%
	Operating Income		1,441 24%		1,385 25% 4%
	Non-Operating Income (Expenses), net		490 8%		185 3% 165%
	Income (Loss) Before Tax		1,931 32%		1,570 28% 23%
	Income Tax		(261) (4%)		(232) (4%) 13%
	Net Income		$ 1,670 28%		$ 1,338 24% 25%
	Other Comprehensive Income		(163) (3%)		(173) (3%) (6%)
	Comprehensive Income		$ 1,507 25%		$ 1,165 21% 29%
	EPS (Basic)		$ 4.23		$ 3.54 19%
	EPS (Diluted)		$ 4.07		$ 3.31 23%

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Non-operating Income included 100% owned subsidiaries’ income - New Material: 18m (YoY ↓ 44%), MAS: 183m (YoY ↑ 239%).

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Balance Sheet Highlights & Financial Ratio

	Parent Only (In Million NTD) Balance Sheet Highlights Cash & Short Term Investment Inventory Short Term Debt Long Term Debt Shareholders Equity		2017. Sept 3,471 1,810 2,990 728 12,145	2016. Dec 3,656 1,458 800 2,597 10,617	+ / - % - 5% 24% 274% - 72% 14%
	Total Assets		18,216	16,586	10%
	Inventory Turnover (Day) AR Turnover (Day) AP Turnover (Day) Net Debt to Equity (%)		156 123 106 2%	145 100 91 Net Cash
	ROE (%)		20%	17%
	ROA (%)		13%	11%
	Cash Position EBITDA Cash Flow from Operation	2017.3Q 1,028 (52)	2017.2Q 650 11	QoQ 58% n/a	2017.1~3Q YoY 2,063 21% (107) n/a
	Free Cash Flow	(300)	982	n/a	356 n/a

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All ROE + ROA has been annualized.

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Free Cash Flow = Net Cash Provided by Operating Activities + (Net Cash used by Investing Activities)

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OPERATION HIGHLIGHT

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Chroma Ate Inc. Sales Breakdown by Testing Solutions

(Unit: Million NTD) Test Instruments & Automate Testing System (ATS) Semiconductor Test Solutions Turnkey Solutions Service & Others		2017.3Q % QoQ YoY 1,068 47% (1%) 17% 882 38% 44% 142% 249 11% 137% (75%) 86 4% (10%) 12%	2017.1~3Q % YoY 3,117 52% 20% 2,125 35% 143% 456 8% (76%) 274 5% 16%	2016 % 3,570 49% 1,209 17% 2,143 30% 311 4%
Total		2,285 100% 21% (4%)	5,972 100% 6%	7,233 100%

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Chroma Ate. Inc. Sales Mix Breakdown (YTD)

A Turnkey Solution and Intelligent Automation Line Provider

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3,926 5,135 4,539 7,233 5,972
Parent Only
5% 4% 4% 4% 5%
9% 8%
18% 12%
Others
30%
21% 17%
35%
Turnkey Solutions 21%
17%
Semiconductor Test Solutions
Test Instruments & ATS
67% 65% 67% 49% 52%
2013 2014 2015 2016 2017.1~3Q
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Sales Breakdown by Consolidated Entities

(Unit: Million NTD) Chroma Ate. Inc.included overseas affiliates MAS New Material Others		2017.3Q % QoQ YoY 2,915 74% 30% 5% 358 9% 121% 184% 528 13% 8% (5%) 126 4% 29% 35%		2017.1~3Q % YoY 7,242 75% 9% 600 6% 127% 1,528 16% (8%) 317 3% 10%
Consolidated Sales		3,927 100% 32% 10%		9,687 100% 9%

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Year 2017.2H Guidance

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In the first three quarters 2017, the key drivers for parent company sales revenues are coming from semiconductor testing solutions and Test Instruments and ATS, which presented a strong growth of 143% and 20% YoY respectively.

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The Company expected 2H profitability will be better than 1H due to:

• Test Instruments and ATS will remain a steady growth in 2H, mainly contributing from EV market growing the demand of high power electronics testing.

• The increasing adoption for Laser Diode (VCSEL) in 3D images and the new SoC/Analog Test System will continue to drive the semiconductors testing solutions sales in 2H, 2017 and carry forward to 2018.

• The 4Q turnkey solutions will be better than 3Q due to battery cell order deliver.

• The subsidiary MAS will have a outstanding sales growth in 2H.

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Test Instruments & ATS – 1/2

TECHNOLOGY

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Independent 8K Graphics Core
HDMI 2.0a / Display Port 1.4
8K Pattern switch time <200ms
Video /FPD
Testing
8K x 4K@60Hz 8K x 4K@120Hz
Impedance Measurement
Passive
Wide Freq. range: 30MHz
Comp. Testing
DC Bias Current : 0-5A / 100KHz-10MHz
’17 ’17.2H
MARKET Flat Panel Display Portable & Wearable Device/IoT
New
New
New
8K Video Pattern Generator 8K FPD Tester
2238 2918
HF LCR Meter
11050-30M
A110502
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SOLUTION

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Test Instruments & ATS – 2/2

TECHNOLOGY

High Precision Accuracy: 0.1%RD + 0.05%RNG High Transient Linear Load: 100us Power Testing In compliance with High Power Density: 6kW@4U IEC 61000-4-7 harmonic measurement Regenerative Design: >85% Energy Regenerative & High Accuracy Battery Testing Charge/Discharge mode: CC, CV, CP 5V, 60A High power density with competitive cost

Battery Testing

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’17 ’17.2H
MARKET EV/D2D/OBC/EVSE/HVDC Battery Cell/ Module/ Pack
New New
New
Digital Power Meter High Power DC Load
66205 150~1200V,4~24kW
63200E Series
New
Battery Charge & Discharge Tester Battery Pack Test System
17212R 60/100V, 10~80kW
SOLUTION
17020E Series
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Semiconductor Test Solutions – 1/3

TECHNOLOGY

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IC Testing
Robot Application Nitro TEC Engine
Handler °
0.02mm Tolerance to ~ -50 C
Multi Function SoC Solution
SoC/VLSI
Up to 750Mbps, 2048ch, 128 DPS,
Testing
400Msps AWG and 250Msps Digitizer
’17 ’17.2H
MARKET
ICs, IoT, MEMS, Sensors, PMIC, MCU
New New
New
Versatile Robotic Hybrid Chiller
Handler 3200 3100-CL
3680
SoC/Analog Test System
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SOLUTION

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Semiconductor Test Solution – 2/3

TECHNOLOGY

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High Speed Double Side Inspection High Throughput Wide Temp. Range : -40C~85 ° C
15 ms per chip UPH 3600 High Stability: 0.5 ° C
Laser Diode
°
Testing High Accuracy TEC. Controller: Up to 0.01 C High Density Burn-in Module
Auto alignment for fiber-coupled tests 256Ch SMU/module, and Spike free
’17 ’17.2H
MARKET Fiber Optical Communication
Wafer Package Module
New
New
Wafer Chip CoC/CoS Laser Diode TO-CAN Package Laser Diode TOSA/BOSA Temperature
Inspection System Characterization System Inspection System Burn In System Control System
7940 58620 7925 58604 58691
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SOLUTION
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Semiconductor Test Solution – 3/3

TECHNOLOGY

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6” VCSEL Wafer High Accuracy TEC. Controller: Up to 0.01 ° C
NF & FF Testing (L-I-V) High Throughput: UPH 900
VCSEL
Testing
High Speed Double Side Inspection High Density Burn-in Module
15ms per chip 256Ch SMU/module, and Spike free
’17 ’17.2H
MARKET 3D Image Sensing/ AR/ Autonomous Driving
Wafer Package
New New New New
VCSEL Wafer Probing Wafer Chip VSCEL Module VCSEL Module
Test System Inspection System Characterization System Burn In System
58635 7940 58621 58604
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SOLUTION
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Turnkey/Smart Factory Solutions

TECHNOLOGY

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High current probe up to 200Amp
Battery Cell
Formation long life cycle time and reliable contact
Android Operating System
IMS
IoT Gateway
’17 ’17.2H
MARKET Battery Cell Formation Smart Factory
Prober
Smart Controller
98015
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SOLUTION

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www.chromaate.com

let’s make a better world

Thank You!

Copyright© 2017 Chroma ATE Inc.

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