CHROMA — Call Transcript 2017

Jul 31, 2017

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CHROMA ATE INC.

2017.2Q Earnings Conference Call Paul Ying, CFO Leo Huang, Chairman & CEO

31[st] July, 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 2,636 employees (as June, 2017)

• Chroma Wins Fifth National 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

Distinguished Enterprise Innovation Award.

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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 ： 1,621  (R&D 37%)
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 ： 2,636  , 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 2017.1H Condensed Consolidated Income Statement

	Condensed Consolidated P&L (In Million NTD, except for EPS in NTD)		2017.1H %		2016.1H % YoY %
	Net Sales		5,760 100%		5,292 100% 9%
	Consolidated Sales of Testing Equipment Business		4,327 75%		3,856 73% 12%
	Consolidated Sales of MAS		242 4%		138 2% 75%
	Consolidated Sales of New Material		1,000 18%		1,104 21% (9%)
	Others		191 3%		194 4% (2%)
	Cost of Goods Sold		(2,944) (51%)		(2,815) (53%) 5%
	Gross Profit		2,816 49%		2,477 47% 14%
	Operating Expenses: Selling and General & Administration Research & Development		(1,235) (21%) (571) (10%)		(1,102) (21%) 12% (482) (9%) 18%
	Operating Income		1,010 18%		893 17% 13%
	Non-Operating Income (Expenses), net		(29) (1%)		23 - n/a
	Income (Loss) Before Tax Income Tax		981 17% (189) (3%)		916 17% 7% (173) (3%) 9%
	Net Income		792 14%		743 14% 7%
	Other Comprehensive Income (Losses)		(178) (3%)		(94) (2%) 89%
	Comprehensive Income		$ 614 11%		$ 649 12% (5%)
	Net Income (Losses) Attributable To: Shareholders of the Parent Noncontrolling Interests		804 14% (12) -		764 14% 5% (21) - (43%)
			$ 792 14%		$ 743 14% 7%
	EPS (Basic)		$ 2.05		$ 2.02 1%
	EPS (Diluted)		$ 1.99		$ 1.89 5%

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Basic EPS is based on weighted average outstanding shares of 391 million in 2017 and 377 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. June 5,902 2,341 1,304 1,207 11,366	2016. Dec 5,829 1,906 1,012 2,765 10,788	+ / - % 1% 23% 29% - 56% 5%
	Total Assets		19,101	18,633	3%
	Inventory Turnover (Day) AR Turnover (Day) AP Turnover (Day) Net Debt to Equity (%)		130 94 115 Net Cash	104 88 101 Net Cash
	ROE (%)		15%	17%
	ROA (%)		9%	10%
	Cash Position EBITDA Cash Flow from Operation	2017.2Q 715 638	2017.1Q 435 (235)	QoQ 64% n/a	2017.1H YoY 1,150 4% 403 (32%)
	Free Cash Flow	1,544	(476)	n/a	1,068 1087%

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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

2017.2Q Key Points

• Sales Revenue: $ 1,890 million,

• up 5% QoQ, up 19% YoY

• Gross Margin: 52%

• Operating Margin: 22%

• Net Income: NT$ 517 million,

• up 80% QoQ, up 17% YoY

• 2017.2Q Highlights:

• The major growth driver is coming from Semiconductor Testing

Solutions and Test Instruments &

ATS, presented a growth of 67%

and 13% YoY respectively.

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

Year 2017.2Q Condensed Income Statement

	Condensed P&L– Parent Only (In Million NTD, except for EPS in NTD)		2017.2Q %		2017.1Q % QoQ %	2016.2Q % YoY %
	Net Sales		1,890 100%		1,797 100% 5%	1,589 100% 19%
	Cost of Goods Sold		(908) (48%)		(850) (47%) 7%	(721) (45%) 26%
	Gross Profit		982 52%		947 53% 4%	868 55% 13%
	Operating Expenses: Selling and General & Administration Research & Development		(296) (16%) (261) (14%)		(278) (16%) 6% (252) (14%) 4%	(255) (16%) 16% (222) (14%) 18%
	Operating Income		425 22%		417 23% 2%	391 25% 9%
	Non-Operating Income (Expenses), net		182 10%		(76) (4%) n/a	136 9% 34%
	Income (Loss) Before Tax		607 32%		341 19% 78%	527 34% 15%
	Income Tax		(90) (5%)		(53) (3%) 70%	(84) (5%) 7%
	Net Income		$ 517 27%		$ 288 16% 80%	$ 443 29% 17%
	Other Comprehensive Income		(2) -		(173) (10%) n/a	(74) (5%) n/a
	Comprehensive Income		$ 515 27%		$ 115 6% 348%	$ 369 24% 40%
	EPS (Basic)		$ 1.30		$ 0.75 73%	$ 1.17 11%
	EPS (Diluted)		$ 1.27		$ 0.72 76%	$ 1.09 17%

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100% owned subsidiaries’ income - New Material: 10m (YoY ↓ 29%), MAS: 39m (YoY ↑ 179%), .

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Year 2017.1H Condensed Income Statement

	Condensed P&L– Parent Only (In Million NTD, except for EPS in NTD)		2017.1H %		2016.1H % YoY %
	Net Sales		3,686 100%		3,243 100% 14%
	Cost of Goods Sold		(1,757) (48%)		(1,543) (48%) 14%
	Gross Profit		1,929 52%		1,700 52% 13%
	Operating Expenses: Selling and General & Administration Research & Development		(574) (15%) (513) (14%)		(490) (15%) 17% (434) (13%) 18%
	Operating Income		842 23%		776 24% 9%
	Non-Operating Income (Expenses), net		106 3%		130 4% (18%)
	Income (Loss) Before Tax		948 26%		906 28% 5%
	Income Tax		(144) (4%)		(142) (4%) 1%
	Net Income		$ 804 22%		$ 764 24% 5%
	Other Comprehensive Income		(175) (5%)		(94) (3%) 86%
	Comprehensive Income		$ 629 17%		$ 670 21% (6%)
	EPS (Basic)		$ 2.05		$ 2.02 1%
	EPS (Diluted)		$ 1.99		$ 1.89 5%

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Non-operating Income included 100% owned subsidiaries’ income - New Material: 11m (YoY ↓ 58%), MAS: 33m (YoY ↑ 230%).

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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. June 3,345 1,738 1,100 1,055 11,162	2016. Dec 3,656 1,458 800 2,597 10,617	+ / - % - 9% 19% 38% - 59% 5%
	Total Assets		17,108	16,586	3%
	Inventory Turnover (Day) AR Turnover (Day) AP Turnover (Day) Net Debt to Equity (%)		164 105 112 Net Cash	145 100 91 Net Cash
	ROE (%)		15%	17%
	ROA (%)		10%	11%
	Cash Position EBITDA Cash Flow from Operation	2017.2Q 650 11	2017.1Q 385 (66)	QoQ 69% n/a	2017.1H YoY 1,035 4% (55) n/a
	Free Cash Flow	982	(326)	n/a	656 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		2017.2Q % 1,077 57% 612 32% 105 6% 96 5%	QoQ YoY 11% 13% (3%) 67% 3% (38%) 4% (7%)	2017.1H % YoY 2,049 56% 21% 1,243 34% 143% 206 6% (77%) 188 4% 18%	2016 % 3,570 49% 1,209 17% 2,143 30% 311 4%
Total		1,890 100%	5% 19%	3,686 100% 14%	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 3,686
Parent Only
5% 4% 4% 4% 4%
6%
9%
12%
18%
Others
30%
21% 17%
34%
Turnkey Solutions 21%
17%
Semiconductor Test Solutions
Test Instruments & ATS
67% 65% 67% 49% 56%
2013 2014 2015 2016 2017.1H
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Sales Breakdown by Consolidated Entities

(Unit: Million NTD) Chroma Ate. Inc.included overseas affiliates MAS New Material Others		2017.2Q % QoQ 2,237 75% 7% 162 5% 103% 487 16% (5%) 98 4% 5%	YoY 15% 67% (9%) 1%		2017.1H % 4,327 75% 242 4% 1,000 18% 191 3%	YoY 12% 75% (9%) (2%)
Consolidated Sales		2,984 100% 7%	11%		5,760 100%	9%

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Year 2017.2H Guidance

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In the first half 2017, the key driver for parent company growth is coming from semiconductor testing solutions, which presented a strong growth of 143% YoY exceed the total sales of semiconductor testing solutions in year 2016. Meanwhile, the core business of Test Instruments and ATS also presented a double digits growth of 21% YoY.

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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 subsidiary MAS will have a remarkable turnaround in 2H.

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Test Instruments & ATS – 1/3

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 – 2/3

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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