CHROMA — Call Transcript 2020

May 21, 2020

==> picture [141 x 48] intentionally omitted <==

==> picture [153 x 159] intentionally omitted <==

CHROMA ATE INC.

2020.1Q Earnings Conference Call

Paul Ying, CFO

==> picture [31 x 4] intentionally omitted <==

==> picture [53 x 5] intentionally omitted <==

==> picture [84 x 5] intentionally omitted <==

==> picture [121 x 5] intentionally omitted <==

==> picture [193 x 5] intentionally omitted <==

29[th] April, 2020

1

Disclaimer

==> picture [141 x 48] intentionally omitted <==

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 forward-looking 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.

==> picture [31 x 4] intentionally omitted <==

==> picture [53 x 5] intentionally omitted <==

==> picture [84 x 5] intentionally omitted <==

==> picture [121 x 5] intentionally omitted <==

==> picture [193 x 5] intentionally omitted <==

2

Agenda

==> picture [141 x 48] intentionally omitted <==

==> picture [31 x 4] intentionally omitted <==

==> picture [53 x 5] intentionally omitted <==

• Corporate Profile • Financial Review • Operation Highlights • Q&A

==> picture [84 x 5] intentionally omitted <==

==> picture [121 x 5] intentionally omitted <==

==> picture [193 x 5] intentionally omitted <==

3

==> picture [15 x 439] intentionally omitted <==

CORPORATE

==> picture [671 x 11] intentionally omitted <==

PROFILE

==> picture [31 x 4] intentionally omitted <==

==> picture [53 x 5] intentionally omitted <==

==> picture [84 x 5] intentionally omitted <==

==> picture [121 x 5] intentionally omitted <==

==> picture [193 x 5] intentionally omitted <==

4

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).

• 2019 Consolidated Sales : NT$ 13.9 billion

• 2019 Net Income: NT$ 1.9 billion

• Chroma Group total of 2,981 employees (as of March,

2020)

==> picture [141 x 48] intentionally omitted <==

==> picture [37 x 56] intentionally omitted <==

Consolidated Chroma Ate Sales Others Consolidated CNMC Sales Consolidated MAS Sales

==> picture [360 x 348] intentionally omitted <==

----- Start of picture text -----

16,931
14,901
13,910
17% 29% 7%
11,624
15%
3% 14%
12%
9,692
20%
13%
24%
58% 74% 66% 57% 76%
----- End of picture text -----

==> picture [31 x 4] intentionally omitted <==

==> picture [53 x 5] intentionally omitted <==

==> picture [84 x 5] intentionally omitted <==

==> picture [121 x 5] intentionally omitted <==

==> picture [193 x 5] intentionally omitted <==

2015

2016

2017

2018

2019

5

==> picture [31 x 4] intentionally omitted <==

==> picture [53 x 5] intentionally omitted <==

Financial Performance

==> picture [343 x 440] intentionally omitted <==

----- Start of picture text -----

Consolidated Sales Consolidated
Gross Margin
16,931
14,901
13,910
11,624
9,692
47% 47% 47%
44% 44%
2015 2016 2017 2018 2019
----- End of picture text -----

==> picture [141 x 48] intentionally omitted <==

==> picture [365 x 447] intentionally omitted <==

----- Start of picture text -----

Sales Revenues Gross Margin
R&D Expenses
R&D Expenses in % of Sales Revenues
8,111
Parent Only 8,018
7,547
7,233
56%
52% 52%
51% 51%
4,539
Chroma Employees ： 1,731  (R&D 39%)
17%
15%
14%
13% 13%
937 1,085 1,143 1,172
784
2015 2016 2017 2018 2019
----- End of picture text -----

2018 2019

==> picture [84 x 5] intentionally omitted <==

==> picture [121 x 5] intentionally omitted <==

==> picture [193 x 5] intentionally omitted <==

6

Financial Performance

==> picture [333 x 434] intentionally omitted <==

----- Start of picture text -----

ROE
22%
18%
17%
13% 13%
2015 2016 2017 2018 2019
----- End of picture text -----

==> picture [141 x 48] intentionally omitted <==

Dividend

==> picture [349 x 399] intentionally omitted <==

----- Start of picture text -----

Basic EPS Cash dividend
Payout ratio
6.41 6.22
4.53 4.50 4.48
4.20
3.28 3.30
3.00
2.40
2015 2016 2017 2018 2019
----- End of picture text -----

==> picture [31 x 4] intentionally omitted <==

==> picture [53 x 5] intentionally omitted <==

==> picture [84 x 5] intentionally omitted <==

==> picture [121 x 5] intentionally omitted <==

==> picture [193 x 5] intentionally omitted <==

7

Global Operation Sites

==> picture [141 x 48] intentionally omitted <==

==> picture [722 x 156] intentionally omitted <==

----- Start of picture text -----

50 93 EST. 1999 EST. 2017 EST. 2008 EST. 2018 EST. 1993 EST. 2001
Operation Distributors
Sites
Netherlands: Germany: Japan: Korea: United States: United States:
Ede Augsburg Shin-Yokohama/ Pangyo Irvine, CA Foothill Ranch, CA
Nagoya/ Osaka Santa Clara, CA Marlborough, MA
Chandler, AZ Mexico：
Ciudad Juarez
----- End of picture text -----

==> picture [528 x 251] intentionally omitted <==

----- Start of picture text -----

EST. 1998 EST. 1999 EST. 2000 EST. 2001
China/ Shenzhen China/ Beijing China/ Shanghai China/ Dongguan Taiwan: Taoyuan (Headquarters)
EST. 2006 EST. 2011 EST. 2011
EST. 2016
Others:
Thailand: Bangkok
China/ Suzhou China/ Xiamen China/ Chongqing
----- End of picture text -----

==> picture [140 x 15] intentionally omitted <==

----- Start of picture text -----

EST. 2003 EST. 2009
----- End of picture text -----

Taiwan: Hsinchu Taiwan: Kaohsiung

India: New Delhi/ Mumbai/ Bangalore Thailand: Bangkok Vietnam: Hanoi/ Ho Chi Minh Malaysia: Kuala Lumpur/ Penang Philippines: Manila/ Cebu Indonesia: Jakartar

Quantel：Singapore

==> picture [31 x 4] intentionally omitted <==

==> picture [53 x 5] intentionally omitted <==

Others: Qingdao/ Zhengzhou/ Xian/Hefei/ Chengdu/ Wuhan/ Hangzhou/ Guangzhou/ Hong Kong

==> picture [84 x 5] intentionally omitted <==

==> picture [121 x 5] intentionally omitted <==

==> picture [193 x 5] intentionally omitted <==

8

==> picture [15 x 439] intentionally omitted <==

FINANCIAL REVIEW

==> picture [671 x 11] intentionally omitted <==

==> picture [31 x 4] intentionally omitted <==

==> picture [53 x 5] intentionally omitted <==

==> picture [84 x 5] intentionally omitted <==

==> picture [121 x 5] intentionally omitted <==

==> picture [193 x 5] intentionally omitted <==

9

==> picture [141 x 48] intentionally omitted <==

Year 2020.1Q Condensed Consolidated Income Statement

==> picture [727 x 23] intentionally omitted <==

----- Start of picture text -----

Condensed Consolidated P&L 2020.1Q % 2019.1Q % YoY %
----- End of picture text -----

	2020.1Q %	2020.1Q %
(In Million NTD, except for EPS in NTD)
Net Sales	3,371 100%	2,742 100% 23%
Consolidated Sales of Testing Equipment Business	2,557 76%	2,023 74% 26%
Consolidated Sales of MAS	177 5%	274 10% (35%)
Consolidated Sales of New Material	559 17%	395 14% 42%
Others	78 2%	50 2% 56%
Cost of Goods Sold	(1,625) (48%)	(1,425) (52%) 14%
Gross Profit	1,746 52%	1,317 48% 33%
Operating Expenses: General & Administration Research & Development	(884) (26%) (314) (9%)	(733) (26%) 21% (295) (11%) 6%
Operating Income	548 16%	289 11% 90%
Non-Operating Income (Expenses), net	59 2%	72 2% (18%)
Income (Loss) Before Tax Income Tax	607 18% (121) (4%)	361 13% 68% (64) (2%) 89%
Net Income	486 14%	297 11% 64%
Other Comprehensive Income (Losses)	(64) (2%)	67 2% n/a
Comprehensive Income	$ 422 12%	$ 364 13% 16%
Net Income (Losses) Attributable To: Shareholders of the Parent Noncontrolling Interests	471 14% 15 -	296 11% 59% 1 - n/a
	$ 486 14%	$ 297 11% 64%
EPS (Basic)	$ 1.13	$ 0.72 57%
EPS (Diluted)	$ 1.12	$ 0.71 58%

==> picture [31 x 4] intentionally omitted <==

==> picture [53 x 5] intentionally omitted <==

==> picture [84 x 5] intentionally omitted <==

==> picture [121 x 5] intentionally omitted <==

10

Balance Sheet Highlights & Financial Ratio

==> picture [141 x 48] intentionally omitted <==

Consolidated (In Million NTD)		2020. March	2019. Dec	+ / - %
Balance Sheet Highlights
Cash & Short Term Investments		3,728	3,455	8%
Inventory		2,980	2,665	12%
Short Term Debt		2,168	2,381	- 9%
Long Term Debt		2,691	2,422	11%
Shareholders Equity		13,989	14,785	- 5%
Total Assets		25,476	25,437	-
Inventory Turnover (Day)		156	127
AR Turnover (Day)		136	133
AP Turnover (Day)		145	129
Net Debt to Equity (%)		8%	9%
ROE (%)		13%	13%
ROA (%)		7%	8%
Cash Position	2020.1Q	2019.1Q	YoY
EBITDA	732	486	51%
Cash Flow from Operation	619	500	24%
Free Cash Flow	442	388	14%

==> picture [31 x 4] intentionally omitted <==

==> picture [53 x 5] intentionally omitted <==

==> picture [9 x 9] intentionally omitted <==

==> picture [9 x 9] intentionally omitted <==

==> picture [9 x 9] intentionally omitted <==

All ROE + ROA has been annualized.

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

==> picture [84 x 5] intentionally omitted <==

==> picture [121 x 5] intentionally omitted <==

==> picture [193 x 5] intentionally omitted <==

11

==> picture [31 x 4] intentionally omitted <==

Quarterly Highlights

2020.1Q Key Points

• Sales Revenue: $ 2,053 million,

down 20% QoQ, up 33% YoY

• Gross Margin: 55%

• Operating Margin: 25%

• Net Income: NT$ 471 million,

down 22% QoQ, up 59% YoY

• 2020.1Q Highlights:

• The major growth in first quarter is

contributed from Semiconductor /

Photonics sector, which presented a growth of 4% QoQ and 78% YoY respectively.

==> picture [141 x 48] intentionally omitted <==

Sales Revenues Gross Margin Operating Margin

==> picture [31 x 11] intentionally omitted <==

----- Start of picture text -----

2,571
----- End of picture text -----

==> picture [368 x 401] intentionally omitted <==

----- Start of picture text -----

2,053
2,037
1,961
1,541
55% 55%
51% 52%
47%
25%
23%
20% 21%
19%
----- End of picture text -----

==> picture [53 x 5] intentionally omitted <==

==> picture [84 x 5] intentionally omitted <==

==> picture [121 x 5] intentionally omitted <==

==> picture [193 x 5] intentionally omitted <==

2020.1Q

2019.1Q 2019.2Q 2019.3Q 2019.4Q

12

Year 2020.1Q Condensed Income Statement

==> picture [141 x 48] intentionally omitted <==

==> picture [765 x 23] intentionally omitted <==

----- Start of picture text -----

Condensed P&L – Parent Only 2020.1Q % 2019.4Q % QoQ 2019.1Q % YoY
----- End of picture text -----

	2020.1Q %	2020.1Q %
(In Million NTD, except for EPS in NTD)		% %
Net Sales	2,053 100%	2,571 100% (20%) 1,541 100% 33%
Cost of Goods Sold	(929) (45%)	(1,370) (53%) (32%) (696) (45%) 33%
Gross Profit	1,124 55%	1,201 47% (6%) 845 55% 33%
Operating Expenses: General & Administration Research & Development	(342) (16%) (278) (14%)	(339) (13%) 1% (291) (19%) 18% (311) (13%) (11%) (265) (17%) 5%
Operating Income	504 25%	551 21% (9%) 289 19% 74%
Non-Operating Income (Expenses), net	63 3%	195 8% (68%) 53 3% 19%
Income (Loss) Before Tax	567 28%	746 29% (24%) 342 22% 66%
Income Tax	(96) (5%)	(142) (6%) (32%) (46) (3%) 109%
Net Income	$ 471 23%	$ 604 23% (22%) $ 296 19% 59%
Other Comprehensive Income	(61) (3%)	(211) (8%) (71%) 66 4% n/a
Comprehensive Income	$ 410 20%	$ 393 15% 4% $ 362 23% 13%
EPS (Basic)	$ 1.13	$ 1.45 (22%) $ 0.72 57%
EPS (Diluted)	$ 1.12	$ 1.43 (22%) $ 0.71 58%

==> picture [31 x 4] intentionally omitted <==

==> picture [53 x 5] intentionally omitted <==

==> picture [84 x 5] intentionally omitted <==

==> picture [9 x 9] intentionally omitted <==

==> picture [121 x 5] intentionally omitted <==

==> picture [193 x 5] intentionally omitted <==

100% owned subsidiaries’ income - New Material: 11m (QoQ ↑ 175%, YoY ↑ 38%), MAS: (73m).

13

Balance Sheet Highlights & Financial Ratio

==> picture [141 x 48] intentionally omitted <==

Parent Only (In Million NTD)	2020. March	2019. Dec	+ / - %
Balance Sheet Highlights
Cash & Short Term Investment	606	459		32%
Inventory	2,308	2,026		14%
Short Term Debt	1,400	1,615	-	13%
Long Term Debt	2,500	2,285		9%
Shareholders Equity	13,681	14,489		- 5%
Total Assets	22,006	21,807		1%
Inventory Turnover (Day)	210	178
AR Turnover (Day)	123	123
AP Turnover (Day)	122	102
Net Debt to Equity (%)	23%	24%
ROE (%)	13%	13%
ROA (%)	9%	9%

Cash Position	2020. 1Q	2019.1Q	YoY
EBITDA	629	402	56%
Cash Flow from Operation	378	451	(16%)
Free Cash Flow	120	428	(72%)

==> picture [9 x 8] intentionally omitted <==

All ROE + ROA has been annualized.

==> picture [31 x 4] intentionally omitted <==

==> picture [53 x 5] intentionally omitted <==

==> picture [84 x 5] intentionally omitted <==

==> picture [9 x 9] intentionally omitted <==

==> picture [9 x 9] intentionally omitted <==

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

==> picture [121 x 5] intentionally omitted <==

==> picture [193 x 5] intentionally omitted <==

14

OPERATION HIGHLIGHT

==> picture [15 x 439] intentionally omitted <==

==> picture [31 x 4] intentionally omitted <==

==> picture [53 x 5] intentionally omitted <==

==> picture [84 x 5] intentionally omitted <==

==> picture [121 x 5] intentionally omitted <==

==> picture [193 x 5] intentionally omitted <==

15

==> picture [141 x 48] intentionally omitted <==

2020.1Q Product Mix and Consolidated Sales Breakdown

	(Unit: Million NTD)	(Unit: Million NTD)	2020.1Q % QoQ YoY	2019 %
		Test Instruments & Automatic Testing System (ATS)	1,168 57% (11%) 24%	4,605 57%
		Semiconductor / Photonics Test Solutions	682 33% 4% 78%	2,311 28%
		Turnkey Solutions	55 3% (87%) (45%)	632 8%
		Service & Others	148 7% (23%) 29%	563 7%
		Total of Parent Company Sales	2,053 100% (20%) 33%	8,111 100%
		+ Sales from Overseas Operations & Related Subsidiaries	504 (41%) 5%	2,435
	Chroma Consolidated Testing Equipment Business		2,557 76% (25%) 26%	10,546 76%
	MAS New Material Other Subsidiaries Consolidated Sales		177 5% (43%) (35%) 559 17% (16%) 42% 78 2% (5%) 56%	1,009 7% 2,097 15% 258 2%
			3,371 100% (25%) 23%	13,910 100%

==> picture [47 x 64] intentionally omitted <==

==> picture [31 x 4] intentionally omitted <==

==> picture [53 x 5] intentionally omitted <==

==> picture [84 x 5] intentionally omitted <==

==> picture [121 x 5] intentionally omitted <==

==> picture [193 x 5] intentionally omitted <==

16

Year 2020 Guidance

==> picture [141 x 48] intentionally omitted <==

==> picture [11 x 12] intentionally omitted <==

Chroma first quarter consolidated sales revenues reached 3.4 billion NTD, presented a decline of 25% QoQ, but an increase of 23% YoY. The Parent Company sales hit first quarter’s record high reached 2.1 billion, presented a decline of 20% QoQ, but a growth of 33% YoY, mainly contributed from Semiconductor / Photonics testing solutions which increased 78% compared to last year.

==> picture [11 x 12] intentionally omitted <==

2020 Business Outlook:

• Rapidly development of AIoT (convergence of AI and IoT) increases the demand for high performance CPU/GPU, Sensors, RF connections etc. which will be continuously driving the sales growth in Semiconductors / Photonics testing solutions. Particularly from:

• High Reliability Testing Solutions : Burn-in Test, SLT Test

• VCSEL / ToF testing for 3D sensing

• OFC (Optical Fiber Communication) testing

• Integrated wireless RF and MCU testing solutions for True Wireless Stereo (TWS)

• The Test Instruments & ATS for power testing solutions will be focusing on green energy, included EV related components, battery module / pack and smart-grid and 5G / Server related power testing.

• The In-line Nanoparticle Monitoring System, a breakthrough technology developed by Innovative Nanotech, which could precisely detect the particles down to 3nm and have started to deliver to foundry customer.

==> picture [31 x 4] intentionally omitted <==

==> picture [53 x 5] intentionally omitted <==

==> picture [84 x 5] intentionally omitted <==

==> picture [121 x 5] intentionally omitted <==

==> picture [193 x 5] intentionally omitted <==

17

www.chromaate.com

==> picture [141 x 48] intentionally omitted <==

Keep going beyond

Thank You !

==> picture [31 x 4] intentionally omitted <==

==> picture [53 x 5] intentionally omitted <==

==> picture [84 x 5] intentionally omitted <==

==> picture [121 x 5] intentionally omitted <==

==> picture [193 x 5] intentionally omitted <==

Copyright © 2018 Chroma ATE Inc. All rights reserved.

18