Lasertec : Presentation Material - First Quarter of Fiscal Year ending June 2024 Financial Results (Script Including Q&A)

Lasertec Corporation

Financial Results Briefing for the First Quarter of Fiscal Year Ending June 2024

October 31, 2023

Event Summary

*Analysts that SCRIPTS Asia was able to identify from the audio who spoke during Q&A or whose questions were read by moderator/company representatives.

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Presentation

Hanashima: Now that it is time, we will now begin the presentation of the financial results of Lasertec Corporation for the first quarter of the fiscal year ending June 30, 2024. Thank you very much for taking time out of your busy schedules to join us today. I am Hanashima of the Corporate Planning and Control Department and I will be the moderator. Thank you for your time.

We are pleased to present today's speaker. Osamu Okabayashi, Representative Director, President & CEO.

Okabayashi: My name is Okabayashi. Thank you very much for taking time out of your busy schedules to join us today. Thank you very much for your cooperation.

Hanashima: Yutaro Misawa, Director, Executive Officer, CFO.

Misawa: My name is Misawa. Thank you very much for your time today.

Hanashima: I will now explain the flow of the briefing. First, CFO Misawa will give an overview of the financial results, and President Okabayashi will explain the business environment and future outlook. A Q&A session will follow until 6:00 PM, with the entire event scheduled to last approximately one hour. Please also note that a Japanese-English script of this briefing will be posted on our website at a later date. We will now give an overview of the financial results. Mr. Misawa, please.

Misawa: Yes, I will now give an overview of the financial results.

First, here are the results for Q1. Net sales were JPY47.3 billion and operating income was JPY10.2 billion. The operating margin was 21.7%, which was very low compared to the last fiscal year, including the full year, but this is the result of the recognition of some of the low-profit ACTIS sales. We expect that the bottom will be reached in Q1, and that the sales will recover from Q2 onward and approach the guidance figures.

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Orders received totaled JPY40.7 billion and order backlog is slightly below JPY400 billion. As for the volume of orders, it is neither good nor bad, and as Mr. Okabayashi will explain later, we expect it to improve in the future. As for research and development expenses, we are still spending about JPY2.3 billion to JPY2.4 billion. The situation is progressing as planned.

Next is sales by product.

Of the total sales of JPY47.3 billion, semiconductor-related equipment accounted for JPY41.7 billion, others were JPY100 million, and services, JPY5.3 billion. As you can see, our sales are very volatile when broken down by quarter, but the JPY47.3 billion in Q1 of this fiscal year is just about a quarter of the JPY190 billion that we have provided in our guidance for the current fiscal year. We believe that this is normal progress for Q1 of the fiscal year.

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Next are orders received and order backlogs.

As I mentioned earlier, orders received totaled JPY40.7 billion. Compared to the same period two years ago, the amount is still a little lower, but compared to the lowest point of JPY30 billion in the previous fiscal year and the second and third quarters, it has recovered in the medium to long term. We expect that customer momentum will become more positive from next year onward. The order backlog has been hovering around JPY400 billion for a little over a year.

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Next, the balance sheet shows inventories of JPY150 billion, slightly less than at the end of the previous fiscal year. Advances received increased by about JPY4.2 billion compared to the end of the previous fiscal year. Cash on hand was a little over JPY40 billion at the end of Q1, a bit excessive due to the dollar and other funds that came in at the end of the month.

Here is the cash flow.

Profits and collection of trade receivables exceeded income tax payments, resulting in a positive operating cash flow of JPY14.5 billion. Financial investments have been small.

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R&D expenses, capital expenditures, and depreciation and amortization are generally in line with the plan. As you can see in the graph, there was a very large investment in Q1 of last year due to the acquisition of a new base we call InnoPa, but since then, there has not been so much investment, although some clean rooms have been installed. The current fiscal year will be a particularly lean period.

Capital expenditures for the full year was JPY1.8 billion. This has been a unique period in which there have not been many projects except for equipment maintenance and renewal expenses. That is all.

Hanashima: We would like to continue with an explanation of the business environment and future outlook. Mr. Okabayashi, please.

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Okabayashi: I will begin by explaining the business environment.

The bar graph on the right shows historical results and forecasts for the semiconductor front-end manufacturing equipment market, as updated by SEMI in September. In the second row on the right, CY23E is projected to decrease compared to FY2022. However, we expect this to recover in CY24.

On the left side, semiconductor device manufacturers continue to take a cautious stance toward investment, as they continue to curb capital investment in the short term. Despite this situation, as I mentioned earlier, we expect the semiconductor market to recover through CY2024.

While the overall situation is such, investment in specific areas, such as power semiconductors and HBM (high bandwidth memory) for generative AI, continues to be very strong.

Secondly, I would like to talk about the expansion of wafer fabs and semiconductor device factories. In preparation for medium- and long-term increases in demand for semiconductors and rising geopolitical risks, semiconductor device manufacturers are promoting plans for new and expanded wafer fabs in each region, with support from governments around the world.

Thirdly, with respect to the development of next-generation manufacturing process, 2nm logic devices are scheduled to go into mass production in CY2025. In addition, the development of next-generation manufacturing processes, such as EUV for High-NA, is progressing as planned, and investments appear to be proceeding as planned.

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In this environment, we have concluded that there are no changes to our full-year forecasts for net sales and income. As Misawa mentioned earlier, the acceptance of low-profit ACTIS started in Q1 and was completed during Q1. As a result, the operating profit margin bottomed out in Q1 and is expected to improve in Q2.

In terms of orders, however, we expect demand to increase toward H2 of the fiscal year. Inquiries about ACTIS for High-NA are strong.

In addition, strong demand continues for compound power semiconductors. As for our products, inquiries and orders for SICA, a SiC wafer inspection system, continue to be strong. In addition, as I mentioned earlier, inquiries and orders for HBM are increasing in relation to generative AI. We are receiving strong inquiries about our product, BGM, which is a device to measure the thickness of the remaining silicon in the process of bonding and thinning silicon wafers.

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