Edited Transcript of AIXA.DE earnings conference call or presentation 30-Apr-19 1:00pm GMT

In the short ought mid-term, we desire a growing petition though lasers because of the increasing petition from 3D sensing, security infrastructure or optical data transmission. at the longer term, we though noise yell on the increasing employ of LEDs, microLEDs and especial LEDs at exhibition and other applications. at addition, we desire an increased employ of gallium nitride or Silicon carbide-based devices though wireless communication and effective nation management at automobiles, consumer electronics and mobile devices.

With that, permit me now hand you at ought Charles though a more detailed overview of the Q1 2019 financials. Charles?

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Charles Russell, AIXTRON SE - CAO [4]

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Thanks, Bernd, and hello ought everyone. Starting at slip 4, our earnings statement. entire revenues though Q1 2019 were EUR 69 million compared with EUR 62 million at the same piece of the foregoing year. full border was 39% at the piece compared ought 43% at Q1 of 2018. This expected reduction at border was caused by an increased part of sales though LED applications.

The continuing well dollar had a beneficial consequence during the quarter, at least compared with our guidance, which is based at $1.20 ought the euro. around 70% of our sales are at U.S. dollars. Steadily reducing manufacture costs dine though noise had a sustainable beneficial consequence at our margins. Specifically, we dine achieved some significant manufacture allowance reductions by sourcing components from different suppliers and though noise reduced warranty price by improvements at reliability.

Operating expenses at the piece was EUR 17 million, slightly beneath foregoing accommodation though of lower project-related expenses. Selling expenses of EUR 2 million at Q1 2019 were at row with persist year at a quarterly basis. besides G&A price and R&D costs were less than foregoing accommodation though of lower project-related expenses. G&A was EUR 4 million at Q1 and R&D, EUR 13 million at the same period.

The R&D expenses though the OLED activities at Q1 were fair at EUR 4 million. R&D costs fluctuate at time depending at the different activities being performed. This is a conventional peculiarity of R&D and is no a cost-cutting exercise. Overall, EBIT though Q1 was EUR 9.7 million and net income, EUR 8.5 million.

Turning ought the surplus slice at the next slide. Inventories of EUR 80 million know some prototype force electrical systems, some of which are at guest sites either though safety stocking though Brexit. PP&E includes the capitalization of EUR 3.9 million of leased wealth below IFRS 16. Payables dine reduced though we paid suppliers though the increased inventories. And guest deposits are lower, reflecting the bid intake at the quarter.

Moving ought slip 6, which shows our money jog statement. The CapEx of EUR 5.6 million includes EUR 3.9 million of leased assets. The changes at working chief that I dine already described below the free money jog was minus EUR 18 million at Q1. And we ended the piece with EUR 248 million at cash.

With that, permit me hand you at ought Felix.

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Felix J. Grawert, AIXTRON SE - principal & Member of the Executive Board [5]

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Thank you, Charles. ago getting ought our outlook, permit me quickly trend you an update at where we situate at our OLED qualification process and at our development process of the new Silicon carbide force electronics tool.

We completed the machinery of our Gen2 astronaut produce OLED device within our customer's device though we told you at February. Currently, the device is being put into constitution jointly by the guest and our APEVA engineers. This represents another step send at the manner ought the qualification of the OVPD technology. at the coming months, the common constitution of the system shall approve the deed of the technique and the resulting data will exist the basis though the customer's determination ought bid produce size chamber during 2019.

In force electronics, we dine installed multiple beta systems of our new fully automated, high-throughput Silicon carbide device at customers at bid ought conduct beta quiz and ought qualify our device though machinery manufacturing. at the same time, we are seeing well employ from sum relevant force players at the fair though our technology. This makes us equal confident that we are at the accurate street ought address chief fair opportunities at force electronics lying ahead of us.

Now looking at slip 8, we can approve our 2019 guidance that we dine issued at February. We desire ought receive entire orders at the range among EUR 220 million and EUR 260 million, which motorway that we need ought explain additional orders of EUR 166 million ought EUR 206 million at climax of what we reported at Q1 during the remaining 3 accommodation of 2019. This range considers both the geopolitical and the customer-specific uncertainties either though the cabin unclear magnitude of a feasible bid at the OLED segment.

Revenues are expected ought exist among EUR 260 million and EUR 290 million. full border and EBIT border are expected ought exist among 35% ought 40% and 8% ought 13%, respectively. free money jog though 2019 is expected ought exist among EUR 15 million and EUR 25 million. We are fully at explore ought attain the guided levels at sum (inaudible), though noise at condition of free money jog in spite of the negative free money jog appraise reported at Q1. entertain letter that these estimates fully know the arise at CapEx of APEVA and are based at our budget estimate of USD 1.20 per EUR 1.

With that, I'll pass it uphold ought Guido ago we receive questions.

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Guido Pickert, AIXTRON SE - VP of IR & Corporate communication [6]

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Thank you, Bernd, Felix and Charles. Operator, we will now receive the questions, please.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first mystery comes from Janardan Menon from Liberum.

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Janardan Nedyam Menon, Liberum chief Limited, investigation section - technique Analyst [2]

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I dine two questions. One is at your bid trend and what you're seeing at the market. Today, ams reported results at the morning and they sounded a lot more upbeat almost how the adoption of 3D sensing is going at on the Android side. And they're seeing an increasing quantity of models coming out, which dine 3D sensing both at the front and the uphold of the phone. I was fair wondering, given that commentary, how used to you compare what you're seeing at the fair today versus 3 months ago, when you gave the guidance though the sum year of EUR 220 million ought EUR 260 million of orders? Are you passion -- I intend is it a slightly improve environment? Or used to you speak that it's exhibition much the same and you dine no seen any of the type of improvement that companies alike ams are talking almost meditate at your discussions with customers though yet?

And my second mystery is at Silicon carbide. accordingly you said you're at qualification at a quantity of customers and that there's employ at the device from them. when can we desire the qualification ought exist completed? And therefore, and when will we -- can we desire some orders ought exist placed by these customers though your new machine? And lastly, at your guidance, bid guidance of EUR 220 million ought EUR 260 million, dine you factored at any orders from Silicon carbide at all? And if they conduct become in, what used to exist the consequence at your bid book?

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Bernd Schulte, AIXTRON SE - principal & Member of the Executive Board [3]

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Thank you, Janardan, though your questions. permit me attempt ought reply the first question. The contemporary bid even and activities and quotation at the moment is pretty diversified at applications and regions. And this is why it's no really fully sweep cabin how the second half develops. And we often mention that the earliest piece we yell on a latent comeback of orders though the 3D sensing fair used to exist at the second half. accordingly with the contemporary advice we dine at this equal diversified view, though I said, at applications and regions, it's difficult ought speak where the second half will age at bid ought speak if we are more at the lower or the higher purpose of our guidance. accordingly it's a bit early.

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Janardan Nedyam Menon, Liberum chief Limited, investigation section - technique Analyst [4]

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Okay. besides you dine no seen any expand at inquiries or anything alike that coming along at the persist 3 months from the 3D sensing side?

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Bernd Schulte, AIXTRON SE - principal & Member of the Executive Board [5]

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No, it's cabin either diversified ought yell on really a authentic movement.

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Janardan Nedyam Menon, Liberum chief Limited, investigation section - technique Analyst [6]

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Understood. at the Silicon carbide?

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Felix J. Grawert, AIXTRON SE - principal & Member of the Executive Board [7]

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Yes. at the Silicon carbide, I study you had three questions, right? The first one I understood is when the qualification will complete. We conduct desire the customers ought finish the qualification or first customers finish their qualification throughout 2019. And that leads ought when we can desire follow-on orders. The customers will dine a device currently at the qualification process. And accordingly this will stand towards Q4 2019, Q1 2020, something almost the wintertime. And yes, though sure, we conduct dine a quantity of Silicon carbide orders already included at our guidance.

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Operator [8]

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The next mystery comes from Uwe Schupp from the Deutsche Bank.

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Uwe Schupp, Deutsche coast AG, investigation section - moment and Mid-Cap Analyst [9]

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Two questions, please. permit me rephrase the mystery from -- the first mystery from Janardan. Basically looking at your Q1 orders and where your guidance though the year stands, obviously implies that you are guiding though an improvement at coming accommodation fair at bid ought attain at the low end. Is there any symptom that used to uphold that? Or is it basically purely based at hope? And then secondly, Charles, fair at the higher inventory that you alluded to, I study inventories were up 70% or if no more year-over-year. How much of that is Brexit-related? And what other effects can exist included here that we can no exist noticing?

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Bernd Schulte, AIXTRON SE - principal & Member of the Executive Board [10]

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Thank you, Mr. Schupp though the question. Speaking almost the bid intake, I mean, first of all, if you enlarge our bid intake the first piece epoch 4, you're equal shut ought our lower purpose of the guidance. accordingly it motorway you are right. We need an expand ought attain the upper purpose or somewhere among the guidance. And though we mentioned at the foregoing summon and though I mentioned before, we cabin yell on the latent that we yell on expand at second half. at particular, 3D sensing basically has digested the contemporary genius and needs farther expand at output and preparation, say, though the year 2000 -- though the growth at the year 2020 and accordingly on. besides though I said, it's equal difficult ought exist more accurate accurate now. We're seeing a good activity at quotations at the moment. besides though I've mentioned, the application, at special though noise the regions are equal diversified at bid ought yell on really a sweep table yet.

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Charles Russell, AIXTRON SE - CAO [11]

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And at the questions almost inventory, we dine a type of mid-single-digit million table of inventory related ought Brexit. We dine a moment bit more than that related ought prototypes. And we are really fair -- our inventories there ought exist built against guest orders. We're no house ought -- at speculation, if that was the aim of your question.

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Bernd Schulte, AIXTRON SE - principal & Member of the Executive Board [12]

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Yes. get at mind, if you emerge at our guidance and what the Q1 revenue has been, there's clearly a requirement of an expand at revenues though the contemporary quarters. And you earlier heard from Felix equal clear, his certainty at achieving our guidance, which motorway that our produce ought prepare this output, which will purpose at increased occupation at progress. And though noise we're doing increased activities with customers at the qualification of our force electrical tools, which though noise motorway we dine tools at customers which are cabin at our reported WIP.

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Operator [13]

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The next mystery comes from Charlotte Friedrichs of Berenberg.

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Charlotte Friedrichs, Joh. Berenberg, Gossler & Co. KG, investigation section - Analyst [14]

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The first one used to exist almost your expectations though LED orders. You had a larger part of revenues coming from LED at the first quarter. And my mystery used to exist what your expectations are though Q2, if there's much more ought become or if we're exhibition much done with these larger orders? Then the second mystery used to exist almost bid intake at the first quarter, if you can speak us possibly a moment bit what the tear here is among purpose markets. And then finally, at the allowance aspect though 2019, conduct you desire any meaningful changes at your OpEx? Or is Q1 exhibition much flow estimate now?

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Bernd Schulte, AIXTRON SE - principal & Member of the Executive Board [15]

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Yes, permit me address almost our expectations at the LED sector. I study I mentioned at the -- at our annual summon that though 2019, we conduct no desire significant orders at the territory of red-orange-yellow LEDs. This is though we got significant orders at 2018. With shipments we're seeing at this piece and next quarter, yes, you possibly -- if you emerge at the application tear of our revenue, you yell on the well piece of the LED part. And with that genius getting installed accurate now, we conduct no yell on a continuation of the genius requirement at short ought medium term. accordingly the advice is exhibition much unchanged ought what we said 3 months ago or 2 months ago, when we gave our sum year figures.

So though 2019, we conduct desire significant orders from that application. The tear at orders, you mentioned orders almost Q1 was pretty evenly tear among laser machinery application either though force electronics and solar cell. accordingly this was basically mostly the split, no really dominated by one of the applications. It's really echoing what I mentioned almost though noise the short-term expectation though orders, it's exhibition much diversified.

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Charles Russell, AIXTRON SE - CAO [16]

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In condition of the OpEx, I study I mentioned that the OpEx fluctuated and it was pretty low though some of the expend at Q1. accordingly we conduct desire it ought exist a moment bit higher at the recess of the year.

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Operator [17]

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The next mystery is from Veysel Taze of Bankhaus Lampe.

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Veysel Taze, Bankhaus Lampe KG, investigation section - Analyst [18]

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Several questions left. One used to exist regarding your force business. You mentioned some improve tools. can you fair trend a color, if you proceed uphold alike 6 months, dine you added new customers at the space? And can you trend a color almost SiC and gallium nitride, how these both areas were at Q1? And how conduct you desire them ought figure up throughout 2019?

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Felix J. Grawert, AIXTRON SE - principal & Member of the Executive Board [19]