• Revenue: $206.4 million, down 12% year-on-year, up 1% quarter-on-quarter.
• Gross Margin: Increased by 14% quarter-on-quarter.
• EBITDA: $50.3 million with a margin of 24.4%.
• Cash and Cash Equivalents: Approximately $316 million at the end of the third quarter.
• Automotive Business Growth: 8% year-on-year, with China automotive business up 55% year-on-year and 38% quarter-on-quarter.
• Industrial and Medical Business: Decreased 41% and 29% respectively year-on-year.
• Consumer Communication and Computer Business: Grew 13% compared to the previous quarter.
• Silicon Carbide Sales: Decreased 60% year-on-year.
• Capital Expenditure: EUR 150 million in the first quarter, with a full-year projection of EUR 550 million.
• Fourth Quarter Revenue Guidance: Expected to be in the range of $195 to $205 million.
• Full Year Revenue Guidance: Adjusted to $822 to $832 million.
• Full Year EBITDA Margin Guidance: Adjusted to 23.4% to 24%.

• Warning! GuruFocus has detected 4 Warning Signs with XFABF.

Release Date: October 24, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• X-FAB Silicon Foundries SE (XFABF) recorded a 4% year-on-year increase in bookings with a book-to-bill ratio of 1.05, indicating a healthy demand pipeline.
• The company's automotive business in China showed significant growth, with a 55% year-on-year and 38% quarter-on-quarter increase.
• The consumer communication and computer business grew by 13% compared to the previous quarter, with a strong book-to-bill ratio above two.
• X-FAB Silicon Foundries SE (XFABF) successfully increased its quarter-on-quarter gross margin by 14% and EBITDA by 5%, despite only a 1% increase in revenue.
• The company is making progress with its capacity expansion programs, particularly in its 180 nanometer and 110 nanometer technologies, preparing for future demand.

Negative Points

• Revenues for the third quarter were down 12% year-on-year, reflecting challenges in the market.
• The industrial and medical business segments saw significant declines of 41% and 29% respectively, due to market uncertainties and de-stocking activities.
• Silicon carbide sales continued to decline, with a 60% year-on-year decrease, and visibility in this market remains low.
• An operational incident in the Malaysian factory caused a three-day production slowdown, shifting revenue from the fourth quarter into the first quarter of 2025.
• The overall silicon carbide revenue target for 2026 is no longer achievable due to lower installed capacity and changes in customer consignment strategies.

Q & A Highlights

Q: Can you elaborate on the operational incident in Malaysia and the measures to prevent future occurrences? A: The incident was due to an impurity in a chemical system, resolved after three days. Measures are being implemented to prevent recurrence. Such events are rare, given our long-term use of the chemical. Most products were unaffected, requiring only additional testing and rework.

Q: Regarding price negotiations for 2025, will there be a return to usual price erosion, especially with silicon carbide wafer prices dropping? A: Price evolution is moderate due to existing long-term agreements. For silicon carbide, substrate cost savings are passed directly to customers, whether they source through us or consign their own substrates.

Q: Are customers holding off orders in Q4 expecting lower prices next year? A: We don't believe that's the main reason. Inventory adjustments are more about optimizing supply chains post-shortage, rather than price expectations. The Chinese market, particularly in electric vehicles, shows strong growth, unlike other regions.

Q: When will you start supplying wafers charged against prepays, and what will be the quarterly rate next year? A: Prepayments are spread over three years, starting significantly at the end of next year. Smaller repayments have begun in 2024, with larger amounts expected in the second half of next year.

Q: Can you provide more details on the capex for next year, particularly for Q1 2025? A: We expect around EUR150 million in Q1, with a significant drop to about EUR50 million per quarter thereafter. This aligns with our capacity expansion needs, particularly for 180 and 110 nanometer technologies.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.