Release Date: September 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- IQE PLC (IQEPF, Financial) reported a 27% year-on-year revenue growth to GBP66 million in the first half of 2024.
- The Wireless division saw a significant 73% year-over-year increase, driven by market recovery and strategic penetration into the Android ecosystem.
- Adjusted EBITDA improved significantly, swinging from a loss of GBP5.7 million to a positive GBP6.6 million.
- The company has made progress in its diversification strategy, particularly in GaN power and micro LED displays.
- IQE PLC (IQEPF) is planning an IPO for IQE Taiwan, which is expected to accelerate investment in growth and R&D efforts.
Negative Points
- The Photonics division experienced flat performance, with some areas failing to demonstrate recovery.
- The company reported an adjusted loss before interest and tax of GBP7.2 million, despite improvements.
- Working capital outflow of GBP8.4 million was adverse compared to the prior year's inflow.
- The CMOS division is being deprioritized and will no longer be reported separately from next year.
- The pace of industry recovery is expected to be variable, impacting the growth rate in the second half of the year.
Q & A Highlights
IQE PLC (IQEPF) Earnings Call Highlights
Q: Is IQE still the global leader in the supply of compound semiconductors?
A: Yes. IQE remains the global leader in this industry. Despite market fluctuations, we maintain a strong position in our core technology and offer a secure and resilient supply to our customers. (Americo Lemos, CEO)
Q: What is the wider investment community missing when it comes to IQE's potential?
A: The investment community may not fully understand the technology sector. We are working hard to improve business performance, and we believe the market will eventually recognize our value. (Americo Lemos, CEO)
Q: When do you expect the new GaN reactors to be up and running and delivering revenue?
A: The GaN reactors have been installed in the US and UK. They are already generating revenue and supporting our R&D investments in GaN power and micro LED technologies. (Americo Lemos, CEO)
Q: What is IQE's potential to improve gross margin in percentage?
A: We are optimizing our manufacturing footprint and managing costs diligently. Increasing production volumes will significantly improve profitability. (Americo Lemos, CEO and Jutta Meier, CFO)
Q: Do you expect to hit 2022 revenue numbers of GBP167 million in the full year of 2025?
A: We will provide guidance for next year in due course. Currently, we are not commenting on 2025 revenue projections. (Americo Lemos, CEO)
Q: When do you expect micro LED to be a major growth trend?
A: Micro LED growth has been delayed but remains a significant market. We are preparing our technology and have a strong customer pipeline to support this market when it matures. (Americo Lemos, CEO)
Q: What do you expect the single largest driver of revenue to be in the next 3 years?
A: The ramp-up of GaN power electronics is expected to be a major growth driver. We aim to serve the global market with our advanced GaN power epitaxy offerings. (Americo Lemos, CEO)
Q: Can you walk us through the cash position in more detail? Does working capital unwind in H2?
A: Working capital reflects increased volumes and inventory. We are managing it tightly to ensure efficiency, but we do not expect significant decreases in working capital. (Jutta Meier, CFO)
Q: How do you view business opportunities in China?
A: China is a large market, and we intend to capture opportunities there through our global infrastructure. We do not plan to manufacture in China but will serve the market with our existing footprint. (Americo Lemos, CEO)
Q: What was the feedback from potential strategic investors in Taiwan?
A: Investors see our strategy as strong and are confident in our technology and execution capabilities. They view the Taiwan IPO as a fantastic opportunity. (Americo Lemos, CEO)
Q: Do you think you can get customers to support some of the capital burden in the ramp-up?
A: We are in discussions with customers and public-private partnerships to share the capital investment for high-volume growth. We are also engaging with the CHIPS Act office for potential funding. (Americo Lemos, CEO)
Q: Can you remind us what the 650 volt ED mode GaN is about and how it differs from other GaN power technologies?
A: GaN technology is efficient for power management, operating at high voltage and switching speeds. The 650 volt is targeted for the automotive market, with a roadmap extending to 1,250 volts for broader applications. (Americo Lemos, CEO)
Q: GlobalFoundries acquired GaN power technology. How relevant is this to IQE?
A: This is encouraging as it shows more companies investing in GaN power. We aim to be part of this ecosystem from an epitaxy foundry perspective. (Americo Lemos, CEO)
Q: Can you comment on where you are at with the CHIPS Act funding and if there is a timeline for that?
A: We are in active discussions with the CHIPS office and are encouraged by the level of interaction. However, there is no specific timeline provided for the funding process. (Americo Lemos, CEO)
Q: Is there an indication of how much cash you might get from the Pennsylvania site sale?
A: We are negotiating with interested parties and are confident that the sale will be at a satisfactory level. (Jutta Meier, CFO)
Q: Please could you clarify your comments on peer group valuations in relation to the Taiwan IPO?
A: We are comparing IQE Taiwan to peers like VPEC, LandMark, and WIN Semi in the compound space, which will guide the valuation process. (Americo Lemos, CEO)
Q: Please could you update on the progress of outsourced contract awards?
A: We do not comment on specific customer engagements but have a healthy pipeline and will announce developments in due course. (Americo Lemos, CEO)
Q: Please talk us through average selling prices and how you are able to influence these or not in H1?
A: We aim to maximize the value of our offerings and adjust prices in line with market conditions and supply chain risks, such as restrictions on compound materials exports from China. (Americo Lemos, CEO)
Q: How do you view business opportunities in China?
A: China is a large market, and we intend to capture opportunities there through our global infrastructure. We do not plan to manufacture in China but will serve the market with our existing footprint. (Americo Lemos, CEO)
Q: What was the feedback from potential strategic investors in Taiwan?
A: Investors see our strategy as strong and are confident in our technology and execution capabilities. They view the Taiwan IPO as a fantastic opportunity. (Americo Lemos, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
