Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AUO Corp (AUOTY, Financial) reported a 25% quarter-over-quarter increase in net sales for Q2 2024, driven by strong demand in consumer electronics and growth in notebook and monitor shipments.
- The company's gross margin improved by nearly 8 percentage points to 11.2%, attributed to product mix improvements, higher utilization rates, and favorable foreign exchange rates.
- AUO Corp (AUOTY) has successfully integrated BHTC, enhancing its automotive and vertical business segments, which now account for 23% of revenue.
- The company is focusing on three strategic pillars: mobility solutions, vertical solutions, and display, aiming to optimize operations and resource allocation for future growth.
- AUO Corp (AUOTY) is advancing its micro LED technology, which is expected to provide strong differentiation in automotive and outdoor applications, aligning with its Go Premium strategy.
Negative Points
- Despite returning to operating profitability, AUO Corp (AUOTY) reported a net loss of TWD231 million due to non-GAAP losses, including a TWD400 million loss from an earthquake in April.
- The company's cash and cash equivalents decreased due to the BHTC acquisition, impacting its balance sheet with a combined short-term and long-term debt of TWD126 billion.
- Inventory turnover was at 43 days, which, while healthy, reflects the impact of the BHTC inclusion and could indicate potential challenges in inventory management.
- The consumer segment is experiencing muted demand, with less pronounced inventory restocking momentum expected in the second half of the year.
- AUO Corp (AUOTY) faces challenges in the display market with the emergence of OLED technology, which, despite its higher cost and carbon emissions, is gaining traction in IT and automotive applications.
Q & A Highlights
Q: Could you elaborate on the potential synergies from the BHTC and AUO merger? Are there any new projects or customer acquisitions resulting from the deal?
A: Benjamin Tseng, AUO Corp's CFO, explained that since the merger in April, synergies have been materializing in both revenue and cost perspectives. AUO's advanced display technologies combined with BHTC's strong integration capabilities have led to positive feedback from customers. A notable achievement post-merger was securing an HMI solution deal with a new commercial customer in Europe. Cost synergies include interest savings and optimization in production and logistics.
Q: Can you provide an update on the full-year G&A and CapEx, and how will the Super SU transformation affect your working capital and profit structure?
A: David Chang, AUO Corp's CFO, stated that the full-year depreciation and amortization will be around TWD34 billion, with CapEx not exceeding TWD33 billion. The focus will shift towards mobility and vertical solutions, impacting working capital needs. Vertical solutions are expected to have higher margins than mobility, which in turn will have better margins than the display business.
Q: What is your view on the trend of OLED usage in IT and automotive applications, and how will AUO respond?
A: James Chen, Senior Deputy General Manager of Display Strategy Business Group, noted that while OLED panels are gaining attention, they are costly and have higher carbon emissions compared to LTPS. AUO's LTPS technology offers better power efficiency and is more suitable for automotive applications, where high brightness is essential.
Q: Could you provide a projection for the revenue breakdown of the three pillars and your margin objectives?
A: Frank Ko, AUO Corp's CEO, mentioned that the goal is for Mobility and Vertical solutions to account for more than half of the revenue by 2027. The focus will be on improving revenue growth for these pillars, which will stabilize the display business. Vertical solutions are expected to have higher margins than mobility.
Q: Can you share your OpEx target post-BHTC consolidation and provide updates on your micro LED and mini LED product plans?
A: Shuang-Lang Peng, AUO Corp's Chairman, stated that OpEx is expected to decrease as consolidation progresses. AUO has showcased micro LED products in various applications, including large displays and transparent displays, and is receiving positive feedback. Micro LED is a key part of AUO's premium strategy and aligns with their growth pillars.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
