Release Date: November 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Soitec SA (SLOIF, Financial) reported a strong operating cash flow of EUR129 million, supporting a positive free cash flow of EUR35 million in H1 '25.
- The company maintained a robust EBITDA margin of 33%, demonstrating resilience despite a 15% year-on-year revenue decline.
- Significant rebound in the mobile communications division, with Q2 '25 revenue up 164% over Q1 '25, indicating recovery from inventory absorption issues.
- Continued investment in R&D and capacity expansion, with a focus on new product development and agile capacity deployment.
- Edge and Cloud AI division grew by 57%, driven by strong demand for low-power computing devices and edge AI applications.
Negative Points
- Revenue for H1 '25 was down 15% year-on-year, primarily due to RF-SOI under-shipment amid inventory absorption in the smartphone value chain.
- Automotive and industrial revenue declined by 20% year-on-year, impacted by market weakness and inventory adjustments.
- Gross margin decreased by 6 points year-on-year to 30%, affected by higher depreciation expenses and underutilization of SOI fabs.
- Net income was EUR14 million, representing only 4% of revenue, reflecting lower fab loading and revenue levels.
- The company faces a two-year delay in SmartSiC qualifications, impacting the timeline for volume production and market penetration.
Q & A Highlights
Q: Can you confirm the current inventory levels at foundries for mobile communications and whether there will be no massive under-shipment in the second half? Also, when do you expect to enter volume production for SmartSiC?
A: Inventory levels are stabilizing around a one-year average, which supports a positive trend for RF-SOI in the second half. We anticipate a progressive recovery. For SmartSiC, there is a two-year delay in qualifications, but we are ready to ramp up production. We have a fourth customer in qualification and 35 prospects evaluating SmartSiC.
Q: Is the sales growth in Edge and Cloud AI sustainable, and when will Photonics-SOI reach $100 million in annual sales?
A: The growth in Edge and Cloud AI, particularly in Silicon Photonics, is expected to continue due to increasing data center needs. While 60% growth is exceptional, strong growth is anticipated. Photonics-SOI is integral to next-generation data centers, and while it's too early to specify when it will reach $100 million, the outlook is promising.
Q: What gives you confidence in reaching your 2025 guidance despite needing a strong acceleration in the second half?
A: We have a 90% backlog and contract coverage, which is an improvement from last year. Additionally, we are seeing increased customer engagement for long-term agreements, which boosts our confidence in meeting the guidance.
Q: How do you see content growth in RF-SOI, and are your segment-level outlook statements still valid?
A: We expect continued content growth in RF-SOI due to more applications and 5G expansion. Our segment-level outlook remains valid, with stable revenue expected in the automotive division and double-digit growth in Edge and Cloud AI.
Q: Are there any non-cancellable orders that customers must take regardless of need?
A: No, there are no non-cancellable orders. Customers are taking products based on clear needs, and we are seeing increased discussions for long-term commitments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
