November 7, 2022
For the first nine months of the year, deposition equipment manufacturer Aixtron SE of Herzogenrath, near Aachen, Germany, reported 13% year-on-year revenue growth , rising from 248.1 million euros in 2021 to 279.9 million euros in 2022 (including 78% from the sale of equipment and 22% from after-sales service & spare parts).
On equipment revenue, metal-organic chemical vapor deposition (MOCVD)/chemical vapor deposition (CVD) equipment for manufacturing gallium nitride (GaN)-based power electronic devices ) and silicon carbide (SiC) accounted for 37% (SiC is growing strongly); MOCVD equipment for manufacturing optoelectronic devices (telecom/datacom and 3D sensing lasers for consumer electronics, solar and wireless/RF communications) accounted for 36% (with optical data transmission and 5G applications growing strongly growth) ; and MOCVD equipment for LED manufacturing accounted for only 25% (mainly traditional red LEDs, but also micro-LED applications).
On a regional basis, 66% of revenue came from Asia (about the same year-over-year), 17% from the Americas (vs. 10%) and only 16% from Europe ( against 23%).
Revenue for the third quarter of 2022 was just €88.9 million, down 13.3% from €102.5 million in the second quarter of 2022 and down 32% from 130.8 million euros a year ago. However, this was mainly due to some customer-related delivery delays (shifting some tool deliveries to Q4/2022) and delays in granting export licenses. More than half of sales come from GaN and SiC power electronics manufacturing equipment. Sales of systems for manufacturing lasers (particularly for optical data transmission and 3D sensor technology) were also buoyant.
Gross margin for the first nine months of 2022 was 40%, down slightly year-over-year from 41%. However, Q3/2022 gross margin was 44%, compared to 37% last quarter and 43% a year ago, mainly due to improved product mix.
Operating expenses increased further, from €20.1m in Q3/2021 and €20.6m in Q2/2022 to €23.1m in Q3/2022, contributing €65.4m to first nine months of 2022 (up year-over-year). from €60.3 million), due to the increase in variable compensation and the decrease in R&D subsidies.
Operating profit (EBIT, earnings before interest and tax) improved to 47.6 million euros in the first nine months, compared to 41.1 million euros in the previous year, the margin of EBIT remaining at 17% of sales. However, Q3/2022 EBIT of €16.2m is down from €17.2m in Q2/2022 and €36.2m in Q3/2021 (with a margin of 18% vs. % one year ago).
Net profit in Q3/2022 amounted to €19.1m (€0.28 per share, i.e. 21% of revenue), down from €31.4m (€0.39 per share, 24% of turnover) a year ago. However, that’s up from 17.3 million euros (€0.16 per share, 17% of revenue) last quarter. Net profit for the first nine months of 2022 amounted to €50.2 million (€0.45 per share, 18% of revenue), compared to €42.9 million (0. €17 per share, 17% of turnover) a year ago.
Operating cash flow now positive
Operating cash flow improved from -€27.6m in Q2/2022 to €0.5m in Q3/2022.
Capital expenditure (CapEx) nearly doubled from €4.2m in Q2/2022 to €8m in Q3/2022 (contributing to CapEx for the first nine months of the year from €13.3m € for 2021 to €16.9 M for 2022), mainly investments in new generation MOCVD tools.
Free cash flow was therefore -€7.5m in Q3/2022, but this is a significant improvement from -€19m in Q3/2021 due to higher customer deposits. For the first nine months of 2022, free cash flow amounted to €19m, mainly due to the strong cash inflow related to receivables.
Due to the surge in shipments from Q3 and in anticipation of the exceptionally high shipments expected in Q4/2022, inventories increased to increase further from €161.6m at the end of June to €209.2m at the end of September.
However, the increase in inventories was offset by a further increase in advances received on customer orders, from €103.7m at the end of June to €121.8m at the end of September (nearly a third of the order book) .
Overall, cash and cash equivalents (including financial assets) decreased further, from €352.5m at the end of December and €346.2m at the end of June to €339.2m at the end of September, but this is largely due to the payment of a dividend of €33.7 million agreed at the annual general meeting (AGM) of shareholders on May 25 (a payout ratio of 35% of the company’s net income ).
Aixtron says its financial strength is underscored by its high equity ratio of 75% at the end of September. Meanwhile, headcount grew to 842 at the end of September, up 9% from 772 at the end of June and up 19% from 710 a year earlier, so the structural strengthening of the organization for future growth is on track.
Third-quarter order intake up 25% year-on-year, driven by GaN and SiC-based power electronics
Order intake for the first nine months of the year increased by around 13% year-on-year, from €377.6m in 2021 to €425.6m in 2022, including €142.8m in Q3, up 25% from €114.2m in Q3/2021. This reflects “consistently high demand” for efficient GaN and SiC based power electronics (with the multi-wafer batch CVD system fully automated next-generation G10-SiC (9×6″ or 6×8″) – launched just mid-September – already including largest Q3 contribution, followed by GaN), plus demand for lasers and LEDs (including micro-LEDs).
At the end of September, the equipment order book stood at €369.4 million, up 17.5% compared to €314.4 million at the end of June and up 38% compared to €267.6 million. € the previous year.
Due to continued strong demand and stable supply chains, as well as surge deliveries from Q3/2022, Aixtron expects exceptionally high deliveries in Q4/2022, which will result in a sales figure of quarterly business record.
Improved forecasts for the year 2022
Based on a budget rate of 1.20 $/€ (compared to 1.25 $/€ in 2021), given the continued improvement in demand, Aixtron is raising its full-year order intake guidance by €520-580m to €540-600m.
Based on revenue of €279.9 million in the first nine months of 2022, plus forecast revenue of €20 million from spare parts and aftermarket services in the fourth quarter of 2022, joined by an equipment order book at the end of September of 150 to 200 million euros (convertible to sales in 2022), Aixtron still expects double-digit growth in its turnover full-year revenue of €450-500m in 2022.
However, given the improved product mix (for the rest of 2022, compared to the first half), Aixtron is raising its gross margin guidance from 41% to around 42% and EBIT margin from 21-23 % to 22%-24%.
“Our increased guidance for 2022 in this challenging environment is the result of growing demand for our pioneering technologies,” comments CFO Dr. Christian Danninger. “Our strategic initiatives in product development and supply chain management are paying off,” he adds.
“We are very pleased with the success of our recently launched G10-SiC and expect similar success for future launches of our next-generation systems,” said CEO and President Dr. Felix Grawert. “G10 silicon carbide is the first member of the new family of series we are launching. Also for GaN power electronics and for gallium arsenide lasers and micro-LEDs we have new members in the making. We plan to launch them both in the first half of 2023. These products are in validation with several beta customers,” he adds. “The growing share of fully automated systems also shows the strong demand for new technologies.”
“Overall, the current global crisis situations and market developments continue to have a minor impact on the business,” Aixtron notes. “Logistics and supply chains are tight, but in our view they remain broadly stable.”
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