- Group Revenue: EUR3,702 million.
- Segment Result: EUR734 million.
- Segment Result Margin: 19.8%.
- Order Backlog: EUR22 billion.
- Automotive Revenue: EUR2,112 million.
- Automotive Segment Result: EUR537 million.
- Automotive Segment Result Margin: 25.4%.
- Green Industrial Power Revenue: EUR475 million.
- Green Industrial Power Segment Result: EUR88 million.
- Green Industrial Power Segment Result Margin: 18.5%.
- Power and Sensor Systems Revenue: EUR749 million.
- Power and Sensor Systems Segment Result: EUR70 million.
- Power and Sensor Systems Segment Result Margin: 9.3%.
- Connected Secure Systems Revenue: EUR366 million.
- Connected Secure Systems Segment Result: EUR42 million.
- Connected Secure Systems Segment Result Margin: 11.5%.
- Adjusted Gross Margin: 42.2%.
- Reported Gross Margin: 40.2%.
- Research and Development Expenses: EUR509 million.
- Selling, General, and Administrative Expenses: EUR390 million.
- Net Other Operating Expense: minus EUR72 million.
- Non-Segment Result: minus EUR215 million.
- Financial Result: minus EUR30 million.
- Income Tax Expense: EUR88 million.
- Cash Taxes: EUR117 million.
- Investments: EUR700 million.
- Depreciation and Amortization: EUR470 million.
- Free Cash Flow: EUR393 million.
- Gross Cash: EUR2.3 billion.
- Gross Debt: EUR5.4 billion.
- Net Debt: EUR3.1 billion.
- After-Tax Reported Return on Capital Employed: 7.8%.
- Q4 Revenue Outlook: Around EUR4 billion.
- Q4 Segment Result Margin Outlook: Around 20%.
- Full-Year Revenue Outlook: Around EUR15 billion.
- Full-Year Adjusted Gross Margin Outlook: Low-40s.
- Full-Year Segment Result Margin Outlook: Around 20%.
- Full-Year Investments Outlook: Around EUR2.8 billion.
- Full-Year Depreciation and Amortization Outlook: Around EUR1.9 billion.
- Adjusted Free Cash Flow Outlook: Around EUR1.5 billion.
- Reported Free Cash Flow Outlook: Minus EUR200 million.
Release Date: August 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Infineon Technologies AG (IFNNF, Financial) reported a slight sequential improvement in revenue and segment results in the second half of the fiscal year.
- The company confirmed its full-year outlook to be within the previously guided range, demonstrating resilience in a down cycle.
- Significant traction in the AI power franchise, with expectations to double business next year and cross the EUR1 billion revenue mark within two to three years.
- Opening of the Kulim 3 facility for silicon carbide power devices, positioning Infineon as a cost-competitive leader in the market.
- The step-up program aimed at improving profitability is on track, expected to deliver a high triple-digit million euro margin improvement by the first half of fiscal 2027.
Negative Points
- The cyclical bottoming process is continuing across many target markets, indicating ongoing market challenges.
- Some shipments corresponding to a mid-double-digit million euro amount missed the quarterly cutoff, affecting the sequential uptick in revenue.
- Idle charges are increasing, impacting the segment result margin despite higher revenue and better cost performance.
- Visibility over and beyond around a quarter is limited, creating uncertainty in sales outcomes.
- Inventory levels remain elevated, and customers are ordering inside lead times, leading to more turns business and non-linearity in sales outcomes.
Q & A Highlights
Q: You are outperforming markedly some competitors of yours in terms of next quarter guidance. What are the key idiosyncratic factors and how sustainable are they?
A: Our specific structural growth drivers include AI power, automotive MCU share gains, and e-mobility, particularly in China. We also see a cyclical uptick for PSS and CSS. Growth rate quarter over quarter is about 5%. Visibility is low, making it difficult to predict beyond the next fiscal year, but we are confident in our structural growth drivers.
Q: Can you provide more details on the drivers of the rebound in PSS and CSS?
A: For CSS, channel inventory is coming down, which is a good signal. For PSS, the smartphone business is picking up, and we have structural growth drivers with our microphones and AI power business. We are gaining market shares in these areas.
Q: Can you give us more details on the puts and takes in the gross margins into the fiscal fourth quarter?
A: There is a positive contribution from volumes and a negative contribution from underutilization charges. The idle cost number for the full year is around EUR800 million, with 60% in the second half and 40% in the first half. Idle costs are increasing from Q3 to Q4.
Q: Have you noticed any change in customer behavior in recent weeks?
A: Customers are placing more short-term orders, and we are seeing a lot of term business. Visibility is not as far-reaching as we would like, but this is a function of the market cycle we are in.
Q: Can you tell us more about the reasons for gaining business from competitors in the silicon carbide market?
A: In the silicon carbide market, customers value reliable long-term supply and innovation. In one case, we had a better packaging offering that fit the customer's needs, leading them to choose us over competitors.
Q: Can you provide more details on the automotive microcontroller market share gains and their sustainability?
A: We expect continued market share gains as we transition from the 65 to the 40 nanometer generation. Our design win pipeline is strong, and we see good traction for the 28 nanometer node as well.
Q: How should we think about the speed of the Kulim ramp and its flexibility?
A: We build the clean room and infrastructure first, then order equipment as needed with a lead time of 9 to 12 months. We have collected about EUR1 billion of prepayments from customers, who provide us with good forecasts to ensure we can deliver on our commitments.
Q: Can you provide more details on the step-up program and its impact for fiscal year '25?
A: The step-up program is back-loaded, with measures agreed upon to not jeopardize growth potential or innovation power. We expect a high triple-digit million euro margin improvement by the first half of fiscal year '27. More details will be provided in November.
Q: Can you provide more details on the silicon carbide revenue outlook for fiscal year 2025 and beyond?
A: We expect growth for silicon carbide next year and will build out capacity accordingly. Long-term, the market will see different patterns for silicon carbide and gallium nitride, with all three technologies (including silicon) being relevant for various applications.
Q: When do you think the inventory correction will end, and when will you start shipping to end demand?
A: The inventory correction varies by end market. For automotive, the structural growth drivers will play out, and the total number of cars sold next year will be between 85 and 90 million. The rebalancing of inventories along the supply chain will be a key factor to watch.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
