ASM International N.V. reports third quarter 2023

Rhea-AI Summary

ASM International N.V. reports Q3 2023 operating results, with new orders flat and revenue growth of 9% YoY. Normalized net earnings decrease to €139 million. The company expects an operating margin of at least 26% for FY 2023. Despite soft market conditions, ASM remains committed to transition to gate-all-around (GAA) technology.

Positive

• New orders of €627 million for Q3 2023 were flat at constant currencies compared to last year. Revenue growth for Q3 2023 was 9% YoY. ASM expects an operating margin of at least 26% for FY 2023. Leading logic/foundry customers remain committed to transition to GAA technology.

Negative

• Normalized net earnings decrease to €139 million for Q3 2023 compared to €175 million in Q3 2022.

Almere, The Netherlands
October 24, 2023, 6 p.m. CET


ASM International N.V. (Euronext Amsterdam: ASM) today reports its third quarter 2023 operating results (unaudited).

Robust results and orders amidst continued soft market conditions

Financial highlights

€ million	Q3 2022	Q2 2023	Q3 2023
New orders	675.5	485.8	627.4
YoY change % at constant currencies	1%	(48%)	0%
Revenue	609.8	669.1	622.3
YoY change % at constant currencies	33%	21%	9%
Normalized gross profit margin 1)	48.1%	49.0%	48.9%
Normalized operating result 1)	160.3	180.1	157.2
Normalized operating result margin 1)	26.3%	26.9%	25.3%
Share in income of investments in associates (excluding amortization intangible assets resulting from the sale of ASMPT stake 2013)	19.6	9.2	0.4
Amortization intangible assets (resulting from the sale of ASMPT stake in 2013)	(3.6)	(0.2)	(0.1)
Impairment of investments in associates	(321.4)	0.0	0.0
Net earnings	(150.5)	151.2	129.6
Normalized net earnings 2)	174.9	160.7	139.1

¹ Excluding amortization of fair value adjustments from purchase price allocations (before tax)
² Excluding amortization of fair value adjustments from purchase price allocations (net of tax), change in fair value of the contingent consideration (LPE earn-out) and impairment of ASMPT

• New orders of €627 million for the third quarter 2023 were about flat at constant currencies compared to the same period last year (decreased by 7% as reported).
• Year-on-year revenue growth for the third quarter 2023 was 9% at constant currencies (2% as reported).
• Normalized gross profit margin of 48.9%, improved compared to 48.1% in the same quarter last year, mainly explained by mix, including a continued solid contribution from China sales.
• Normalized operating result for the third quarter 2023, slightly decreased from €160 million last year to €157 million this year, with slightly higher sales and a higher normalized gross profit margin offset by increased R&D expenses.
• Normalized net earnings for the third quarter 2023 were €139 million, down from €175 million in Q3 last year, and included a translation gain of €3 million compared to a translation gain of €25 million in Q3 2022 and a translation gain of €8 million in Q2 2023.
• Net earnings included a negative impact of €10 million (net of tax) relating to PPA expenses. Details of (estimated) amortization and earn-out expenses (PPA expenses) relating to the 2022 acquisitions of LPE and Reno are found in Annex 2.

Comment

“ASM delivered robust results amidst continued soft market conditions,” said Benjamin Loh, President and CEO of ASM. “Revenue increased 9% at constant currencies compared to prior year to €622 million, which is at the top end of our previous guidance of €580-620 million. The gross margin was again relatively strong at around 49% in Q3, with a positive mix including again significantly higher contribution from the Chinese market. Slightly higher revenue and gross margin was offset by further increases in R&D investments resulting in an operating margin of 25.3% in Q3. For FY 2023 we expect an operating margin of at least 26%, somewhat better than the previous forecast of 26% or slightly lower.

Orders came in at €627 million in Q3, about flat compared to last year (at constant currencies), and up compared to the lower level in Q2 2023, despite the generally weaker market conditions. Against the backdrop of continued economic pressure and geopolitical tensions, large parts of the semiconductor end markets are still sluggish and the timing and strength of recovery is still uncertain. As a consequence, demand from our customers in the leading-edge logic/foundry segment remains relatively soft, and this also includes the earlier reported push outs due to delays in fab readiness. On the positive side, leading logic/foundry customers remain committed to transition to the next node which will be based on gate-all-around (GAA) technology. As previously communicated, we expect the first meaningful GAA orders in Q4 2023, of which part has now already been booked in Q3. Despite some advanced-technology investments in the DRAM segment, overall demand in memory is still low and not expected to recover in the near term. The power/analog market so far held up well but is now also showing signs of slowdown, including in the automotive and industrial segments. Traction in SiC Epi remains solid and we still expect revenues in excess of €130 million for this business this year.

An important event during the quarter was our Investor Day 2023. Despite the current market weakness, we increased our revenue target for 2025 to €3.0-€3.6 billion¹, assuming recovery of the WFE market. We also issued new guidance for 2027, including further revenue growth to €4.0-5.0 billion¹, as we continue to execute our Growth through Innovation strategy. We also shared that we expect the ALD market to remain among the fastest growing segments with a CAGR of 10%-14% for the period 2022-2027, while in Si Epi we continue to target market share increases. In addition, with SiC Epi we have added a rapidly growing and highly synergistic product line. We are well placed to support our leading logic/foundry customers in the upcoming transition to gate-all-around (GAA), which we expect to increase ASM’s served available market (SAM) by an estimated US$400 million per 100k wafer starts per month.

During the Investor Day we also highlighted actions taken with respect to our commitment to sustainability, such as the recent SBTi verification of our Net Zero 2035 targets, and initiatives to increase the energy efficiency of our products in close collaborations with customers and suppliers.”


Outlook

On a currency-comparable level, we project revenue of €600-640 million for Q4 2023. Our forecasts for the second half and the full year 2023 are largely unchanged. At constant currencies and taking into account the guidance for Q4, we expect revenue in the second half to drop by approximately 10% compared to the first half of the year, and for FY 2023, we expect revenue to show a year-on-year increase of close to 10%, including the consolidation of LPE.
On October 17, 2023, the US issued new export control measures. Based on our preliminary assessment, we do not expect any material additional impact, relative to what we previously communicated.
Wafer fab equipment (WFE) is now expected to drop by a high single-digit to low double-digit percentage in 2023. Memory WFE is still expected to show the sharpest drop. Compared to memory, leading-edge logic/foundry is relatively resilient but also impacted by the weaker market conditions. The mature node markets are expected to be up this year, although, as mentioned, power/analog is showing signs of slowdown. We continue to expect to outperform the WFE market this year.

Share buyback program

On September 19, 2023, ASM completed the €100 million share buyback program that was started on April 27, 2023. In total, we repurchased 264,503 shares at an average price of €378.07, under the 2023 program.

ASM Investor Day 2023

On September 26, 2023, ASM held its Investor Day, where ASM’s management provided an update on our business and financials, and discussed how new technology developments will drive expected market expansion, new growth opportunities and initiatives to improve sustainability. Highlights included:

• Revenue target for 2025 increased to €3.0-€3.6 billion², up from the previous 2021 Investor Day target of €2.8-€3.4 billion. Further growth in revenue to €4.0-€5.0 billion by 2027 (2022-2027 CAGR of 11%-16%).
• Gross margin of 46%-50% and operating margin of 26%-31% reiterated for 2023-2025, and also targeted for 2026-2027³, with upward trend in operating margin expected in outer years.
• Annual capex of €100-€180 million (in 2024-2027), to support growth.
• Single-wafer ALD market forecast of $3.1-$3.7 billion by 2025 repeated, up from $2.6 billion in 2022; with further expected growth to $4.2-$5.0 billion by 2027, with a continued leading targeted market share of >55%.
• Si Epi market 2025 forecast increased to $1.9-$2.3 billion, compared to market size of $2.0 billion in 2022, with further growth to $2.3-$2.9 billion in 2027. We continue to target an increase in market share to >30% by 2025.
• SBTi’s verification of ASM’s net-zero 2035 targets.

About ASM International

ASM International N.V., headquartered in Almere, the Netherlands, and its subsidiaries design and manufacture equipment and process solutions to produce semiconductor devices for wafer processing, and have facilities in the United States, Europe, and Asia. ASM International's common stock trades on the Euronext Amsterdam Stock Exchange (symbol: ASM). For more information, visit ASM's website at www.asm.com.

Cautionary Note Regarding Forward-Looking Statements: All matters discussed in this press release, except for any historical data, are forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These include, but are not limited to, economic conditions and trends in the semiconductor industry generally and the timing of the industry cycles specifically, currency fluctuations, corporate transactions, financing and liquidity matters, the success of restructurings, the timing of significant orders, market acceptance of new products, competitive factors, litigation involving intellectual property, shareholders or other issues, commercial and economic disruption due to natural disasters, terrorist activity, armed conflict or political instability, changes in import/export regulations, pandemics, epidemics and other risks indicated in the company's reports and financial statements. The company assumes no obligation nor intends to update or revise any forward-looking statements to reflect future developments or circumstances.

This press release contains inside information within the meaning of Article 7(1) of the EU Market Abuse Regulation.

Quarterly earnings conference call details

ASM will host the quarterly earnings conference call and webcast on Wednesday, October 25, 2023, at 3:00 p.m. CET.

Conference call participants should pre-register using this link to receive the dial-in numbers, passcode and a personal PIN, which are required to access the conference call.

A simultaneous audio webcast, and replay will be accessible at this link.

Contact

Investor and media relations

Victor Bareño
T: +31 88 100 8500
E: investor.relations@asm.com

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¹ Based on WFE market size assumption of $~100 billion in 2025 and $~120 billion in 2027.

² Based on WFE market size assumption of $~100 billion in 2025 and $~120 billion in 2027.

³ On a normalized basis, excluding fair value adjustments of purchase price allocations.

Attachment

• 20231024 ASM reports Q3 2023 results

FAQ

What were the new orders for Q3 2023?

New orders for Q3 2023 were €627 million.

What was the revenue growth for Q3 2023?

Revenue growth for Q3 2023 was 9% YoY.

What is ASM's expected operating margin for FY 2023?

ASM expects an operating margin of at least 26% for FY 2023.

What technology are ASM's leading customers transitioning to?

ASM's leading customers are transitioning to gate-all-around (GAA) technology.