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Nanya Technology Corporation Investor Presentation 2017

Jul 17, 2017

52061_rns_2017-07-17_23725a14-cc60-4388-b963-d07126294464.pdf

Investor Presentation

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Q2’ 2017 Investor Conference Presentation to Investors and Analysts 17 Jul. 2017 Dr. Pei-Ing Lee , President & Spokesman

July 17, 2017 © 2017 Nanya Technology Corp.

Safe Harbor

The information herein and the presentation made during the conference contain forward-looking statements and are provided for information purposes only. Neither Nanya Technology Corp. nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements or undertakes duty to update the statements. You are urged to review the information provided herein carefully, and please don’t distribute, reproduce or disclose the information in whole or in part without prior written permission of NANYA Technology Corp.

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Agenda Agenda
01. Q2’17 Key Takeaways
02. Q2’17 Revenue & Results
03. Operation Guidance
04. Market Outlook
05. Business Outlook

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01

KEY TAKEAWAYS

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Q2’17 Key Takeaways

  • Q2’17 Revenue of NT$ 12,626 million(M), (+3.2% QoQ)

  • ASP increased 4.6%, Bit shipment increased 1.7%

  • Gross Margin 43.9%, (+13.1% QoQ); Operating Margin 33.0%, (+8.2% QoQ)

  • Recognized NT$ 4,819M gain from Micron share disposal

  • Recognized NT$ 1,502M tax expense primarily due to undistributed earnings, NT$ 1,013M loss due to ECB valuation

  • 2Q’17 Net Income of NT$ 6,449M, Net Margin 51.1%, EPS NT$ 2.35

  • 1H’17 Net Income of NT$ 9,724M, Net Margin 39.1%, EPS NT$ 3.54

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02 Q2’17 REVENUE & RESULTS

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Financial Highlights

2015-2017 Quarterly Results

Monthly Revenues

  • Unaudited number

  • Unaudited number

Net operating revenues(Million NT$)

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＊
12,028 12,096 [12,231 12,626]
＊
＊
11,15610,337 165.9% 4,317 ＊
10,355 [10,398] 10,204 4,067 4,193 4,115 4,193
3,970
8,933
45.6%
51.1%
52.3%
38.1% 18.1%
17.8% 13.7% 26.8%
4.4%
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Jan Feb Mar Apr May Jun
Net operating revenues(Million NT$) Net Margin(%) Net operating revenues(Million NT$)
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Quarterly Revenue Results

QoQ YoY
Q2’17 vs. Q1’17 Q2’17 vs. Q2’16
Revenue 3.2% 41.3%
Shipment 1.7% 9.7%
ASP 4.6% 38.2%
Exchange Rate -3.0% -6.8%

  • Revenue increased 3.2% quarter-over-quarter

  • Q2’17 bit shipment increased 1.7% QoQ

  • ASP increased 4.6% QoQ

  • Negative impacted 3.0% on revenue by exchange rate

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July 17, 2017 © 2017 Nanya Technology Corp.

Q2’17 Financial Results Summary

Amount in Million NT$, Q2'17 Q1'17 QoQ Q2'16 YoY
except for EPS & BVPS Unaudited Audited Audited
Net Sales 12,626
100%		 12,231
100%		 3.2% 8,933
100%
41.3%
Gross Margin (Loss)Gross Margin(%) 5,544
43.9%		 4,901
40.1%		 13.1% 2,537
28.4% 118.5%
Operating Income(Loss)Operating Margin(%)
4,167
33.0%		 3,853
31.5%		 8.2% 1,651
18.5% 152.4%
EBITDA*EBITDA Margin (%) 6,088
48.2%		 5,458
44.6%		 11.5% 3,165
35.4% 92.4%
Non-operating Income (Expense) 3,794
30.0%		 -566
-4.6%		 -599
-6.7%
Income Tax Benefit (Expense) -1,505
-11.9%		 -4
0.0%		 -647
-7.2%
Net Income (Loss)Net Margin (%) 6,449
51.1%		 3,275
26.8%		 96.9% 397
4.4%
1526%
Earnings Per Share (NT$) 2.35** 1.19 0.14
Book Value Per Share (NT$) 35.44*** 35.31 22.03
Shares Outstanding(million shares) 2,748 2,748 2,748

Note: * EBITDA = Operating income + Depreciation & Amortization Expenses

  • ** EPS is based on weighted average outstanding shares of 2,748 million.

  • *** Included accumulated unrealized gain on Micron shares

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Q2’17 vs. Q1’17 Results Comparison

*Percentage Points

Q2'17 Q1'17 QoQ
(PPT
Delta)*		 Difference
Amount in Million NT$ Unaudited Audited
Net Sales 12,626 12,231 +3.2% •
ASP increased 4.6% QoQ
•
Bit shipment increased 1.7% QoQ
•
FX impacted revenue -3.0%
Gross Margin (Loss)
Gross Margin(%)		 5,544
43.9%		 4,901
40.1%		 +3.8% •
Q2’17 Gross Margin increased NT$ 643M, mainly due to ASP increase
Operating Income (Loss)
Operating Margin(%)
4,167
33.0%		 3,853
31.5%		 +1.5% •
Approx. NT$ 356M R&D expense
increased (2.8% negative impact to
OPM) mainly for 20nm preparation and
product development
Net Income (Loss)
Net Margin (%)		 6,449
51.1%		 3,275
26.8%		 +24.3% •
NT$4,819M realized gain from MU share
disposal
•
Q2 recognized NT$ 1,731M surtax on
undistributed earnings and NT$ 228M
tax reduction for 2016 R&D Investment
•
ECB valuation negative NT$ 857M
(Q2’17: NT$ -1.013B, Q1’17: NT$ -156M)
•
Exchange loss decreased NT$ 489M
(Q2’17: NT$ -86M, Q1’17: NT$ -575M)

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Operating Expenses

R&D Expenses

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(Million NT$)
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NT$2,478
Q4, 579
Q3, 1,030
Q2, 882
Q2, 491
Q1, 527
Q1, 378
2016 2017
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Note: R&D expenses increased by NT$356M in Q2’17; mainly in 20nm preparation and product development

SG&A Expenses

(Million NT$)

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NT$1,821
Q4, 596
Q3, 442
Q2, 495
Q2, 395
Q1, 521
Q1, 388
2016 2017
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Note: Increase of SG&A expenses in Q4’16 were mainly from employee compensation and other expense

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Investment of Micron Private Placement

The Investment as of
2016/12/02
Realized Gain
(2017/06/14~2017/06/30)
Unrealized Gain
(2017/06/30)		 The Investment as of
2016/12/02
Realized Gain
(2017/06/14~2017/06/30)
Unrealized Gain
(2017/06/30)		 The Investment as of
2016/12/02
Realized Gain
(2017/06/14~2017/06/30)
Unrealized Gain
(2017/06/30)		 The Investment as of
2016/12/02
Realized Gain
(2017/06/14~2017/06/30)
Unrealized Gain
(2017/06/30)		 The Investment as of
2016/12/02
Realized Gain
(2017/06/14~2017/06/30)
Unrealized Gain
(2017/06/30)
Volume 57,780,138
shares		 Shares sold 12,014,080
shares		 Shares
held
45,766,058
Shares
Approx.4.11%of
Micron’s Interest
Purchase
price (per
share) & EX
rate		 US$ 17.29
(US$ 1: NT$ 31.488)		 Average
Sale
Price		 US$ 31.21
(Weighted average
EX rate 30.322)		 Market
Price
US$ 29.86
(EX rate 30.436)
Investment
amount		 NT$
31,457,097,237		 Realized
Gain
(A)		 NT$
4,818,672,138		 Unrealized
Gain
(B)
NT$
16,676,759,778
Share-
holding		 Approximately
5.26%of
Micron’s interest		 Total
Gain
(A + B)		 NT$ 21,495,431,916

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Q2’17 Cash Flows

Q2'17 Q1'17 Q2'16
(Unit: Million NT$) Unaudited &
Consolidated		 Audited &
Consolidated		 Audited &
Consolidated
Beginning Balance 20,300 9,102 14,545
Cash from Operating
Activities		 2,952* 5,498 3,343
Capital expenditures -12,163 -6,147 -1,689
Long-term & Short-term
loans		 7 9,984 1
Investments and others 11,821** 1,863 -239
Ending Balance 22,917 20,300 15,961
Free Cash Flow(1) -9,212 -649 1,655

  • (1) Free Cash Flow = Cash from operating activities – Capital expenditures

  • Mainly due to Income Tax payment of NT$ 1,867 million

  • ** Mainly from the proceeds of Micron shares disposal of NT$11.0 billion

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Financial Highlights

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Revenue (Million NT$) Net Income (Million NT$) Gross Margin(%)
30,000 70%
49%
43.9%
47%42% 40.1%
40% [44% 48%] 32.7%
37% 31.1%31.0%
30% 28.4%
18%
13%
-4%
-30%
-31%
-85%
-30,000
-102%
Gross Margin (%)
Revenue, Net Income (Million NT$)
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-110%
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Sales Breakdown by Application

  • Q2’17 strong demand from Consumer segment, mainly from storage, IPC and printer

  • Q2’17 Auto & IT continue to grow to account for 8.3% of total revenue

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Auto Auto
& IT & IT
8.2% Commodity 8.3% Commodity
Mobile 6.5% Mobile 3.8%
21.3% 18.9%
Product Product
2017 Q1 2017 Q2
Consumer Consumer
64% 69%
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03 OPERATION GUIDANCE

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2017 Revenue Breakdown Guidance

Applications

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100%
8.7% PC
~10%
22.4%
26.3%
Commodity 17.4%
Low Power
20~30%
12.3%
7.2%
12.1%
Low Power Auto & IT
6.4%
(Mobile) 4.5% 8~9%
50%
Auto
&
Industrial Consumer
66.7%
& PC
57.1% 58.9%
Peripheral
Consumer
51~62%
&
PC Peripheral
0%
2014 2015 2016 2017(E)
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  • Revenue portion by Application

  • Specialty includes Consumer & PC Peripheral, Auto & Industrial, Low Power

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CAPEX & Bit Shipment

CAPEX

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34.3
NT$ Billion
22.3
12.2
5.6 5.8
3.8
6.1
2013 2014 2015 2016 2017(E)
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BIT SHIPMENT (YOY)

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~45%
20%
16%
Flat
-8.6%
2014 2015 2016 2017(E) 2018(E)
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  • Capital Expenditure

  • (CAPEX)

  • Q2’17 CAPEX NT$ 12.2Billion (B)

  • Estimated 2017 CAPEX of NT$ 34.3B

  • Anticipated CAPEX of NT$55.7B for 38K WSPM 20nm migration. (2016 CAPEX NT$ 20.6B for 20nm)

  • Bit Shipment

  • Q2’17 bit shipment up 1.7%, Q3’17 bit shipment forecast to increase mid single digits % and Q4 bit shipment to grow onward

  • 2017 bit shipment to be flat

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04 MARKET OUTLOOK

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DRAM Market

Supply Side

 DRAM vendors modestly increase bit supply mainly by process conversion

 2H’17 DRAM demand expected better than 1H’17

  • Q3’17 strong demand due to seasonality

  • New model of smartphone launched in Q3 requiring 3-6GB. Dual-lens cameras and AI expected to continue drive DRAM content growth

Demand Side

  • Continues strong momentum in server market and data center. PC market sustained by enterprise PCs replacement and gaming PCs demand

  • 4K TV penetration rate exceed 55% in Chinese market and expected to achieve 45% in global market. 2H traditional high season for set-top boxes and Networking. The demand of IP cameras, automotive, game consoles, and Virtual Personal Assistant (VPA) applications expected to be key drivers

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05 BUSINESS OUTLOOK

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Nanya Business Outlook

 Limited DRAM supply growth and solid demand expected in 2H’17

  • Continued strong demand all sectors, including consumer and automotive applications in Q3’17

  • 20nm shipment started in Q2’17, cost cross over expected in Q3’17

  • Q3’17 bit shipment forecast to increase mid-single digits % QoQ

  • Q3’17 ASP expected to increase low-to-mid single digits %

 Cash dividend of NTD 1.5 per common share, payment date on Jul. 14, 2017

*WSPM: Wafer Starts Per Month

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Thanks & Questions

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2Q’17 Consolidated Income Statement

Q2'17 Q1'17 QoQ Q2'16 YoY
Amount: Million NT$ unAudited Audited Audited
Net Sales 12,626
100.0%		 12,231 100.0% 3.2% 8,933
100.0%		 41.3%
Cost of Goods Sold 7,082
56.1%		 7,330
59.9%		 6,396
71.6%
Gross Margin 5,544
43.9%		 4,901
40.1%		 13.1% 2,537
28.4%		 118.5%
SG&A Expenses 495
3.9%		 521
4.3%		 395
4.4%
R&D Expenses 882
7.0%		 527
4.3%		 491
5.5%
Operating Income 4,167
33.0%		 3,853
31.5%		 8.2% 1,651
18.5%		 152.4%
Non-operating Income (Exp.) 3,794
30.0%		 -566
-4.6%		 -599
-6.7%
Income before Tax 7,961
63.1%		 3,286
26.9%		 142.2% 1,052
11.8%		 656.9%
Income Tax Benefit (Expense) -1,505
-11.9%		 -4
0.0%		 -647
-7.2%
Net Income 6,456
51.1%		 3,283
26.8%		 405
4.5%
Net income attributable to
noncontrolling interests		 7
0.1%		 7
0.1%		 8
0.1%
Net Income attributable to NTC 6,449
51.1%		 3,275
26.8%		 96.9% 397
4.4%		 1526.0%
EPS(NT$) 2.35 1.19 0.14
Book Value Per Share 35.44 35.31 22.03

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