CHROMA ATE INC. 2016.2Q Investor Conference Paul Ying, CFO Leo Huang, Chairman & CEO 28 th July, 2016 1 1
Disclaimer This presentation contains some forward-looking statements that are subject to substantial risks and uncertainties. Typically, these statements contain words such as anticipate, believe, could, estimate, expect, intend, plan, forecast, project, predict, potential, continue, may, should, will, and would or similar words. You should consider these forward-looking statements carefully because such statements are only our expectations or projections about future events, and actual results may differ materially from those expressed or implied by such statements. The forward-looking statements in this presentation include, but are not limited to, growth rates for various markets estimated by third party sources, future products and technology development, widespread market acceptance of the hosted delivery model, future revenue growth and profitability. You should be cautioned that the forwardlooking statements are no guarantee of our future performance. The forward-looking statements contained in this presentation are made only as of the date of this presentation and we undertake no obligation to update the forward-looking statements to reflect subsequent events or circumstances, except as required by law. This presentation and the information contained herein are the property of Chroma Ate Inc. 2 2
Agenda Corporate Profile Financial Review Operation Highlights Q&A 3 3
CORPORATE PROFILE 4 4
Corporate Profile Chroma Group founded in 1984, a world leading own brand turnkey test & automation solution provider, specialized in electronics test and measurement instruments and ATS (auto test system). Businesses cover test and measurement instruments and ATS for various industries, and a turnkey solution as an integration of Test and Measurement, Automation and MES (manufacturing execution system). Key success: Precision, Reliability, Innovation Chroma group encompass business unit of Chroma Ate Inc., Modular Assembly System (MAS) and Chroma New Material Corp (CNMC). 2015 Consolidated Sales : NT$ 9.69 billion 2015 Net Income: NT$1.24 billion Chroma Group total of 2,399 employees (as June, 2016) Harvard Business Review (HBR) names Chroma CEO Leo Huang as The Taiwan Best Performing CEO (Rank 38). Consolidated Chroma Ate Sales Others Consolidated CNMC Sales Consolidated MAS Sales 14,148 8% 11,644 48% 5% 10,171 10,307 9,692 7% 15% 13% 48% 29% 24% 34% 41% 44% 47% 60% 58% 2011 2012 2013 2014 2015 5 5
Financial Performance Consolidated Sales Sales Revenues R&D Expenses Gross Margin Gross Margin R&D Expenses in % of Sales Revenues 14,148 11,644 37% 39% Consolidated 44% 5,338 54% 55% 52% 4,174 3,926 54% 5,135 Parent Only 56% 4,539 28% 29% 10,171 10,307 9,692 12% 15% 16% 15% 17% 630 637 631 755 784 Chroma Employees:1,408 (R&D 39%) 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 6 6
Financial Performance ROE Dividend 19% 4.06 EPS Cash dividend Stock dividend Payout ratio 3.21 3.51 3.28 15% 12% 14% 13% 2.50 2.52 2.50 2.60 2.40 2.00 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 * * The dividend will be paid out after the resolutions of Annual General Shareholders meeting. 7 7
Chroma Global Network Global Employees:2,310, Branch Offices x17, Distributors x68 Hong Kong : Neworld US : Irvine/ Santa Clara/ Foothill Ranch, CA Tempe, AZ Europe : Netherlands SE Asia: Singapore Japan: Yokohama China : Beijing / Nanjing / Shanghai / Suzhou Chongqing / Xiamen / Shenzhen / Dongguan 8 8
FINANCIAL REVIEW 9 9
Year 2016.1H Condensed Consolidated Income Statement Condensed Consolidated P&L (In Million NTD, except for EPS in NTD) 2016.1H % 2015.1H % YoY % Net Sales 5,292 100% 4,633 100% 14% Consolidated Sales of Testing Equipment Business 3,856 73% 2,434 53% 58% Consolidated Sales of MAS 138 2% 825 18% (83%) Consolidated Sales of New Material 1,104 21% 1,158 25% (5%) Others 194 4% 216 4% (10%) Cost of Goods Sold (2,815) (53%) (2,696) (58%) 4% Gross Profit 2,477 47% 1,937 42% 28% Operating Expenses: General & Administration (1,102) (21%) (975) (21%) 13% Research & Development (482) (9%) (414) (9%) 16% Operating Income 893 17% 548 12% 63% Non-Operating Income (Expenses), net 23-41 1% (44%) Income (Loss) Before Tax 916 17% 589 13% 56% Income Tax (173) (3%) (104) (2%) 66% Net Income 743 14% 485 11% 53% Other Comprehensive Income (Losses) (94) (2%) (175) (4%) (46%) Comprehensive Income $ 649 12% $ 310 7% 109% Net Income (Losses) Attributable To: Shareholders of the Parent 764 14% 505 11% 51% Noncontrolling Interests (21) - (20) - 5% $ 743 14% $ 485 11% 53% EPS (Basic) $ 2.02 $ 1.34 51% EPS (Diluted) $ 1.89 $ 1.28 48% 10 10
Balance Sheet Highlights & Financial Ratio Consolidated (In Million NTD) Balance Sheet Highlights 2016. June 2015. Dec + / - % Cash & Short Term Investments 5,660 5,116 11% Inventory 2,017 1,636 23% Short Term Debt 709 333 113% Long Term Debt 2,865 3,142-9% Shareholders Equity 9,466 9,531-1% Total Assets 17,399 16,060 8% Inventory Turnover (Day) 117 108 AR Turnover (Day) 90 108 AP Turnover (Day) 102 91 Net Debt to Equity (%) Negative Negative ROE (%) 16% 13% ROA (%) 9% 8% Cash Position 2016.1H 2015.1H YoY EBITDA 1,107 770 44% Cash Flow from Operation 594 1,366 (57%) Free Cash Flow 90 922 n/a All ROE + ROA has been annualized. Free Cash Flow = Net Cash Provided by Operating Activities + (Net Cash used by Investing Activities) 11 11
Quarterly Highlights 2016.2Q Key Points Sales Revenues Gross Margin Operating Margin Sales Revenue: $ 1,589 million, 1,654 1,589 down 4% QoQ, up 41% YoY Gross Margin: 55% Operating Margin: 25% Net Income: NT$ 443 million, 57% 1,126 53% 1,356 55% 1,193 57% 50% 55% up 38% QoQ, up 16% YoY 864 2016.2Q Highlights: The major growth driver came from Semiconductor test 22% 20% 23% 25% solutions and Test instruments & 13% 16% ATS, presented a growth of 155% and 29% QoQ respectively. 2015.1Q 2015.2Q 2015.3Q 2015.4Q 2016.1Q 2016.2Q 12 12
Year 2016.2Q Condensed Income Statement Condensed P&L Parent Only (In Million NTD, except for EPS in NTD) 2016.2Q % 2016.1Q % QoQ 2015.2Q % YoY % % Net Sales 1,589 100% 1,654 100% (4%) 1,126 100% 41% Cost of Goods Sold (721) (45%) (821) (50%) (12%) (524) (47%) 38% Gross Profit 868 55% 833 50% 4% 602 53% 44% Operating Expenses: General & Administration (255) (16%) (234) (14%) 9% (229) (19%) 11% Research & Development (222) (14%) (213) (13%) 4% (198) (18%) 12% Operating Income 391 25% 386 23% 1% 175 16% 123% Non-Operating Income (Expenses), net 136 9% (7) - n/a 225 20% (40%) Income (Loss) Before Tax 527 34% 379 23% 39% 400 36% 32% Income Tax (84) (5%) (58) (4%) 45% (19) (2%) n/a Net Income $ 443 29% $ 321 19% 38% $ 381 34% 16% Other Comprehensive Income (74) (5%) (20) (1%) n/a (122) (11%) (39%) Comprehensive Income $ 369 24% $ 301 18% 23% $ 259 23% 42% EPS (Basic) $ 1.17 $ 0.85 38% $ 1.01 16% EPS (Diluted) $ 1.09 $ 0.80 36% $ 0.96 14% 100% owned subsidiaries income - New Material: 14m (QoQ 17%, YoY 56%), MAS: 14m (QoQ n/a, YoY n/a). 13 13
Year 2016.1H Condensed Income Statement Condensed P&L Parent Only (In Million NTD, except for EPS in NTD) 2016.1H % 2015.1H % YoY % Net Sales 3,243 100% 1,990 100% 63% Cost of Goods Sold (1,543) (48%) (894) (45%) 73% Gross Profit 1,700 52% 1,096 55% 55% Operating Expenses: General & Administration (490) (15%) (438) (22%) 12% Research & Development (434) (13%) (374) (19%) 16% Operating Income 776 24% 284 14% 173% Non-Operating Income (Expenses), net 130 4% 256 13% (49%) Income (Loss) Before Tax 906 28% 540 27% 68% Income Tax (142) (4%) (35) (2%) n/a Net Income $ 764 24% $ 505 25% 51% Other Comprehensive Income (94) (3%) (174) (8%) (46%) Comprehensive Income $ 670 21% $ 331 17% 102% EPS (Basic) $ 2.02 $ 1.34 51% EPS (Diluted) $ 1.89 $ 1.28 48% Non-operating Income included 100% owned subsidiaries income - New Material: 26m (YoY 30%), MAS: 10m (YoY n/a). 14 14
Balance Sheet Highlights & Financial Ratio Parent Only (In Million NTD) Balance Sheet Highlights 2016. June 2015. Dec + / - % Cash & Short Term Investment 3,273 2,703 21% Inventory 1,633 1,301 26% Short Term Debt 446 101 342% Long Term Debt 2,706 2,988-9% Shareholders Equity 9,281 9,410-1% Total Assets 15,566 13,965 11% Inventory Turnover (Day) 169 231 AR Turnover (Day) 123 159 AP Turnover (Day) 95 101 Net Debt to Equity (%) Negative 4% ROE (%) 16% 13% ROA (%) 11% 9% Cash Position 2016.2Q 2016.1Q QoQ YoY EBITDA 573 425 35% 28% Cash Flow from Operation 415 276 50% 121% Free Cash Flow 456 (487) n/a n/a All ROE + ROA has been annualized. Free Cash Flow = Net Cash Provided by Operating Activities + (Net Cash used by Investing Activities) 15 15
OPERATION HIGHLIGHT 16 16
Chroma Ate Inc. Sales Breakdown by Testing Solutions (Unit: Million NTD) 2016.2Q % QoQ YoY 2016.1H % YoY 2015 % Test Instruments & Automate Testing 950 60% 29% 21% 1,689 52% 18% 3,029 67% System (ATS) Semiconductor Test Solutions 367 23% 155% 99% 511 16% 52% 759 17% Turnkey Solutions 169 11% n/a 61% 883 27% 564% 532 12% Service & Others 103 6% 81% 106% 160 5% 82% 219 4% Total 1,589 100% (4%) 41% 3,243 100% 63% 4,539 100% 17 17
Chroma Ate. Inc. Sales Mix Breakdown (YTD) A Turnkey Solution and Intelligent Automation Line Provider Parent Only 4,174 3,926 5,135 4,539 3,243 6% 5% 4% 4% 5% Others 10% 9% 18% 12% 27% 17% 21% 17% Turnkey Solutions 21% 16% Semiconductor Test Solutions Test Instruments & ATS 63% 67% 65% 57% 52% 2012 2013 2014 2015 2016.1H 18 18
Sales Breakdown by Consolidated Entities (Unit: Million NTD) 2016.2Q % QoQ YoY 2016.1H % YoY Chroma Ate. Inc. included overseas affiliates 1,952 72% 3% 43% 3,856 73% 58% MAS 97 4% 137% (85%) 138 2% (83%) New Material 536 20% (6%) (5%) 1,104 21% (5%) Others 97 4% - (14%) 194 4% (10%) Consolidated Sales 2,682 100% 3% (1%) 5,292 100% 14% 19 19
Year 2016.2H Guidance In the first half 2016, turnkey solutions and semiconductor testing solutions are the biggest drivers for Chroma parent sales, which presented a strong growth of 564% and 52% YoY respectively. Meanwhile, the core business of Test Instruments and ATS also presented a double digits growth of 18% compared to first half last year. Moving forward to the second half 2016, the Company expected the overall operation will be better than first half. The turnkey solutions will continue to drive the Company sales revenues growth, while test instruments & ATS and semiconductor testing solutions will continue steady growth in the second half. 20 20
Business Development Roadmap Turnkey (Test & Measurement + Automation + MES) Industry 4.0 ICT Industries Clean Tech. I984 2010 2016 21 21
Test Instruments & ATS TECHNOLOGY Power Testing Wider Operation Voltage: Up to1200v Max. Power: 240kW (parallel) 1~60 Series Cell Voltage Simulation Active and Passive Balance Test Electrical Safety Wide Range Inductance: 10~1,000V; 0.1uH~100uH High speed: <18mS FPD Testing 8K x 4K@60Hz 8K x 4K@120Hz 16 16.2H MARKET Server & Telecom Power/ EV/EVSE/Battery/UHD Display/ Mobile Phone/Power Choke High Power DC Load 632XXA Impulse Winding Tester 19301A BMS ATS 8700 SOLUTION FPD Tester 27014 8K FPD Tester 2918 22 22
Test Instruments & ATS TECHNOLOGY AOI High Precision/High Speed 2D & 3D Measuring 2.5sec/pcs LED Testing New Application: UVA, UVB, UVC Optical Device Testing Bar Type Sorting No Probing Mark High Density Burn-in Module 256Ch SMU/module 6 VCSEL Wafer NF &FF Testing 16 16.2H MARKET 3C Cosmetics/LED/Fiber Optical Communication UV LED Chip Prober 58212-C Multi-Functional Dimension Measuring System 7505 SOLUTION Laser Diode/Photo Diode Mapping Sorter 58205 Laser Diode Burn-In Test System 58604 VCSEL Wafer Probing Test System 58630 23 23
Semiconductor Test Solutions TECHNOLOGY Analog Testing Touch Sensor/Finger Printing IC testing 256 I/O, 16 bits ADC/DAC Logic Testing Compact Size, Best Cost Of Ownership 256 digital pins, 100Mbps IC Testing Handler Thermal Engine Nitro-TEC (Liquid Nitrogen) 16 16.2H MARKET IoT, Touch Sensor ICs, Finger Printing IC, MCU SOLUTION VLSI Test System 3380D Full Range ATC Cold Temperature Handler 3160C 24 24
Turnkey Solutions TECHNOLOGY MES Intelligent Process System Battery Formation Regenerative CH/DCH System, Negative Pressure Formation MARKET 15 Industry 4.0 Battery Cell Formation 16 Intelligent Battery Process System Battery Cell Formation System 17000 SOLUTION 25 25
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