Elmos Semiconductor SE (XTER:ELG) Q1 2025 Earnings Call Highlights: Navigating Challenges with ...

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Wed, May 7, 2025, 1:02 AM 4 min read

Revenue: EUR126.9 million, down 7% year on year.
Gross Margin: 43.4% in Q1 2025.
EBIT: EUR25.6 million, compared to EUR33.8 million one year ago.
EBIT Margin: 20.2%.
CapEx: EUR13.5 million or 10.6% of sales; operational CapEx EUR7.6 million or 6% of sales.
Adjusted Free Cash Flow: EUR21.5 million, significantly higher than the previous year's figure of minus EUR48.9 million.
Full Year Sales Guidance 2025: EUR580 million plus or minus EUR30 million.
Full Year EBIT Margin Guidance 2025: 23% plus or minus 3 percentage points.
Full Year CapEx Guidance 2025: Around 7% plus or minus 2 percentage points of sales.
Full Year Adjusted Free Cash Flow Guidance 2025: Positive, 7% plus or minus 2 percentage points of sales.

Warning! GuruFocus has detected 4 Warning Signs with XTER:ELG.

Release Date: May 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Elmos Semiconductor SE (XTER:ELG) reported a solid start to the fiscal year 2025, in line with expectations despite a challenging market environment.
The company expects higher revenue and clear sequential growth in the second quarter, with a book-to-bill ratio greater than one.
Elmos Semiconductor SE (XTER:ELG) has launched a successful optimization program to reduce personnel and material costs, which is expected to improve profitability.
The company reported a significant improvement in adjusted free cash flow, reaching EUR21.5 million in Q1 2025, compared to a negative figure in the previous year.
Elmos Semiconductor SE (XTER:ELG) is confident in its operating model and strategic positioning, focusing on profitable growth, cost discipline, and operational efficiency to create value for shareholders.

Negative Points

Sales in Q1 2025 were EUR126.9 million, a 7% decline year-on-year, impacted by lower volumes and inventory destocking effects.
The gross margin was affected by fixed cost effects, particularly in the testing area, due to lower volumes, resulting in a decrease to 43.4%.
EBIT decreased to EUR25.6 million in Q1 2025 from EUR33.8 million a year ago, primarily due to lower volumes and increased R&D expenses.
The automotive semiconductor market continues to face challenges with lower order levels and weaker visibility due to short-term order behavior.
Rising geopolitical tensions and potential tariffs add further uncertainty to the market, although the direct impact on Elmos Semiconductor SE (XTER:ELG) is limited due to minimal exposure to the US market.

Q & A Highlights

Q: Have you seen any change in the ordering behavior from your customers due to US tariffs? A: We do not see a change in ordering patterns. The US-China tensions are not currently reflected in our order book. However, this situation may offer opportunities in countries like China, where European players might benefit.

Q: Can you elaborate on the inventory headwinds and the expected growth in the current quarter? A: We are operating in a dynamic environment with short-term orders. We expect substantial growth in the current quarter, potentially high single-digit, but the situation remains uncertain.

Q: How is the design ramp-up progressing, and are there any delays or accelerations? A: The design ramp-up is progressing as planned, with some dynamic developments. For example, BYD's "God's Eye" feature in China is ramping up this year, which is challenging but satisfactory.

Q: What impact could the stronger Euro have on your forecast? A: We are mostly naturally hedged. While the impact on profitability is not large, the Euro's strength affects revenues. We have kept our dollar assumption at 1.05 for now due to volatility.

Q: Is the expected sequential acceleration in demand driven by easing inventories or underlying demand? A: It's a combination of both. We see a return to more normal order volumes and patterns, although some customers still place short-term orders.

Q: Can you provide insights into your China order strength versus non-China orders? A: China is experiencing double-digit growth. However, China also has a fair share of non-compliant orders concerning lead time, making it a dynamic but successful market.

Q: Are you using local fabs in China, and how does this affect your operations? A: We have our first product in development in a local fab and are expanding our localization efforts in China. This includes selling millions of chips through our local brand entity, GY Chang.

Q: How do you avoid a gray market for your products due to price differences between Chinese and foreign-made products? A: There is no discount on pricing for Chinese-made products. The China market is price-sensitive, but customers are willing to pay for quality products.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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