Yahoo Finance ASE Technology Holding Co., Ltd. (NYSE:ASX) Q1 2024 Earnings Call Transcript
ASE Technology Holding Co., Ltd. (NYSE:ASX) Q1 2024 Earnings Call Transcript April 26, 2024
ASE Technology Holding Co., Ltd. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Ken Hsiang: Hello. I am Ken Hsiang, the Head of Investor Relations for ASE Technology Holdings. Welcome to our First Quarter 2024 Earnings Release. Thank you for attending today. Please refer to our safe harbor notice on Page 2. [Operator Instructions] I would like to remind everyone that the presentation that follows may contain forward-looking statements. These forward-looking statements are subject to a high degree of risk, and our actual results may differ materially. For the purposes of this presentation, dollar figures are generally stated in new Taiwan dollars, unless otherwise indicated. As a Taiwan-based company, our financial information is presented in accordance with Taiwan IFRS. Results presented using Taiwan IFRS may differ materially from results using other accounting standards, including those presented by our subsidiary using Chinese GAAP.
I’m joined today by Joseph Tung, our CFO. For today’s presentation, I will first go over the financial results and give the company guidance. Joseph will then be available to take your questions during the Q&A session that follows. During the Q&A session, each caller will be limited to two questions at a time, but may return to the queue for further questions. With that, let’s get started. As per our expectations, the overall demand environment for our services during the first quarter fell on a sequential quarterly basis, primarily due to seasonality of electronics products. And as was the case at the end of 2023, higher and leading-edge services generally fared better than legacy services. For our ATM business, revenues were on the higher end of our expectations.
During the quarter, key equipment utilization rates were still relatively low, averaging out around 60%. Certain devices initiated a short but unsustained inventory refresh, easing off initially more optimistic outlooks. For our EMS business in the first quarter, demand for our services was slightly ahead of our initial expectations as a result of improving customer inventory levels. Please turn to Page 3, where you will find our first quarter consolidated results. For the first quarter, we recorded fully diluted EPS of $1.28 and basic EPS of $1.32. Consolidated net revenues declined 17% sequentially but increased 1% year-over-year. We had a gross profit of $20.9 billion with a gross margin of 15.7%. Our gross margin declined by 0.3 percentage points sequentially but increased by 0.9 percentage points year-over-year.
The sequential decline in margin is principally due to lower revenues due to seasonality of both our ATM and EMS businesses. The annual improvement in gross margin is principally the result of foreign exchange. Our operating expenses declined by $0.6 billion sequentially, but increased by $1.7 billion annually. The sequential decrease in operating expenses, are primarily due to lower compensation expenses. The year-over-year increase in operating expenses is primarily attributable to R&D staff up, overseas expansion start-up costs and higher incentive stock option expenses. Our operating expense percentage increased 1.3 percentage points sequentially and 1.1 percentage points year-over-year to 10%. The sequential operating expense percentage increase was primarily related to lower operating leverage during our seasonally down quarter.
The annual increase was related to higher R&D staff up, overseas expansion and higher incentive stock option and bonus expenses. Operating profit was $7.5 billion, down $4.3 billion sequentially and down $0.2 billion year-over-year. Operating margin declined 1.7 percentage points sequentially and declined 0.2 percentage points year-over-year. During the quarter, we had a net non-operating gain of $0.4 billion. Our non-operating gain for the quarter primarily consists of net foreign exchange hedging activities, profits from associates and other non-operating income, offset in part by net interest expense of $1.1 billion. Tax expense for the quarter was $1.9 billion. Our effective tax rate for the quarter was 24%. Income tax expense was higher than anticipated, mainly from a tax basis gain realized due to the U.S. dollar appreciation against the Korean won.
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