Aixtron purpose of this thread

This the fun time of owning Aixtron, a day before the revelation.  Investors will pay strong attention to the Q1 orders and Q2's sales guidance.  

I have posted before that the total H1 order inputs need to be about 320m to meet the midpoint 2024 sales guidance of 675m.  If Q1 orders are weak, then Q2 orders should be strong.

The average estimates on Q2 sales is 150m with the low being 137m and the high 165m, comparing to 2023 Q2 's revenue of 173m.  Such bearing view of a 13% drop is reflected by the poor stock performance.

Fundamentally I believe the company is doing fine.  Strong orders  and high work-in-process inventories at 2023 yearend both point to a very good H1. Based on those numbers, I believe Aixtron's 2024 Q2 sales guidance will be much higher than 2023's 173m.

Fingers crossed.

 

https://www.aixtron.com/de/investoren/...rfolg%2520bei%2520SiC_n12568

Weiterer Top 5 SiC Kundengewinn
Starker McroLED Auftragseingang
Exporte nach China

Prognose bestätigt.

Schaun mer mal was der Markt draus macht.

Gruß
baggo-mh

 

My quick take & comparison to expectations:

Qualitative comments ? very strong (e.g. SiC and microLED)
Q1 sales ? in line/slightly above
Q1 gross profit ? slightly below
Q1 EBIT ? strongly below (9.9m vs 14.8m cons.)
Order entry ? in line to slightly below (120m reported vs e.g. Citi at 117m and Berenberg at 130m)
Free cash flow ? no cons., the (33)m do not look that positive IMHO
Confirmation of annual guidance ? as expected
Q2 sales guidance - ? (120-140m compares to ?)

In ?normal? times, I would call this a lacklustre/uninspiring set of results. Considering the recent share price performance this year from a peak ~38 Euro to ~23 Euro, I am not that sceptical in terms of today?s share price reaction. Keep my fingers crossed.

Appreciate any assessment from you guys!  

Q2 sales guidance of 120-140m (mid point would bring H1-2024 exactly in line with H1-2023) is quite markedly worse than your "I believe Aixtron's 2024 Q2 sales guidance will be much higher than 2023's 173m." above. Any educated guess as to why and what it means for your overall/2024 expectation? This also means that Q2 order entry needs to come in at above EUR 200m, right?

Have to admit that I just reduced my position, i.e. some money/risk management. CF not inspiring, order intake only OKish, flat H1 revenue guidance and EBIT sharply below expectation (needless to say: in the most unimportant quarter). Not sure how this should be supportive for the share price, except for the qualitative comments from Aixtron and the effect I mentioned above (i.e. share prive level at 23 Euro).  

I agree with a number of points from your post @DLG and personally I was braced for a -10% day.. a classic Aixtron. Lots hope we can dodge this this time after the painful YTD performance, but the jury is still out.

The call at 3 pm will be key

A couple of additions though:
FCF was actually quite solid! -33m includes -26m in capex, let?s assume 20m of that is for the large capex project. PLUS another WC buildup of -21m, part of which is inventory increasing (!).
So I would be happy to adjust for those 41m which takes the FCF to positive 8m after 3m in Q1-23.

Given that we know that the capex program ends in 2024 and that an inventory buildup should drive revenue growth, I would not emphasize the FCF number.

I would be more interested in a response to why inventory increases again despite a weakish Q2 revenue Guide.. why would I increase inventory today for Q4?!

Regards,
Fel
 

Thanks for the clarification and additional flavour on the FCF. Even taking your pro-forma underlying adjusted FCF of 8m/+5m y-o-y, this would not be particularly impressive IMHO... LTM, cash position is down by ~180m.

Anyway, assume you have spent more on time this, while I haven't even read the Q-Report or Q-PPTX. Agree that some parts of the 3pm call could be crucial/exciting.  

37% only.

A reason could be that the service reevnue in Q1 was relatively high with 21%
Guidance for the full year stands at addtional 90 million or 90 + 25 (118 *21%) = 115 Million

Depending on the Rev. range applied that translates to between 18,2% and 15,9% top end.

"Technical  progress      with   G10-SiC§confirmed by multiple customers ? upgrades for installed base throughout 2024"

from the IR Presentation  https://www.aixtron.com/de/investoren/publikationen#IR%2520Pr%C3%A4sentationen

My assumption is that these upgrades ar done with low margin built in.

Best regards
 baggo-mh

 

I just took a quick look at the earnings. Obviously my Q2 sales projection is way off.  

H1 sales: 118m+ 130m= 248m. H2 sales : 675m-248m=427m. That's >200m sales per Q if Aixtron meets its guidance and we just divide H2 by 2.  My +50m sales overestimation would go to Q3.  

I was assuming that Aixtron would clear its high inventories in Q4'23, but Aixtron went the other way.  The inventories instead are up another 40m in Q1'24 from Q4'23.  

With the Q1'24 inventories of 436m, they will turn into >1B future sales (436/0.4).  Aixtron is taking the risk away from its customers.  I don't understand why the management would do that, unless they are extremely certain about the future and trusting its customers.


 

I personally liked the call  as it confirmed a few issues that have been discussed before. It clearly demonstrates that the rumors spread are not true

LED and MicroLED
AMS/Apple rumor does not mean the technology is dead
Order intake in Q2 lower than Q1 but stronger again in Q3 and Q4
Transfer still the major technological issue but mass market expected from 2026 onwards
Strong order intake has not shifted the revenue contribution from the Feb. guidance

GaN
Silicon power supply replacement up to 650 Volts, but also for
- 100 or 200 Volt applications
- AI Power supply for data centers but also for the chips internally
- large penetration and adoption

 

SiC
Rumor: 200mm batch reactor not suitable or competitive for transformation customers:
Of multi sourcing customer ? Aixtron systems are running in case of overcapacity
?Felix?s answer ? money talks?
- 2 customers collecting SiC orders at the moment AMS and Aixtron. Therefore both are reporting of gaining market share. Early adopters are now on 8? already. By 2026 the whole market will be on 8? as it offers 69% more wafer space and the ensuing back end costs are mor or less the identical to 6?
- incumbent 6? supplier not competitive at 8?
- New Top 5 customer win (contract signed) majority of the orders not yet in the order backlog yet due to missing export license. To me an indication that the customer is Infineon, as they build out 200mm in Villach (Austria no export license needed) and Kulim Malaysia.
- reported Wolfspeed orders to be shipped to Durham and Siler City in 2024 and 2025
- Vishay ramp plan is confidential
- demand is normalizing (?honeymoon phase is over?), but with the high inventory levels Aixtron is well or better equipped to catch the momentum. Equipment to be used typically 8-10 years; in Aixtron?s case closer to 15 years.
- no dilution of the optimistic 2025 outlook given in February
- Chinese customers are buying 8? systems from Aixtron Time lag of 6 to 9 months from the rest of the world. Paying standard prices ? ?of course?
- ?The best defense against copying from the Chinese (has not happened yet) is innovation?, suggesting to me the next generation of tools is already being worked on - G20 ??
- SiC demand ramp will be the deciding factor on whether to upper or lower end of the 2024 guidance will be reached.

order intake and revenue recognition
- The high inventory is in anticipation of a large shipments in H2 (as late as end Q3) to still be turned into revenue in Q4.
- Wait and see mentality of the Aixtron clients will result with lower end of the 2024 revenue guidance.
- Aixtron is not reliant on 1 or 2 big customers, has high segmentation and multiple customers. Therefore pot. pushouts are not really a problem for reaching the 2024 guidance.

Best regards
baggo-mh

 

is now online.
https://seekingalpha.com/article/4686317-aixtron-se-aixxf-q1-2024-earnings-call-transcript?mailingid=35161586&messageid=2800&serial=35161586.160&utm_campaign=rta-stock-article&utm_medium=email&utm_source=seeking_alpha&utm_term=35161586.160

For thiose who want to read it.

Greetings
baggo-mh

 

This is what I wrote in # 1561 on 10/23/2023 before the Q3'23 CC

"In this chart I have included the advanced payments/Backlog. The ratio stays pretty constantly in 0.3-0.4, in contrast to the inventories/backlog  which ramps noticeably in 2022Q4.  I can speculate that Aixtron decided to build inventories without getting the firm orders which would come with advanced payments. Is it because Aixtron anticipated very large orders coming in and wanted to build inventories beforehand? Export licenses cannot explain this because they were largely resolved and shipped in Q2/2023.  If Aixtron is building large inventories without the advanced payments, we could expect a very robust Q4 and into 2024.  Perhaps Aixtron could clarify in the 10/26 CC."

This is the updated chart after Q1'24.  Six month later, the inventories have been getting worse, accelerating against the order backlog and customer deposits (Advanced payments).
The inventories/backlog ratio has moved to 100% higher than its target of 0.5-0.6 provided by Dr. Danninger in the Q1'23 CC.

I hope Aixtron starts turning its huge inventories very soon.  Since the Q2'24 revenue would only be 130m (midpoint), a meaningful inventories drop could only occur in H2.  That depends on its customers confirming order deliveries by Q3'24.  

today I researched this and there are some nice references. Most notably from Navitas:
https://navitassemi.com/navitas-gan-and-sic-technologies-to-enable-next-gen-ai-power-delivery/
oder
https://youtu.be/vH9ivQJxnrQ

Wolfspeed & Infineon haben auch Energiesparmöglichkeiten per SiC chips für Datencenter in Angebot, 

https://omdia.tech.informa.com/blogs/2024/apr/new-semiconductor-technologies-could-help-power-ai

Gruß
baggo-mh

 

Every quarter Aixtron adds new inventories.  That amount is the difference between the current inventories and the last quarter's, and adding back the inventories expensed this quarter.  The inventories expensed in 2024 should be very close to 40% of the sales according to Aixtron's 2023's and 2022's cost of goods sold (COGS) margin. I just call it the strategic inventory. This chart shows that Aixtron's quarterly strategic inventory is coming down since Q3'23.  This trend should continue based on comments from the CFO and result in positive FCF in 2024.