X-FAB First Quarter 2023 Results

Regulatory News:

X-FAB Silicon Foundries SE (BOURSE:XFAB):

Highlights Q1 2023:

› Revenue was USD 208.1 million, within the guided USD 205-220 million, up 16% year-on-year (YoY) and up 13% quarter-on-quarter (QoQ)

› Record revenues with strong 28% year-on-year growth across X-FAB’s key end markets automotive, industrial, and medical

› EBITDA at USD 58.0 million, up 41% YoY

› EBITDA margin of 27.9%, above the guided 22-26%

› EBIT was USD 37.4 million, up 68% YoY, with an EBIT margin of 18.0%

Outlook:

› Q2 2023 revenue is expected to come in at a range of USD 205-220 million with an EBITDA margin in the range of 23-27%. The guidance is based on an average exchange rate of 1.09 USD/Euro

Revenue breakdown per quarter:

* Consumer, Communications & Computer

Business development

In the first quarter of 2023, X-FAB recorded revenues of USD 208.1 million, within the guided USD 205-220 million, up 16% year-on-year and 13% quarter-on-quarter. X-FAB’s core markets – automotive, industrial, and medical – accounted for USD 185.4 million, up 28% year-on-year, further increasing their share of total revenues to 89.1%. Each core market set a new quarterly revenue record.

Demand remained strong throughout the quarter with order intake amounting to USD 226.8 million and a book-to-bill ratio of 1.1. Backlog at the end of the first quarter came in at USD 508.3 million.

X-FAB's automotive business continued to grow strongly, reaching USD 120.9 million in the first quarter, up 35% year-on-year. The transition to climate-friendly mobility continues to drive demand for power semiconductors and supporting applications covered by X-FAB's comprehensive technology portfolio and expertise as an automotive supplier. In the first quarter, the share of automotive revenues went up to 58%, reflecting X-FAB's strong exposure to this market. The growth of X-FAB’s automotive business continues to be driven by the French site’s ongoing capacity conversion to X-FAB's automotive technologies. 89% of X-FAB France's first quarter revenues were based on X-FAB technologies.

Industrial revenue for the first quarter was USD 46.9 million, up 13% year-on-year. The electrification trend is also driving growth in X-FAB's industrial business, as the transition to renewable energy sources as well as the need to efficiently generate and store energy, requires more and more semiconductor technologies, including silicon carbide (SiC) applications and sensors.

X-FAB’s SiC revenues in the first quarter were USD 13.2 million, up 9% year-on-year. An increasing share of customers sourced their own SiC raw wafers, contributing to a lower total billing. However, this had no impact on the total value added provided by X-FAB to customers, which resulted in a higher profitability margin for the business. In the first quarter, customers provided the substrate for more than 70% of all SiC wafers produced by X-FAB while the total quantity of SiC wafers delivered increased by 56% year-on-year.

First quarter medical revenues came in at USD 17.6 million, up 28% year-on-year. Strong medical growth during this period was primarily driven by increased production volumes of a lab-on-a-chip device for DNA sequencing. Lab-on-a-chip applications are one of the key technologies driving advances in medicine, enabling reliable, fast and cost-effective testing and screening for a wide range of applications, and are expected to remain a major growth driver for X-FAB's medical business going forward.

In the first quarter, CCC (Consumer, Communication & Computer) revenues were USD 22.5 million, down 31% year-on-year. The first quarter still included a small amount of legacy CCC business produced at X-FAB France, which has now been reduced to zero. This is in line with the plan to convert the freed-up capacity at the French site to X-FAB's popular automotive technology platform. X-FAB’s CCC business has thus reached a more sustainable level and top line growth will no longer be impacted by the planned phase-out of the legacy business.

In the first quarter, prototyping revenues came in at USD 26.4 million, up 7% year-on-year and up 12% quarter-on-quarter.

Prototyping and production revenue per quarter and end market:

Operations update

Given the continued strong demand, all fabs operated at high capacity throughout the first quarter, focusing on smooth execution, productivity improvements and the implementation of ongoing capacity expansion projects. Equipment engineering teams at all sites have made good progress with the installation and qualification of new equipment, which is being delivered on a regular basis.

In the first quarter, capital expenditures came in at USD 48.9 million. With total capital expenditures expected to reach approximately USD 350 million in 2023, the first quarter capital expenditures were rather on the low side. However, X-FAB expects a significant increase in capital expenditures in the second half of the year in line with anticipated equipment deliveries, primarily related to the capacity conversion at X-FAB France, the expansion of SiC capacity at X-FAB Texas, and the building expansion at X-FAB Sarawak.

Financial update

First quarter EBITDA was USD 58.0 million with an EBITDA margin of 27.9%, above the guidance range of 22-26%. Volume growth and economies of scale positively impacted profitability. In addition, the price increases introduced in 2022 have taken effect, contributing to top-line growth and higher margins.

In the first quarter, deferred tax assets were increased, resulting in a tax benefit of USD 9.6 million. Due to the improved profitability, stable performance of the underlying entities, and positive outlook supported by the long-term agreements with customers, X-FAB is currently reviewing the valuation horizon for deferred tax assets in line with the better expected visibility of the business.

Since X-FAB’s business is naturally hedged, profitability remained unaffected by exchange rate fluctuations. At a constant USD/Euro exchange rate of 1.12 as experienced in the previous year’s quarter, the EBITDA margin would have been 0.1 percentage points higher.

Cash and cash equivalents at the end of the first quarter amounted to USD 350.3 million, down 5.2% compared to the previous quarter end. Cash flow from operating activities was USD 57.3 million.

Organizational update

Damien Macq has joined X-FAB’s executive management team as Chief Operations Officer of the X-FAB group, effective April 2023. Concurrently, Michael Woittennek has assumed the role of CEO of X-FAB Dresden, succeeding Rico Tillner, who will take on a new challenge at X-FAB Texas later this year.

Management comments

Rudi De Winter, CEO of the X-FAB Group, said: "The first quarter was marked by strong revenue growth of 28% in our core business and improved profitability that exceeded our guidance. I am very pleased to see the key elements of X-FAB's success coming to fruition: We offer a broad range of specialty technologies that are urgently needed to address the major challenges of our time, and we continue to see strong demand from our customers. With X-FAB's capacity expansion projects well underway, we are able to increase capacity at our existing sites, setting the stage for strong growth over the next three years. Last but not least, increased volumes, an improved product mix with higher value-added products and the ongoing turnaround of our French site continue to contribute to higher profitability. I am confident in X-FAB's long-term success, and we are fully focused on excellent execution in all parts of our business.”

X-FAB Quarterly Conference Call

X-FAB’s first quarter results will be discussed in a live conference call on Thursday, April 27, 2023, at 6.30 p.m. CEST. The conference call will be in English. Please register in advance of the conference using the following link: https://emportal.ink/3UR032n.

The conference call will be available for replay for ten days following the event. Please call +1-416-764-8692 and enter the following replay code: 270118#.

The second quarter 2023 results will be communicated on July 27, 2023.

About X-FAB

X-FAB is the leading analog/mixed-signal and MEMS foundry group manufacturing silicon wafers for automotive, industrial, consumer, medical and other applications. Its customers worldwide benefit from the highest quality standards, manufacturing excellence and innovative solutions by using X-FAB’s modular CMOS processes in geometries ranging from 1.0 to 0.13 µm, and its special silicon carbide and MEMS long-lifetime processes. X-FAB’s analog-digital integrated circuits (mixed-signal ICs), sensors and micro-electro-mechanical systems (MEMS) are manufactured at six production facilities in Germany, France, Malaysia and the U.S. X-FAB employs approx. 4,200 people worldwide. For more information, please visit www.xfab.com.

Forward-looking information

This press release may include forward-looking statements. Forward-looking statements are statements regarding or based upon our management’s current intentions, beliefs or expectations relating to, among other things, X-FAB’s future results of operations, financial condition, liquidity, prospects, growth, strategies or developments in the industry in which we operate. By their nature, forward-looking statements are subject to risks, uncertainties and assumptions that could cause actual results or future events to differ materially from those expressed or implied thereby. These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans and events described herein.

Forward-looking statements contained in this press release regarding trends or current activities should not be taken as a report that such trends or activities will continue in the future. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless legally required. You should not place undue reliance on any such forward-looking statements, which speak only as of the date of this press release.

The information contained in this press release is subject to change without notice. No re-report or warranty, express or implied, is made as to the fairness, accuracy, reasonableness, or completeness of the information contained herein and no reliance should be placed on it.

Condensed Consolidated Statement of Profit and Loss

Amounts in the financial tables provided in this press release are rounded to the nearest thousand except when otherwise indicated, rounding differences may occur.

Condensed Consolidated Statement of Financial Position

Condensed Consolidated Statement of Cash Flow

Condensed Consolidated Statement of Cash Flow – con’t

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