ASE Technology Holding Co., Ltd. (NYSE:ASX) Q3 2023 Earnings Call Transcript
ASE Technology Holding Co., Ltd. (NYSE:ASX) Q3 2023 Earnings Call Transcript October 26, 2023
Ken Hsiang: Hello, I am Ken Hsiang, the Head of Investor Relations for ASE Technology Holdings. Welcome to our Third Quarter 2023 Earnings Release. Thank you for attending our conference call today. Please refer to our safe harbor notice on Page 2. All participants consent to having their voices and questions broadcast via participation in this event. If participants do not consent, please disconnect at this time. 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 financials are 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 am joined today by Joseph Tung, our CFO. For today's session, I will be giving the prepared remarks. Joseph will then be available to take your questions during the Q&A session that follows. The overall environment for our businesses during the third quarter was relatively soft from an historical perspective. Devices related to new communications products introduced during the quarter generated a small pickup in demand, but, by and large, the post COVID inventory digestion and sub-optimal demand environment continued.
An automated manufacturing production line of semiconductor components on an assembly line. Editorial photo for a financial news article. 8k. --ar 16:9
For the third quarter, both our ATM and EMS businesses saw mild seasonal upticks. Our ATM businesses results were on the higher side of our expectations. We believe this was primarily attributable to higher than expected unplanned orders and the soft loading environment. Our customers have become more cautious when booking regular production forecasts on the expectation that there would be more capacity available when needed. We do, to a certain extent, try to apply an unplanned order rate to our outlooks, but for the third quarter unplanned orders were a bit higher than expected. These unplanned orders were sporadic and dispread and not isolated to any particular product type or market segment. For ATM factories, during the quarter, key equipment utilization rates were still relatively low averaging out in the mid 60s.
Our EMS businesses pickup was slightly below our initial expectation. We believe this was due to some loading being pushed out into the fourth quarter. With that, please turn to page three, where you will find our third quarter consolidated results. For the third quarter, we recorded fully diluted EPS of $2 and basic EPS of $2.04. Consolidated net revenues increased 13% sequentially and declined 18% year-over-year. We had a gross profit of 24.9 billion with a gross margin of 16.2%. Our gross margin improved by 0.2 percentage points sequentially and declined by 3.9 percentage points year-over-year. The sequential improvement of margin is principally due to higher ATM business loading in the current quarter, offset in part by higher EMS revenue mix.
The annual decline in gross margin is principally the result of lower loading during the current downturn. Our operating expenses increased by TWD1.2 billion sequentially and declined by 0.8 billion annually. The sequential increase in operating expenses are primarily due to higher profit sharing expenses, and miscellaneous increases such as D&A in factory supplies and others. The year-over-year decline was primarily attributable to lower bonus and profit sharing expenses across the company. Our operating expense percentage declined 0.2 percentage points sequentially and increased 1.2 percentage points year-over-year to 8.8%. The sequential operating expense percentage decrease was primarily related to lower salary and bonus costs relative to revenues generated.
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