Aixtron Aktiengesellschaft (AIXG)

Q1 2012 Earnings Call

April 26, 2012 9:00 am ET


Guido Pickert – Director, Investor Relations

Paul Hyland – President and Chief Executive Officer

Wolfgang Breme – Executive Vice President and Chief Financial Officer


Simon Schafer – Goldman Sachs

Uwe Schupp – Deutsche Bank

Sandeep Deshpande – JPMorgan

Olga Levinzon – Barclays Capital

David Mulholland – UBS

Bill Arnold – B. Riley & Company

Carter Shoop – KeyBanc Capital Markets

Janardan Menon – Liberum Capital

Francois Meunier – Morgan Stanley

Timothy Arcuri – Citigroup

Aaron Chew – Maxim Group

Andrew Abrams - Avian Securities

Jed Dorsheimer – Canaccord Adams

Edwin Mok – Needham & Company



Good afternoon, ladies and gentlemen, and welcome to AIXTRON’s First Quarter 2012 Results Conference Call.

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Today's call is being recorded. And I would now like to hand over to Mr. Guido Pickert, Director of Investor Relations at AIXTRON for opening remarks and introductions.

Guido Pickert

Good afternoon and good morning everyone, and thank you for attending today’s call. With us today are Paul Hyland,

President and Chief Executive Officer of AIXTRON, as well as Wolfgang Breme, Executive Vice President and Chief Financial Officer of AIXTRON.

As the operator indicated, this call is being recorded by AIXTRON and is considered copyright material. As such, it cannot be recorded or rebroadcast without express permission. Your participation in this call implies your consent to this recording.

As with previous results conference calls, I trust that all participants have our results presentation slides, page two of which contains the usual Safe Harbor statements. I will therefore not read it out loud, but would like to point out to you that it applies throughout the whole conference call.

You may also wish to have a look at our latest IR Presentation, which includes, as you probably know, additional information on markets and technologies.

This call is not being immediately presented via webcast or any other medium; however we will place an audio file of the recording or a transcript on our website at some point after the call.

Let me now hand you over to Paul Hyland, AIXTRON’s President and CEO, to start the actual presentation. Paul?

Paul Hyland

Thank you, Guido. Ladies and gentlemen, good afternoon to those of you calling in from

Europe, good morning to those of you joining us from the U.S., and good evening to investors calling in from Asia. I’d like to welcome you, on behalf of AIXTRON’s Executive Board, to the presentation of our Q1, 2012 results.

I’m sure that many of you are familiar with our format by now. I’m going to start the presentation by giving you an overview of the key developments in the markets and will pick out some specific points from our Q1 financials and operational performance.

Wolfgang will then give you a more detailed view of our financial and business performance during the first quarter and will expand on particular points of interest. I will then close the presentation with a summary of the broader business issues we are addressing in this challenging period and how we see our business prospects going forward.

Let me say upfront that those of you who listened into our 2011 full year conference call eight weeks ago, or who have met Wolfgang or I during the subsequent Results Roadshow, will not find much in the way of surprises in these results. I believe we’ve made it very clear over the past six months that 2012 would be a challenging year.

Certainly the first quarter has been every bit as tough as we expected, and predicted that it would be. However, our visibility has not improved to the point where we can yet predict a full year revenue figure for 2012. Nevertheless, we are still targeting to remain EBIT profitable in 2012 under the current circumstances.

Before I make my comments on our Q1 financials, let me just dwell for a moment on the reasons behind my sustained confidence in our mid to long-term prospects by setting the scene on where we see ourselves, as a company, by giving you three points to characterize our current status.

First, we have the foundations. As I’ve already said, times are tough, but we remain confident that we’ve built a strong and resilient foundation to the business, designed to protect the company in the difficult climate that the whole industry is currently operating in.

Secondly, we have the products. We have significantly enhanced our existing product portfolio over the last 18 months, so we are confident of being highly competitive in the event of a sudden upturn of demand in the market.

And thirdly, we have the roadmap. Despite the very volatile current economic environment, we have more than just sustained our MOCVD R&D efforts. We have accelerated our investments into both next generation MOCVD products and other, beyond LED technologies, that we believe are necessary to support our long term ambitions.

Let me now turn to slide three of our presentation, where I’d like to pick out some of the key financial highlights of the first quarter. On slide three, you can see a year on year comparison between the first quarter of this year and the first quarter of 2011. Reflecting the stark 12 month contrast in market conditions between these two quarters, revenues decreased by 80% from €205 million to €42 million at the end of the first quarter 2012.

Our gross profit decreased correspondingly by 90% year-on-year, to €10 million in Q1, resulting in a gross margin of 25% compared to 51% at the same time last year. Our EBIT came in at minus €18 million, down from €75 million compared to the same period of the previous year. This equates to a negative EBIT margin for the first quarter of 44%, a significant change from the 36% we recorded last year.

Accordingly, our net result was minus €12 million, and earnings per share fell to minus €0.12 in Q1, 2011 after a gain of €0.52 in the first quarter 2011. As we had predicted during our 2011 full year discussions, Q1, 2012 equipment order intake remained low at €31 million, only 14% of the €210 million we recorded in Q1, 2011.

The dramatic comparative reduction in demand was particularly evident in Asia, where historically, we have typically generated about 90% of our revenues. The most severe individual market slowdown in demand was in China, which had for the first time in our history, become the largest individual market for our systems in 2011 and consequently, where the abruptness of the slowdown in orders was most profound.

The equipment order backlog stands at €136 million, all of which we believe will be shipped during 2012. Free cash flow in Q1 2012 was negative at minus €5.6 million compared to a positive free cash flow of €12 million in Q1 2011. Wolfgang will elaborate on the effects which influenced this development later.

Cash and cash equivalents fell by 2% to €289 million as of March 31, 2012, compared to €295 million as of December 31, 2011. Let’s now move to slide four and look at the sequential quarterly movements.

Comparing the first quarter 2012 with the previous quarter; Q4 2011, the following picture emerges: Revenues were down 70% sequentially to €42 million, after a Q4 2011 performance of €140 million, which was strongly influenced by a few, but large shipments executed before the end of last year.

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