X Fab Silicon Foundries EV (XFAB) announced its Q4 2024 earnings, revealing a revenue of $89 million, slightly below market expectations. The company reported a net loss of $7.3 million, largely due to a non-cash deferred tax asset adjustment. Despite these figures, the stock saw a modest increase of 0.7% in after-hours trading, reflecting investor optimism about future growth and strategic initiatives. According to InvestingPro analysis, XFAB currently appears undervalued, trading at a P/E ratio of 5.78x, significantly below industry averages.
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Key Takeaways
- Q4 2024 revenue reached $89 million, with a net loss of $7.3 million.
- Stock price rose by 0.7% in after-hours trading.
- Strong performance in 180nm CMOS technology and new silicon carbide platform.
- CapEx for 2024 was below target, with plans to reduce further in 2025.
- Revenue guidance for Q1 2025 set between $195-$205 million.
Company Performance
XFAB’s Q4 2024 performance demonstrated resilience in a challenging market. The company reported $89 million in revenue for the quarter and $197 million for the full year. Despite a net loss in Q4, driven by tax adjustments, XFAB maintained robust EBITDA margins of 21.1% for the quarter and 23.1% for the year, contributing to a total EBITDA of $206.24 million over the last twelve months. The company’s focus on specialty technologies, such as 180nm CMOS and silicon carbide, has positioned it well amidst market fluctuations, though InvestingPro data indicates analysts anticipate a sales decline in the current year.
Financial Highlights
- Q4 2024 Revenue: $89 million
- Full Year 2024 Revenue: $197 million
- Q4 EBITDA: $40 million (21.1% margin)
- Full Year 2024 EBITDA: $189 million (23.1% margin)
- Net Loss in Q4: $7.3 million
- Cash and Cash Equivalents: $215.8 million (32% decrease from previous quarter)
Market Reaction
Following the earnings announcement, XFAB’s stock price increased by 0.7%, closing at $4.63. This movement reflects a positive investor sentiment, likely influenced by the company’s strategic focus on innovation and future growth prospects. With a beta of 1.9, XFAB shows higher volatility than the broader market. The stock remains within its 52-week range, with a high of $9.37 and a low of $4.30, currently trading at a price-to-book ratio of 0.65.
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Outlook & Guidance
Looking ahead, XFAB has set a revenue guidance of $195-$205 million for Q1 2025, with an EBITDA margin of 22-25%. For the full year 2025, the company expects revenue between $820-$870 million and an EBITDA margin of 24-27%. These projections indicate a cautious optimism, anticipating single-digit growth in 2025 and significant growth in 2026.
Executive Commentary
CEO Rudy de Winter emphasized the company’s strategic focus, stating, "The long term fundamentals for XFAB remain intact, serving applications related to the electrification of everything." He also noted that "2025 will be a transition year due to continued destocking along the automotive supply chain." CFO Alba Morganti highlighted financial discipline, stating, "We will go back to a more normalized level of CapEx."
Risks and Challenges
- Semiconductor inventory challenges could impact supply chain efficiency.
- Market saturation in key segments may limit growth potential.
- Macroeconomic pressures, such as inflation, could affect consumer demand.
- Dependence on the automotive market, which is experiencing inventory corrections.
- Currency fluctuations could impact international revenue.
Q&A
During the earnings call, analysts raised concerns about potential semiconductor inventory challenges and the company’s strategy for debt reduction. Executives also addressed growth prospects in the China automotive market, which grew by 20% in 2024, highlighting its potential as a key growth driver.
Full transcript - X Fab Silicon Foundries EV (XFAB) Q4 2024:
George, Conference Coordinator: Hello, and welcome to the XFAB Full Year and Fourth Quarter twenty twenty four Results Conference Call. My name is George, and I’ll be your coordinator for today’s event. Please note this conference is being recorded, and for the duration of the call, you guys will be in a listen only mode. However, you will have the opportunity to ask questions towards the end of the presentation. I’d now like to hand the call over to your host, Mr.
Rudy de Winter, CEO, to begin today’s conference. Please go ahead, sir.
Rudy de Winter, CEO, XFAB: Thank you. We have today and also in the conference call Alba Morganti, CFO. Good evening, everyone. So let me first walk over the highlights of the fourth quarter twenty twenty four. The revenue was $89,000,000 excluding the impact of the IFRS.
The revenue was $197,000,000 within the guidance range and the EBITDA was $40,000,000 excluding IFRS 15 impact, the EBITDA was $22,800,000 also in the guidance. And the EBIT was $10,600,000 or 6% of sales. With respect to the $25,000,000 are planning for growth, and Alba will go more in detail for that later. Looking at the business side for the fourth quarter comparing versus a year ago, the CMOS, and particularly the 180 nanometer did well due to good demand and the capacity expansions of 180 nanometer, in particularly in our factory in France, contributing to the growth. The 180 nanometer will be the growth driver also for 2025 due to our further expansions and the continued good demand on the further PCB on SOI.
The CMOS three fifty nanometer was weak due to automotive inventory corrections, overall about 75% loading as we speak now. The CMOS 150 millimeter, so the six inches wafers, they are doing well with good feasibility for the next two years due to the last time buy orders that all came in. On the silicon carbide, we reached the low. Better booking came in for production in the fourth quarter, so this quarter and the next quarters will look better. A lot of prototyping was recorded with new MAF sets in 2024.
The customers are preparing with new devices with better performance and new products are focusing more on the automotive end market. So we expect the gradual increase of and and shift from mostly industrial to also a mix industrial automotive. The Microsystems was mixed. New applications are ramping up, such as the smallest contactless medical temperature sensor in the world for health applications in mobile devices, while the automotive sensors are also suffering from inventory reductions. Looking at the end markets.
The automotive supply chain is still reducing inventories. We noticed this in particularly in the March nanometer, which was the highest volume in the past and not so much constrained. So this portion of our business will is suffering right now and we expect nanometer is growing in particularly due to the BCD on SOI, where we’re adding most of the capacity. This is where we have most of the new products in the pipeline as well. This is driving the growth.
However, short term, not yet compensating the loss on 300 of revenue on the three fifty nanometer. Maybe a regional remark. While our Automotive business comparing 23% to 25% was more or less flat for the full year, our China Automotive (NASDAQ:CAAS) business grew with 20%, and we expect this to further accelerate in 2025. We see a gradual recovery of the industrial business, particularly the CMOS demand. The SiC portion in the industrial is lagging behind the CMOS recovery.
We will see this gradually increasing, I mean, the silicon carbide in the first quarter. And this is based on our visibility on the bookings and the wafer starts we have done. The medical recovery is mainly driven by personal medical devices such as hearing aid, pacemakers, glucose sensor devices and then also the larger medical equipments such as echography and devices for echography and x-ray. On the CCC (WA:CCCP), it’s as expected and nothing particular to report. We expect this also to stay flat going forward.
And this, I would like to pass to Arba for the finance section.
Alba Morganti, CFO, XFAB: Thanks, Rudi. Good evening, ladies and gentlemen. And now let’s go to the financial update. In the fourth quarter, our EBITDA was of about $40,000,000 with an EBITDA margin of 21.1%. If we exclude the impact from revenue recognized over time, the EBITDA margin for the fourth quarter would have been of 22.8%.
In the full year of 2024, Iqstaab recorded an EBITDA of almost $189,000,000 with an EBITDA margin of 23.1%. If we exclude the IFRS 15 impact on the fourth quarter, the revenue in the amount of EUR 8,000,000, the full year EBITDA margin would have been of 23.5%, which was in the guided amount. While comparing year on year numbers, we need to keep in mind that Q4 twenty twenty three was a record high quarter and really hard comparable as it was our best quarter ever in the whole history of XFAB. Once again, profitability is not affected by exchange rate fluctuations as XFAB’s business is naturally hedged, which is crucial in this context of trade war. At a constant U.
S. Dollar euro exchange rate of 1.08% as experienced in the previous year’s quarter, the EBITDA margin would have been 0.1 percentage points lower. In this fourth quarter, we had a net loss of EUR 7,300,000.0, mainly due to a noncash deferred tax asset adjustment of $16,500,000 Cash and cash equivalents at the end of the 3 the fourth quarter amounted to US215.8 million dollars which were down 32% against the previous quarter as expected after the payment of several CapEx. Now that we are almost at the end of our major CapEx expansion plan, our CapEx will decrease significantly. As you could see, our CapEx in the fourth quarter were of $133,000,000 and only $510,000,000 for the full year, which was far below the announced $550,000,000 means that we are $40,000,000 better than anticipated.
Despite this reduction, we will still remain within the $250,000,000 CapEx announced for the full year 2025 and won’t exceed this amount. The plan is to return to a normalized CapEx ratio of 10% to 15% of total revenue from second half of twenty twenty five onwards. This also means that we will go back to positive cash flow and should get to a sustainable balance between debt reduction, capital return and further growth. And to conclude this financial section, I would like to share our guidance for the first quarter of twenty twenty five and give you an update for the full year’s perspective. Q1 twenty twenty five revenue is expected to come in within a range of $195,000,000 to $2.00 $5,000,000 with an EBITDA margin in the range of 22% to 25%.
The guidance is based on an average exchange rate of USD 104 to euro and is not taking into account the impact of IFRS 15. For the full year 2025, revenue is expected to come in within a range of $820,000,000 to $870,000,000 with an EBITDA margin in the range of 24% to 27%. And now I would like to give back the word to Rudi.
Rudy de Winter, CEO, XFAB: Thank you. Before going to the Q and A, so I confirm, so the long term fundamentals for Ixfab, they remain intact serving serving applications related to electrification of everything, and this will drive the long term growth. I’m very pleased with the high level of interest in our specialty technologies. Our next generation silicon carbide platform announced in December is gaining strong market interest. Several customers started porting their products to the newer platform.
Also, IXAP’s Microsystems and system integration expertise is also getting a lot of customer interest as well as our gallium nitride offering from Dresen. While 2025 will be a transition year due to continued destocking along the automotive supply chain, it will also mark the completion of our capacity expansions, allowing 80 nanometer, and we are planning for a single digit growth for 2025. And with the completion of the expansion, it means that we will return to positive cash flow in the second half of twenty twenty five. With this, I would like to conclude the introduction. And George, I’m open for questions now.
George, Conference Coordinator: Thank you very much, Mr. De Winter. Hey, we don’t we do have our very first question just came in right now and it is coming from Guy Sips of KBC Securities. Please go ahead. Your line is open.
Guy Sips, Analyst, KBC Securities: Yes. Thank you. Thank you for taking my question. I have a question on the industrial and medical markets, where you already saw see signs of recovery. Can you elaborate a little bit on that?
What kinds of recover of signs are that? And then the second question is on the automotive supply chain. Yes, it’s of course very difficult to estimate, but are we is the trough behind us or what kind what is your expectation on that? Thank you.
Rudy de Winter, CEO, XFAB: Yes. So thank you, Guy. Let me start first with the industrial. So on the industrial, this market, we saw the world, the first market where we saw weakness and it’s now almost more than a year ago. And so there, we see first signs from increased orders from customers that so they gradually the inventories are depleted.
And so that’s looking positive. But that’s if you look at the whole of our industrial segment, so the we used to have a lot of silicon carbide in there plus the CMOS. I’m mostly referring to the CMOS now where that is strengthening. The silicon carbide that we do see new orders coming in and bookings book to bill above one for the silicon carbide in the fourth quarter. So we expect going forward gradually from Q1 to Q2 and step by step, we will see also improvements in the silicon carbide.
On the medical, it’s a bit the same pattern. So the in particularly medical equipments, so the larger equipments like exography, x-ray machines and so forth, because of the COVID that drove also reductions in investments in these areas. And then the high interest rates, they resulted in delayed investments in those type of equipments very these kind of investments for a while and this is now recovering. On the automotive in general, so what’s automotive is the biggest portion of our business and so this has also the biggest impact overall. Where do we stand?
So this is mixed. So we have a good pipeline of new products also with Chinese major EV brands that is ramping up and that is the positive side. On the on some other products on the 180 nanometer where we are still in allocation because we gradually build more and more capacity, we’re able to grow there. But on the three fifty nanometer where also a lot of automotive is that is not fully utilized. So we are there at like 75% utilization.
And there, we expect that still to take two to three quarters before business will come back. So I see this could last well within 2025 for a good recovery there. But because we the 180 nanometer is doing well, that supports the gradual growth that we will see throughout 2025.
Guy Sips, Analyst, KBC Securities: Thank you. And if you allow me for one more one additional question on your statement that once you’re generating positive free cash flow, you aim to achieve a sustainable balance between debt reduction, capital return and further growth rather critical. Can you elaborate a little bit on that? And how do you see that related to the LTAs for instance?
Rudy de Winter, CEO, XFAB: Well, to the with respect to the we have debt that we need to pay back and we need to also have payback the repayments of the LTAs that will start end of this year. But while we expect to have significant higher EBITDA than the CapEx going forward as of the second half of this year. And so first of first, we will use that to pay back the loans. And then in 2026, there is maybe room for also returns from investors. But this is yes, we’ll have to take decisions on that later this year or actually next year.
George, Conference Coordinator: Mr. Sips, is that your question, sir? Oh, very sorry.
Guy Sips, Analyst, KBC Securities: Yes. And is it in that order, meaning first debt reduction, of course, and then capital return and then further growth? Or is that not yet decided that perhaps should be first again investing in further growth before thinking about capital returns? Or how do you look at this?
Rudy de Winter, CEO, XFAB: No, I think we have invested a lot into in capacity increase. Remember, we have the SEK 1,000,000,000 investment that we did over the past three years puts a base capacity in place that should allow us to come roughly to EUR 1,500,000,000.0 revenue. So we as we are not yet there, we can wait with further capacity expansions and think about return before investing in more growth.
Guy Sips, Analyst, KBC Securities: Okay. Thank you.
George, Conference Coordinator: Thank you, Mr. Sipps. We have another question came in just now from Troy and Reid of Berenberg. Please go ahead. Your line is open.
Troy Reid, Analyst, Berenberg: Hi, yes, yes. It’s Treon here from Berenberg. Just two questions. Going back to that comment on capital returns, first of all, I just wondered if you could give an idea of a leverage level that you’d be happy with before you would consider capital returns. Is it a case of paying back all of the debt to get back to a net cash?
Or is there a leverage you would accept? And then the second question was just on the ’25 outlook and what that means in terms of the bridge to the ’26 guidance that you gave at the end of last year? Because it looks like quite significant growth in ’26 compared to where ’25 might end up. Just wondering if you have any comments on that.
Alba Morganti, CFO, XFAB: Good evening, Trion. So for your first question, definitely, we want to be back to a more leveraged and balanced level between our debt and our cash. Means that for the time being, we will still continue to deteriorate our or increase, if you want, our net debt. But then as the CapEx plan, as Rudy mentioned, is now going to the end, and we will anyway go back to normalized levels. But with a much higher capacity in place, this will mean that the operational cash coming out of the operations will increase significantly.
And that would help to reimburse all the LTA prepayments and to go ahead reducing our overall level of debt. So going back to a more normalized level we had before we started all these major CapEx investments. So that being said, don’t forget that our EBITDA margin should go up as well and that we intend not to exceed the EBITDA level in terms exceed the EBITDA level in terms of CapEx. So what we earn what we will make as EBITDA will serve to pay to invest, and we won’t exceed that from this year second half of this year onwards. And then I forgot your second question.
Rudy de Winter, CEO, XFAB: Yes. The second question was on the bridge to 2026. So yes, indeed, that will be an acceleration of growth, but we see this coming first because we continue to see growth on our pipeline, new products, the 180 nanometer that is growing and so forth. And then the fact that the inventories are depleted this year and that should bring also additional business back also next year.
Troy Reid, Analyst, Berenberg: Great. Thank you.
George, Conference Coordinator: Thanks, Sreed. Our next question is coming from Robert Sanders of Deutsche Bank (ETR:DBKGn). Please go ahead.
Robert Sanders, Analyst, Deutsche Bank: Yes. Hi, Rudy and team. I noticed actually one of the Tier 1s today, Aptiv (NYSE:APTV), mentioned that they feared a auto chip shortage ahead of us and that they were now accumulating strategic inventory of semiconductors because of possible shortages in late twenty twenty five and early twenty twenty six. I was just wondering, I think the context here is a sort of repeat of 2021 when the consumer demand picked up and then suddenly there was all these shortages. Is that something that you’ve heard about?
Obviously, these OEMs and Tier 1s have built up a lot of supply chain capability to avoid a repeat of 2021. I was just wondering if you’d seen any sign of the stuff that Aptiv is doing as a sort of beginning of a trend? Thanks.
Rudy de Winter, CEO, XFAB: That’s a good question. So I think very much we can compare what’s happening in the automotive today with 2019, ’20 ’20. I mean, particularly 2019, ’20 ’20 was then the COVID, but the 2020, though the recovery was already happening before the COVID stroke. Whether there is a risk again of shortage, It’s hard to say what we see now if we look at forecasts that coming from customers, then yes, our capacity is going forward will be well utilized whether however, the bookings that we see today are still below that level. But if yes, if suddenly it turns around, yes, then things can go back quickly to very high utilization rates.
Therefore, my recommendation with the customers is, yes, be very careful. Don’t over swing with inventory reductions because, it’s yes, you can reduce orders quickly, Yes. You can reduce orders quickly, but if you increase above 100%, it’s not possible.
Robert Sanders, Analyst, Deutsche Bank: Yes. I mean, given that Alexis said that some customers have reduced to one month of inventory on hand, but some are still at three to four. Months. What is the steady state given the experience of 2021? Is it to go back to one month, which I think was the sort of prior to 2019?
Or would you think now that actually a lot of companies may stay at three to four months?
Rudy de Winter, CEO, XFAB: I cannot answer this question. I have not enough visibility in the inventory levels in the supply chain. But what I fear is that people tend not to learn this. So they it’s by the time it’s a couple of years that the shortage is over, people start to look again at optimizing their inventories and think it will not happen that they’re smarter, but whether they will be smarter, let’s see.
Robert Sanders, Analyst, Deutsche Bank: Got it. My last question is just about the China business. So I think it was in the region of 100 odd million in 2024, but you’ve got this big ramp up. So where could it be driven by the automotive business you’re seeing in China in 2025? Does it go from 100 to 200 or is that too aggressive?
Rudy de Winter, CEO, XFAB: No. So what the there is the total China business, which used to be around 100,000,000, but there was predominantly non automotive or yes, so I think in 2023, ’20 ’20 and we had around $100,000,000 China business, $24,000,000 it was less. In fact, if you take the overall is $90,000,000 but that was the drop was mainly on silicon carbide. So the difference is more like drop of 15,000,000 silicon carbide. So all the other besides silicon carbide, it did show grow in 2024.
But if you look specifically to automotive our automotive business in China, that went up from low 30s to somewhere early low 40s, so like 20% to 25% growth. And so when I refer to the automotive growth in China, that’s where the level where it was in 2024 and we expect significant increase in 2025.
Robert Sanders, Analyst, Deutsche Bank: Got it. Thanks a lot.
George, Conference Coordinator: Thank you very much for your questions, Mr. Sanders. As we have no further questions coming in, I’d like to turn the call back over to Yves Sturdeviccia for any additional or closing remarks. Thank you.
Rudy de Winter, CEO, XFAB: Yes. Thank you very much, everyone, for attending the call today. And I’m looking forward to speak to you on the April 24 to discuss the first quarter results. And then I wish you further all a nice evening. Goodbye.
George, Conference Coordinator: Thank you very much, sir. Ladies and gentlemen, that will conclude today’s conference. Thank you much for your attendance. You may disconnect. Have a good day
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