EQS-Adhoc: ams-OSRAM AG: ams OSRAM solid third quarter revenues and operating profitability (adj.) in line with expectations in more demanding market environment; updated mid-term targets, …

By brandaktuell On 2. November 2022

EQS-Ad-hoc: ams-OSRAM AG / Key word(s): 9 Month figures/Quarterly /
Interim Statement
ams-OSRAM AG: ams OSRAM solid third quarter revenues and operating
profitability (adj.) in line with expectations in more demanding market
environment; updated mid-term targets, …

02-Nov-2022 / 07:00 CET/CEST
Disclosure of an inside information acc. to Article 17 MAR of the
Regulation (EU) No 596/2014, transmitted by EQS News – a service of EQS
Group AG.
The issuer is solely responsible for the content of this announcement.

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Ad hoc Announcement pursuant to Art. 53 Listing Rules of SIX Swiss
Exchange
——————————

ams OSRAM solid third quarter revenues and operating profitability (adj.)
in line with expectations in more demanding market environment; updated
mid-term targets, microLED development advancing, additional cost
mitigation measures, confirming pre-payment agreement

• Third quarter revenues of EUR 1.21 billion and adj. EBIT margin of
7.5% show quarter-on-quarter revenue growth matching expectation range
in more unfavorable market environment
• Robust operating cash flow of EUR 151 million, group leverage at 1.75x
net debt/adj. EBITDA
• Development and industrialization program for leading smallest
structure size microLED technology advancing to plan supported by
excellent customer engagement
• Mid-point of synergy creation period with 70% of expected total
synergies and savings created (EUR 245 million); planned disposals
entering final phase
• Previously announced additional cost mitigation measures with expected
total volume of around EUR 100 million
• Able to confirm substantial pre-payment agreement related to future
deliveries underpinning existing engagement
• Asset testing particularly in light of increased applicable cost of
capital results in IFRS non-cash impairment charge of EUR 335 million
• Mid-term targets updated to EUR 4.7 billion +/- 300 million of
revenues and adjusted EBIT margin 13% +/- 100 basis points for 2024,
based on more cautious view given macro-economic environment with
ongoing cost inflation and less favorable outlook for end markets
likely impacting certain mid-term adoption and volume developments;
expected timeline for industrialization of leading microLED technology
not changed by update
• Fourth quarter expected revenues of EUR 1.15-1.25 billion and expected
adj. EBIT margin of
6-9% show flat quarter-on-quarter revenue development in demanding
macro-economic and market environment causing lower production volumes
and industry inventory adjustments

Premstaetten, Austria and Munich, Germany (2 November 2022) — ams OSRAM
(SIX: AMS), a global leader in optical solutions, reports third quarter
group financial results. “We recorded solid results including sequential
revenue growth for the third quarter as our business performed fully in
line with our previous guidance. We continue to see a demanding market
situation in several end markets in an environment of slowing
macro-economic momentum globally. Despite these unfavorable trends our
automotive, industrial, and medical businesses offered a solid performance
in the quarter while our consumer business provided good contributions to
group results. Looking forward, we are excited that, supported by
excellent customer engagement, our strategic development and
industrialization program for a leading smallest structure size microLED
technology and the construction of our industry-first 8” LED front-end fab
are advancing as planned,” commented Alexander Everke, CEO of ams OSRAM.

“Beyond this highly prioritized strategic program and investment we see
ongoing positive customer traction and engagement in target markets and
applications. Irrespective of the current demanding industry situation,
design activities and successes across our customer base continue to
support our pipeline for the mid to longer term. Customers are highly
interested in harnessing the advantages and richness of our portfolio as
they implement their roadmaps for future products in automotive, consumer,
industrial and medical. In this context, I am glad to confirm a
substantial pre-payment agreement for future deliveries which underpins an
existing engagement. This is a testament to our highly attractive offering
in innovative technologies,” Everke added.

“We have reached the mid-point of the planned synergy creation period and
I am glad to confirm that we have created 70% – or EUR 245 million – of
the total expected synergies and savings so far which are fully in line
with our plans. We are equally successful in advancing our integration
programs as planned and they remain a key priority as we move towards
completing the integration. We are also in the final phase of the planned
disposals and expect total proceeds from the disposals of more than
EUR 550 million. We now look forward to closing the last two already
signed transactions, one of which is expected to close this quarter, as
well as completing the last smaller-scale disposal. All in all, we
continue to realize our targets related to the acquisition and integration
of OSRAM Licht AG (OSRAM).

“We are seeing previously mentioned inventory adjustments in end market
supply chains, particularly in the automotive sector. Imbalances continue
to impact several end markets including effects from lower automotive
production and smartphone shipments globally. These trends create a
demanding market and supply chain situation in an environment of
increasingly unfavorable macro-economic momentum. Against this backdrop
our revenues showed a solid development and sequential growth in the
quarter. At the same time, the current market situation drove the
previously mentioned decreased production volumes which impacted gross
margin in line with expectations.

“As announced we are implementing additional cost mitigation measures to
manage through the current and expected short-term market situation. These
group-wide measures aim at diverse areas of our business and offer an
expected cost mitigation volume of around EUR 100 million. In addition, we
have revisited investment plans for 2022 in light of the market situation
and now expect total capital expenditures for 2022 at a lower level of EUR
600 million.

“In view of financial markets developments, particularly with respect to
increased interest rates and the related increased applicable cost of
capital, as well as on-going macro-economic developments, we have recently
conducted an impairment testing of assets in line with IFRS requirements
and have recorded a one-off non-cash impairment charge, including the
restructuring of certain production capacities, of EUR 335 million in the
IFRS based (unadjusted) results for the quarter.

“Significant changes in the macro-economic and industry environment over
the course of this year include heightened uncertainty regarding the
economic outlook as well as widespread and meaningful inflationary
pressures driven by geopolitical developments. We are taking a cautious
view given this demanding outlook for our markets and ongoing and expected
cost inflation for our business and our customers, which is likely to
impact mid-term volumes and technology adoption in certain markets such as
horticulture, outdoor lighting or certain Android and non-smartphone
consumer applications, resulting in less favorable product mix
assumptions. We therefore update our mid-term financial targets and expect
revenues of EUR 4.7 billion +/-300 million (previously EUR 4.9 billion
+/-300 million) and an adjusted EBIT margin of 13% +/-100 basis points
(previously 15% or better) for full year 2024. The expected timeline for
the industrialization and the volume production availability of our
leading microLED technology is not changed by these updated assumptions.
Moreover, the long-term financial target model for the group, which is
fully supported by our long-term strategy for leadership in optical
solutions, remains unchanged.

“Our strategy is built around innovative applications across end markets
that offer significant mid- and long-term growth opportunities.
Accordingly, we will move forward by continuing to streamline our
portfolio in full alignment with this strategy. Taking the demanding
macro-economic and industry environment into account, we will continue
meaningful R&D investments with a clearly defined focus on driving
technology and product innovation in optical technologies,” Everke
concluded.

Quarterly financial summary

EUR millions Q3 2022 Q2 2022 QoQ Q3 2021* YoY
(except per share data)
Revenues 1,213 1,183 3% 1,288 -6%
Gross margin adj.^1) 28.7% 31.6% -290 bps 34.1% -540 bps
Operating income adj.^1) 91 104 -12% 133 -31%
Operating margin adj.^1) 7.5% 8.8% -130 bps 10.3% -280 bps
Net result adj.^1) 47 -54 187% 10 365%
Diluted EPS adj.^1) 0.18 -0.21 0.02
Diluted EPS adj. (in CHF)^1)2) 0.18 -0.21 0.02
Operating Cash Flow 151 100 52% 216 -30%
Net debt 1,595 1,727 -8% 1,858 -14%

^1)^ Excluding M&A-related, transformation and share-based compensation
costs as well as results from investments in associates and sale of a
business

^2)^ Earnings per share in CHF were converted using the average currency
exchange rate for the respective periods

* 2021 financials reflect reclassification within functional cost
categories / Note: EPS denotes earnings per share

Third quarter group revenues were EUR 1,213 million, up 3% sequentially
compared to the second quarter 2022 and down 6% compared to same quarter
2021, influenced by deconsolidation effects. Adjusted[1]^[1]^group gross
margin for the third quarter 2022 was 29%, down from 32% for the second
quarter and down from 34% for the same quarter 2021. The third quarter
adjusted^1 group result from operations (EBIT) was EUR 91 million or 8% of
revenues compared to EUR 104 million or 9% for the second quarter and EUR
133 million or 10% of revenues for the same period 2021 (unadjusted:
EUR -327 million or -27% of revenues for the third quarter ). Third
quarter adjusted^1 group net result was EUR 47 million compared to EUR -54
million for the second quarter and compared to EUR 10 million for the same
quarter 2021 (unadjusted: EUR -370 million for the third quarter). Third
quarter adjusted^1 diluted earnings per share[2][2] were EUR 0.18 or CHF
0.17 (EUR -1.40 or CHF -1.36 unadjusted).

Third quarter group operating cash flow was EUR 151 million while group
free cash flow was solid with EUR 56 million. Group net debt was EUR 1,595
million on 30 September 2022, translating into a group leverage of 1.75x
net debt/adjusted^1 EBITDA. Through the expected repayment of the maturing
USD convertible bond and a promissory note (Schuldscheindarlehen) in the
third quarter the gross debt position has been reduced by over EUR 300
million sequentially. Cash and cash equivalents reflected the mentioned
repayments and stood at EUR 1,243 million on 30 September 2022.

The group’s Semiconductors segment provided the most relevant contribution
to group results in the third quarter at 67% of group revenues. The
semiconductor automotive business recorded a solid performance in the
quarter in line with previous expectations. This reflected the group’s
previously mentioned reduced production volumes in several product areas
to accommodate the demanding market environment. The overall market
situation remained characterized by reduced automotive production volumes
globally, existing imbalances and ongoing inventory adjustments in
automotive supply chains. Demand trends reflected this situation as well
as increasing uncertainty about macro-economic developments. At the same
time, ams OSRAM is successfully advancing the market adoption of
innovative next generation lighting for future car platforms together with
design success in diverse automotive sensing applications.

The semiconductor consumer business offered solid results that tracked
expectations for the quarter. Global smartphone shipments continued at
lower overall levels year-on-year while new device launches were able to
support market volumes worldwide. As this less favorable demand
environment increasingly reflects macro-economic trends, ams OSRAM notes
the benefit of its large portfolio and customer base in major consumer
segments and device types. A broadening presence in mobile device optical
sensing such as body temperature monitoring in latest wearables underlines
the group’s market position in the consumer market. The semiconductor
industrial and medical business offered another solid contribution to
segment results in the quarter. Shipments for differentiated LED and
imaging solutions in important markets remained at attractive levels
during the quarter while demand trends in certain industrial markets
started to reflect the unfavorable macro-economic momentum exiting the
quarter.

The Lamps & Systems (L&S) segment saw third quarter results in line with
expectations contributing 33% of group revenues. Pro-forma third quarter
segment revenues for retained L&S business after completion of all
previously announced disposals, i.e. deconsolidation of all closed and
to-be-closed disposals, were 26% of same basis group revenues or EUR 281
million. The L&S automotive business including legacy traditional lighting
achieved a solid in-line performance in the quarter. Results reflected
imbalances and inventory adjustments in the automotive sector while global
aftermarket activities provided a positive contribution in a less
favorable environment. The other L&S businesses for traditional
industrial, building-related and medical applications performed in line
with expectations given still supportive end market demand.

For the fourth quarter 2022, ams OSRAM expects group revenues of EUR
1,150-1,250 million, based on currently available information and exchange
rates. ams OSRAM expects a flat revenue development quarter-on-quarter
(approx., at the midpoint) in a market situation where slowing
macro-economic momentum, less favorable demand trends and inventory
adjustments result in a demanding environment. The expected revenue
development is supported by the group’s broad application and customer
exposure across its end markets. In the prevailing industry environment
decreased production levels are expected to continue in the fourth
quarter. Incorporating these factors, ams OSRAM expects an adjusted
operating (EBIT) margin of 6-9% for the fourth quarter.

The above expectations for the fourth quarter also include
disposal-related deconsolidation effects compared to the previous year
(fourth quarter revenue effect year-on-year of around EUR 70 million).

ams OSRAM has started to implement the announced footprint consolidation
measures in Asia as planned for the latter half of the integration and
synergy creation period. Associated with these steps ams OSRAM expects to
record a restructuring charge of up to EUR 60 million in the fourth
quarter IFRS results. These one-time costs are part of the planned and
previously announced total integration costs for the integration of OSRAM.

As previously announced, ams OSRAM has defined additional cost mitigation
measures to manage through the more uncertain and evolving macro-economic
environment, complementing the existing synergy creation programs.
Together, these measures have a total cost mitigation volume of around EUR
100 million. Initiatives include reductions in global operating expenses
including streamlining and efficiency improvements for certain R&D
programs as well as various efficiency improvements in production
activities. Implementation of the initiatives is expected to be completed
in the first half of next year. ams OSRAM has also revisited investment
plans outside of the investment for its new 8” LED front-end fab in light
of the current industry environment and has lowered total expected capital
expenditures for full year 2022 to EUR 600 million.

Significant changes in the macro-economic and industry environment over
the course of this year include heightened uncertainty regarding the
economic outlook as well as widespread and meaningful inflationary
pressures driven by geopolitical developments. ams OSRAM is taking a
cautious view given this demanding outlook for its markets and ongoing and
expected cost inflation for its business and its customers, which is
likely to impact mid-term volumes and technology adoption in certain
markets such as horticulture, outdoor lighting or certain Android and
non-smartphone consumer applications, resulting in less favorable product
mix assumptions. ams OSRAM therefore updates its mid-term financial
targets and expects revenues of EUR 4.7 billion +/-300 million (previously
EUR 4.9 billion +/-300 million) and an adjusted EBIT margin of 13% +/-100
basis points (previously 15% or better) for full year 2024. The expected
timeline for the industrialization and the volume production availability
of the group’s leading microLED technology is not changed by these updated
assumptions. Moreover, the long-term financial target model for the group,
which is fully supported by ams OSRAM’s long-term strategy for leadership
in optical solutions, remains unchanged.

Additional financial information for the third quarter 2022 is available
on the company [3]website. The third quarter 2022 investor presentation is
also available on the company [4]website. ams OSRAM will hold a conference
call on the third quarter results on Wednesday, 2 November 2022 at 10.00am
CET. The conference call will be available via [5]webcast.

###

About ams OSRAM

The ams OSRAM Group (SIX: AMS) is a global leader in optical solutions. By
adding intelligence to light and passion to innovation, we enrich people’s
lives. This is what we mean by Sensing is Life.

With over 110 years of combined history, our core is defined by
imagination, deep engineering expertise and the ability to provide global
industrial capacity in sensor and light technologies. We create exciting
innovations that enable our customers in the consumer, automotive,
healthcare and industrial sectors maintain their competitive edge and
drive innovation that meaningfully improves the quality of life in terms
of health, safety and convenience, while reducing impact on the
environment.

Our around 23,000 employees worldwide focus on innovation across sensing,
illumination and visualization to make journeys safer, medical diagnosis
more accurate and daily moments in communication a richer experience. Our
work creates technology for breakthrough applications, which is reflected
in over 15,000 patents granted and applied. Headquartered in
Premstaetten/Graz (Austria) with a co-headquarters in Munich (Germany),
the group achieved over EUR 5 billion revenues in 2021 and is listed as
ams-OSRAM AG on the SIX Swiss Exchange (ISIN: AT0000A18XM4).

Find out more about us on [6] https://ams-osram.com

ams is a registered trademark of ams-OSRAM AG. In addition many of our
products and services are registered or filed trademarks of ams OSRAM
Group. All other company or product names mentioned herein may be
trademarks or registered trademarks of their respective owners.

Join ams OSRAM social media channels: [7]>Twitter [8]>LinkedIn
[9]>Facebook [10]>YouTube

[11]^[1] Excluding M&A-related, transformation and share-based
compensation costs as well as results from investments in associates and
sale of a business

[12]^[2]^Based on 261,320,928 basic / 264,317,838 diluted shares

02-Nov-2022 CET/CEST News transmitted by EQS Group AG. www.eqs.com

Language: English
Company: ams-OSRAM AG
Tobelbader Straße 30
8141 Premstaetten
Austria
Phone: +43 3136 500-0
E-mail: investor@ams-osram.com
Internet: https://ams-osram.com/
ISIN: AT0000A18XM4
WKN: A118Z8
Listed: Regulated Unofficial Market in Dusseldorf, Frankfurt, Munich,
Stuttgart, Tradegate Exchange; BX, SIX, Vienna Stock Exchange
(Vienna MTF)
EQS News ID: 1476865

End of Announcement EQS News Service

1476865 02-Nov-2022 CET/CEST

References

OTS-ORIGINALTEXT PRESSEAUSSENDUNG UNTER AUSSCHLIESSLICHER INHALTLICHER VERANTWORTUNG DES AUSSENDERS. www.ots.at
(C) Copyright APA-OTS Originaltext-Service GmbH und der jeweilige Aussender. ams-OSRAM AG

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