Phison Electronics (8299) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue reached NT$15.895 billion, up 58.8% year-over-year but down 3.8% sequentially, with gross profit at NT$5.541 billion, marking historical highs for the period.

• Net income was NT$2.451 billion, with EPS of NT$11.97, up 455.8% year-over-year.

• Non-consumer/retail products contributed over 70% of revenue, reducing exposure to NAND market fluctuations.

• Enterprise segment revenue share rose from 5% in Q1 to 14% in Q2, reflecting a strategic shift from weak retail markets.

• Focus remains on enterprise SSDs, AI solutions, and technology leadership, with multiple product launches and industry awards.

Financial highlights

• Gross margin reached 34.9% in Q2, a historical high, with an adjusted gross margin of 35.3% after a 0.5% inventory write-down.

• Operating profit was NT$1.997 billion, up 178.5% year-over-year; net profit margin rose to 15.4% from 4.4% a year ago.

• EPS for Q2 was NT$11.97; first half EPS reached NT$23.99, an all-time high.

• Inventory value increased due to a threefold rise in flash prices year-over-year, despite a decline in petabyte volume.

• R&D expenses were NT$2.853 billion, 18% of revenue.

Outlook and guidance

• Enterprise and AI segments are expected to drive growth in the second half and into next year, with retail remaining weak except for seasonal upticks.

• AI-related SSD demand is projected to grow over 60% annually, benefiting enterprise SSDs and aiDAPTIV+ solutions.

• Next year’s growth will be led by enterprise, embedded ODM, and high-margin AI adaptive solutions.

• Gross margin is targeted to remain flat, with revenue and net profit expected to improve.

• Strategic focus on high-capacity, high-end SSDs for gaming, content creation, and AI applications.