Financial Review Financial Review

FY2019 Q1 (April 1, 2019 through June 30, 2019)

Overview of Business Results

July 24th, 2019 (¥B)
  Three months ended
June 30, 2018
Three months ended
June 30, 2019
As compared to the corresponding period of the previous fiscal year increase (decrease)
Orders received 70.6 65.9 (6.7%)
Net sales 70.9 66.2 (6.7%)
Operating income 15.8 15.2 (4.2%)
Income before taxes 16.5 14.9 (9.6%)
Net income 13.9 12.1 (13.0%)

During Advantest’s first quarter, steady economic growth was maintained in the United States, but in the global economy an overall sense of stagnation and concerns about a future slowdown continued to strengthen due to escalating trade disputes stemming from protectionist trade policies.
In the electronics industry, where Advantest does business, demand had declined broadly since the latter half of 2018 due to the trade dispute between the United States and China, and intensification of the trade conflict further exacerbated confusion in the smartphone market. Additionally, the memory semiconductor market continued to deteriorate due to prolonged weak demand for data center servers and smartphones. This was accompanied by further inventory reductions and a review of capital investment plans by semiconductor manufacturers. At the same time, major semiconductor manufacturers have led the continuous technological evolution of SoC semiconductors to support electronic device performance improvements.
Demand for semiconductor test equipment is influenced by not only change in device production volume but also technological evolution trends in semiconductors. Miniaturization further improves the performance of semiconductors, reduces their power consumption, and increase semiconductor test time and the complexity of functional test processes.
Advantest has a strong customer base that covers the global supply chain involved in leading-edge semiconductor design and manufacturing processes. Advantest also have a broad product portfolio capable of responding to increased demand for any type of semiconductor device. Thus, as the adoption of advanced process nodes for SoC semiconductors used in smartphones has expanded, we have been able to fully exploit this opportunity to leverage our strengths to capture new semiconductor test equipment demand from many SoC semiconductor customers, even as the industry environment has deteriorated.
As a result, orders received were (Y) 65.9 billion (6.7% decrease in comparison to the corresponding period in the previous fiscal year) and net sales were (Y) 66.2 billion (6.7% decrease in comparison to the corresponding period in the previous fiscal year). Even as net sales declined, the gross margin increased in comparison to the corresponding period in the previous fiscal year due to a positive shift in the product mix, but operating income was (Y) 15.2 billion (4.2% decrease in comparison to the corresponding period in the previous fiscal year) as a result of an increase in selling and general administrative expenses associated with reinforcement of customer support capabilities. Income before income taxes was (Y) 14.9 billion (9.6% decrease in comparison to the corresponding period in the previous fiscal year) and net income was (Y) 12.1 billion (13.0% decrease in comparison to the corresponding period in the previous fiscal year). Average currency exchange rates for this quarter were 1 USD to 111 JPY (108 JPY in the corresponding period of the previous fiscal year) and 1 EUR to 125 JPY (131 JPY in the corresponding period of the previous fiscal year). The percentage of net sales to overseas customers was 95.9% (93.5% in the corresponding period in the previous fiscal year).

Semiconductor and Component Test System Segment

(¥B)
  Three months ended
June 30, 2018
Three months ended
June 30, 2019
As compared to the corresponding period of the previous fiscal year increase (decrease)
Orders received 53.6 49.9 (6.9%)
Net sales 51.0 50.9 (0.1%)
Segment income 15.5 17.7 14.0%

In this segment, our SoC test systems business reached record-high orders received and net sales, driven by factors such as smartphone performance gains, increased efforts to expand smartphone sales, and acceleration of efforts aimed at the 5G next-generation communications standard. However, orders received and net sales both declined significantly in our memory test business as a result of inventory adjustments and reduced investment by memory semiconductor manufacturers.

Mechatronics System Segment

(¥B)
  Three months ended
June 30, 2018
Three months ended
June 30, 2019
As compared to the corresponding period of the previous fiscal year increase (decrease)
Orders received 9.4 7.2 (23.1%)
Net sales 11.1 6.6 (40.0%)
Segment income (loss) 0.4 (1.0)

In this segment, sales of device interface products, which are strongly correlated with memory test demand, were generally weak as memory semiconductor manufacturers continued to show restraint in capital spending.

Services, Support and Others Segment

(¥B)
  Three months ended
June 30, 2018
Three months ended
June 30, 2019
As compared to the corresponding period of the previous fiscal year increase (decrease)
Orders received 7.7 8.8td> 14.7%
Net sales 8.9 8.6 (3.0%)
Segment income 1.9 0.5 (73.0%)

In this segment, despite the slowdown in semiconductor capital investment, the level of demand for maintenance services from Advantest customers remained stable due to their solid pace of production.

Overview of Financial Condition for FY2018

Total assets at June 30, 2019 amounted to (Y) 310.8 billion, an increase of (Y) 6.2 billion compared to March 31, 2019, primarily due to an increase of (Y) 9.9 billion in right-of-use-assets, and (Y) 4.4 billion in trade and other receivables, offsetting by a decrease of (Y) 8.6 billion in cash and cash equivalents. The amount of total liabilities was (Y) 111.4 billion, an increase of (Y) 5.5 billion compared to March 31, 2019, primarily due to an increase of (Y) 9.9 billion in lease liabilities, offsetting by a decrease of (Y) 5.3 billion in trade and other payables. Total Equity was (Y) 199.4 billion. Ratio of equity attributable to owners of the parent was 64.2%, a decrease of 1.0 percentage points from March 31, 2019.