2024 Interim Results

Cardiff, UK
10 September 2024

Unaudited Results for the six months ended 30 June 2024

Steady progress with year-on-year revenue growth

IQE plc (AIM: IQE, "IQE" or the "Group"), the leading global supplier of compound semiconductor wafer products and advanced material solutions, announces its interim results for the six months ended 30 June 2024. Revenue for the period was £66.0m, with an adjusted non-GAAP EBITDA of £6.6m.

Americo Lemos, Chief Executive Officer of IQE, commented:

“IQE delivered a consistent performance in the first half of 2024, with a 27% rise in revenue year-on-year and a return to a positive adjusted EBITDA position. We expect the market to continue to show pockets of recovery during the second half, resulting in more moderate growth for 2024 on a full-year basis. We look forward to progressing the planned IPO of our Taiwanese subsidiary, which will help to accelerate our diversification strategy into the GaN Power market and microLED, and will provide additional significant cash resources for the Company.”

H1 2024 Financial Results

^{* All figures £’m excluding diluted and adjusted diluted EPS.
** Adjusted Measures: Alternative performance measures are disclosed separately after a number of non-cash charges, non-operational items and significant infrequent items that would distort period on period comparability. Adjusted items are material items of income or expense that have been shown separately due to the significance of their nature or amount as detailed in note 8.
*** Net funds/debt excludes IFRS16 lease liabilities and fair value gains/losses on derivative instruments.
The following highlights of the first half results are based on these adjusted performance measures, unless otherwise stated.}

Strategic Highlights

Wireless

Growth driven by communications infrastructure and penetration into the Android smartphone and WiFi market

• Successful launch of an 8” GaN on Si product with a major Tier 1 foundry supporting 5G RF base station infrastructure.
• Delivered high power RF amplifier products using GaN on SiC for 5G base station radios to both IDM and fabless customers in North America, Europe and Asia.
• Delivered sample GaAs HBT power amplifiers to two leading compound semiconductor foundries, enabling 5G RF Front End products for Android smartphones and WiFi 7.

Photonics

Well positioned with new technology to capture demand from Gen AI data centres

• Qualification of InP laser technology for high-speed optical transceivers deployed within large-scale gen AI data centres.
• Delivery of new high speed data communications VCSEL product to address market demand for short-reach optical transceiver applications.
• Qualification of Quantum Dot Laser (QDL) products by an industry-leading Silicon Photonics customer, enabling the development of energy-efficient, on-chip laser architectures for next-generation data centre networking applications.
• Delivery of next-generation 3D Sensing VCSEL products for module-level qualification in new AR/VR and mobile platforms.

Power

Increased GaN capacity enabling qualification ramp-up

• Progress with customer qualification of 650V e/d-mode GaN products for Tier 1 OEMs.
• Continued to deploy GaN Power capacity in the US and UK to serve the global Power Electronics market

Display

Successful development driving sampling with new and existing customers

• Successful launch of new 8” GaAs and GaN RGB microLED product portfolio with strong engagement from Tier 1 consumer mobile and display manufacturers.
• Continuation of long term engagement with an AR/VR customer to deliver next-generation microLED display materials.
  

H1 2024 Financial Highlights

• Revenue of £66.0m (H1 2023: £52.0m) increased 26.9% vs H1 2023.
  • Wireless revenue of £38.8m (H1 2023: £22.4m) increased 73% year-on-year on a reported basis. This was a result of inventory normalisation and design wins in Android RF Front End markets.
  • Photonics revenue of £26.8m (H1 2023: £28.0m) was down 4% year-on-year on a reported basis. A reduction in segments of InP telecoms markets was partially offset by strength in GaAs Photonics and infrared sensing product sales.
  • CMOS++ revenue of £0.5m (H1 2023: £1.6m) down 70% on a reported basis. This reflects a strategic rebalancing of IQE’s product portfolio and a shift in focus towards diversification into GaN Power and MicroLED. Reporting on this segment will cease from 2025.
• Adjusted EBITDA of £6.6m (H1 2023: £(5.7)m LBITDA) up £12.3m, as a result of a combination of increased revenue, improved asset utilisation, and the benefit of cost control actions.
• Reported operating loss of £(12.1)m (H1 2023: £(19.6)m loss).
• Adjusted cash inflow from operations of £1.8m (H1 2023: £4.3m) reflecting a combination of improved trading performance offset by an increase in working capital.
• Total net cash capex and cash investment in intangibles of £6.5m (H1 2023: £8.4m)
• Adjusted net debt of £(17.0)m as at 30 June 2024 (net debt of £(2.2)m as at 31 Dec 2023, net funds of £5.3m as at 30 June 2023).
• Cost control actions
  • Reduced labour costs by c.10% year-on-year while ensuring balance of operational efficiency and skills retention.
  • Reduced non-labour costs by c.5% year-on-year.
  • Sale of decommissioned Pennsylvania site expected to complete in H2 2024.

Current trading and outlook

Signs of recovery in the global semiconductor industry continue, despite the pace of progress varying between regions and market segments.

IQE delivered an improved performance in H1 and year-on-year growth is expected in both revenue and adjusted EBITDA for FY 2024. With some markets remaining in recovery in H2 2024, performance is expected to be at the lower end of the range of analyst forecasts for the full year¹.

IQE will maintain a tight focus on structural cost controls, footprint optimisation and operational efficiencies. This will allow the business to continue to improve its profitability while building its market-led technology roadmap in partnership with key customers.

In July 2024, the Group announced plans for the IPO of its Taiwan operating subsidiary on the Taiwan Stock Exchange. This represents an exciting opportunity for IQE to maximise value across its asset base and accelerate the investment in its growth and diversification strategy while continuing to maintain its secure and resilient supply chain. The Group has had a very positive reaction from its first round of engagement with investors in the region, and expects to list on the Emerging Market Board of the Taiwan Stock Exchange in H1 2025. Further updates will be provided when appropriate.

_{¹The analyst range of expectations for FY 2024 revenue are from £130.0m to £153.7m and for adjusted EBITDA from £11.1m to £16.6m.}

Results Presentation

IQE will present its H1 2024 Results via webcast at 9:00am today, Tuesday 10 September 2024. If you would like to view this webcast, please register by using the below link and following the instructions:

https://brrmedia.news/IQE_IR_24

Contacts:

IQE plc
+44 (0) 29 2083 9400
Americo Lemos
Jutta Meier
Amy Barlow           

Peel Hunt (Nomad and Joint Broker)
+44 (0) 20 7418 8900
Ben Cryer
Kate Bannatyne
Adam Telling           

Deutsche Numis (Joint Broker)
+44 (0) 20 7260 1000
Simon Willis
Hugo Rubinstein
Iqra Amin

Headland Consultancy (Financial PR)
+ 44 (0) 20 38054822
Andy Rivett-Carnac: +44 (0) 7968 997 365
Chloe Francklin: +44 (0)78 3497 4624

ABOUT IQE

http://iqep.com

IQE is the leading global supplier of advanced compound semiconductor wafers and materials solutions that enable a diverse range of applications across:

• Smart Connected Devices
• Communications Infrastructure
• Automotive and Industrial
• Aerospace and Security

As a scaled global epitaxy wafer manufacturer, IQE is uniquely positioned in this market which has high barriers to entry. IQE supplies the global market and is enabling customers to innovate at chip and OEM level. By leveraging the Group’s intellectual property portfolio including know-how and patents, it produces epitaxy wafers of superior quality, yield and unit economics.

IQE is headquartered in Cardiff UK, with employees across manufacturing locations in the UK, US and Taiwan, and is listed on the AIM Stock Exchange in London.