ams OSRAM Q3’22 Analysis: Revenue Within Target, Midterm Focus on Cost Mitigation Under Increasingly Unfavorable Momentum

ams OSRAM (SIX:AMS, OTCPK:AMSSY) continues on its long road to become a more streamlined, higher-margin leader in optical solutions.  With a strategy of differentiating itself by combining LED technology with sensing functionality, ams OSRAM’s product range includes LED emitters, optical components & micro-modules, detectors and sensor interfaces & processors for use in consumer, automotive, industrial and medical applications.

In 2020, Austria-based ams purchased OSRAM Licht, a Munich-based leading global manufacturer of lamps and lighting solutions, and has been paring away the low-margin legacy OSRAM business.  On the recent Q3 earnings call, leadership noted they are in the final chapter of the disposals and expect the total proceeds to exceed EUR 550M ($568M), slightly above initial estimates.

The company tracks the percentage share of revenues by segment, end market and by region:

Q3 Revenues by Segment: 

            Semiconductors          67%

            Lamps & Systems        33%

Q3 Revenues by End Market:

            Automotive                 39%

            Industrial & Medical   37%

            Consumer                   24%

Q3 Revenues by Region:

            APAC               51%

            EMEA              31%

            Americas         18%

CEO Alex Everke highlighted the more demanding market environment during the Q3 earnings call, noting the impact of end market supply chains adjusting inventory, combined with continuing effects from lower automotive production volumes and lower smartphone shipments year-on-year.  A less favorable environment for mobile devices continues to include a weaker Android market, leading to ams OSRAM’s clients being more careful about adding cost for new features (like 3D sensing applications) to their phones.

CFO Ingo Bank’s comments during the recent call noted they “expect an environment of persistent inflation to continue over the midterm” with its chain reaction of impacts: cost impact to ams OSRAM (inflation in wages, energy, materials) as well as cost impacts for customers and their customers.  CFO Bank noted these inflation impacts “will mean lower or delayed adoption of certain technologies or sales volume in certain end markets.”

Additional detail was laid out by CFO Bank on the ongoing mitigation measures to manage through the more uncertain environment, including addressing cost of goods sold and OpEx across ams OSRAM, along with streamlining and efficiency improvement for certain R&D programs: “geopolitical and macroeconomic environment developments are not in our control, but we’re focusing on what we definitely have control, which is cash and cost.”

Looking ahead to Q4, ams OSRAM’s more cautious view is reflected in the sequentially flat target revenue range of EUR 1.15B to EUR 1.25B ($1.19B to $1.3B), with expected operating profitability in the range of 6-9% adjusted EBIT margin. 

Go Deeper

ams OSRAM Press Release – Q3 2022 Results:  https://ams-osram.com/documents/4390887/7195804/Ad-hoc_2022_eng+Financial+results+Q3+2022+f.pdf/aacf4f4c-1469-dffe-1fc0-9b2e940647c4?t=1667367352685

ams OSRAM Q3 2022 Presentation: https://ams-osram.com/documents/4390887/7195835/Roadshow+presentation+ams+OSRAM+Q3+2022+f.pdf/48f46355-ac24-2023-7e94-4d8baa948212?t=1667367299966

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