M31 Technology, a leading global IP provider, held an investor conference today (08/08/2024). The consolidated revenue for the second quarter reached NT$429 million, an increase of 23.5% YoY, maintaining a 100% gross margin. Driven by strong revenue growth, both operating and net profit margin improved in the Q2, indicating an overall optimization in the company’s financial health. However, due to the impact of last year’s stock dividends, the Company’s equity inflated by 20%, and EPS for the Q2 amounted to NT$2.64, representing a more than 1.5-fold increase from the previous quarter.
In the first half of this year, the continued momentum in advanced process IP projects led to a recovery in new projects from China chip design companies and new orders from Taiwan IC design houses, advanced processes below 16nm already accounted for over 50% of the total licensing revenue in the second quarter. Although the U.S. market experienced a slowdown in revenue growth in the first half of the year due to the prolonged lead time of advanced process projects, overall IP development has now progressed to the 2nm process platform, which can support smartphones and high-performance computing. The preliminary evaluation phase for new projects with U.S.-based cloud service provider (CSP) is also nearing completion; additionally, the company is expected to enter the advanced driver assistance systems (ADAS) supply chain of leading electric vehicle manufacturers in China, which will further boost the growth momentum of new licensing revenue in the second half of the year. Due to geopolitical influences, IC customers are shifting orders to different regions. In the second half of the year, overseas foundries are expected to push forwards with advanced process platform projects below 5nm. In the medium- to long-term, the technology nodes entering mass production will continue to move towards advanced processes, which will also drive the continuous recovery of mass production royalty revenue.
Looking ahead to the second half of the year, Scott Chang, CEO of M31, stated that with the vigorous development of AI applications, in addition to the upgrade needs of traditional transmission standards such as PCIe, USB, and MIPI, the expansion of servers and data centers has also driven upgrades in the specifications of LPDDR memory IP and ONFI I/O IP for storage interfaces. Moreover, advanced process chips, characterized by small volumes, high diversity, and high unit prices, also require a certain degree of customization in Foundation IP design. Meanwhile, M31 will also expand its product line in advanced packaging by introducing Die-to-Die (D2D) high-speed I/O interfaces, adding new momentum to its operations. Scott Chang also emphasized that although short-term project schedule unpredictability has impacted operations, it is expected that deferred revenue will gradually contribute to revenue growth. Revenue growth in the second half of the year is anticipated to be stronger than in the first half. The goal of achieving revenue growth in line with expense growth remains unchanged for this year. Additionally, the board has just approved the “Employee Stock Ownership Trust(ESOT)” program, hoping to work together with employees to foster positive development for the company’s operations.