Financial Review

April 26, 2024(in billion yen)

	FY2022	FY2023	As compared to the previous fiscal year increase (decrease)
Net sales	560.2	486.5	(13.2%)
Operating income	167.7	81.6	(51.3%)
Income before income taxes	171.3	78.2	(54.4%)
Net income	130.4	62.3	(52.2%)

During Advantest’s fiscal year ended March 31, 2024, despite the post-COVID normalization, the global economy experienced further deceleration due to factors such as monetary tightening mainly in the U.S. and Europe and slowing growth in the Chinese economy.

Under such global economic situation, due to deceleration in investments in data centers in addition to slowdown in demand for semiconductors used in cornerstone consumer electronics products such as smartphones, personal computers, and televisions, the semiconductor market experienced a decline in demand for related semiconductors. While demand for some semiconductors, such as those related to generative AI, has been increasing and semiconductor sales turned around to an increase in the second half of the year, on a full-year basis, they were in line with the previous fiscal year.

In Advantest’s semiconductor test equipment business, investment by customers over the last three years had been robust. However, the weakening of the semiconductor market conditions led to excess capacity among many customers’ supply chains, causing demand for our products to decline significantly compared to the previous fiscal year.

As a result of the above, in the consolidated fiscal year ended March 31, 2024, net sales were (Y) 486.5 billion (13.2% decrease in comparison to the previous fiscal year). In terms of profit, operating income was (Y) 81.6 billion (51.3% decrease in comparison to the previous fiscal year) due to factors including a decrease in sales, a change in product mix, an increase in raw material cost, and an impairment loss for a portion of goodwill of approximately (Y) 9.0 billion in the fourth quarter. Income before income taxes was (Y) 78.2 billion (54.4% decrease in comparison to the previous fiscal year) due to an increase in financial expenses caused by foreign exchange losses. Net income was (Y) 62.3 billion (52.2% decrease in comparison to the previous fiscal year) as deferred tax assets of approximately (Y) 3.8 billion, which are likely to be realized in Japan within a certain period in the future, were recognized in the fourth quarter. Average currency exchange rates in the consolidated fiscal year were 1 USD to 143 JPY (134 JPY in the previous fiscal year) and 1 EUR to 155 JPY (140 JPY in the previous fiscal year). The percentage of net sales to overseas customers was 95.9% (96.3% in the previous fiscal year).

In May 2021, Advantest unveiled the Second Mid-Term Management Plan, a three-year plan from FY2021 to FY2023. In July 2022, targets were revised upward to reflect a larger than originally expected size of the semiconductor test-related market. However, due to the aforementioned weakness of the semiconductor market from the latter half of the said plan period, demand for semiconductor testers for cornerstone consumer electronics products declined significantly in the fiscal year ended March 31, 2024, compared with the previous fiscal year. As a result, although Advantest was able to achieve all of the targets as originally set in our Second Mid-Term Management Plan, Advantest failed to achieve the revised targets except for sales.

(in billion yen)

	FY2022	FY2023	As compared to the previous fiscal year increase (decrease)
Net sales	404.3	331.5	(18.0%)
Segment income (loss)	163.2	91.9	(43.7%)

In this segment, sales of SoC semiconductor test equipment for legacy semiconductors such as those for automotive and industrial equipment-related applications were solid. However, slow market conditions for smartphones and a deceleration in server investment led to a decline in sales of high-performance semiconductors related to these devices. Sales of memory semiconductor test equipment exceeded the previous fiscal year’s level, driven by robust tester demand for high-performance DRAM and an increase in sales to Chinese memory customers. In terms of profit, profitability in this segment declined as a result of lower sales as well as a change in product mix and an increase in raw material cost.

(in billion yen)

	FY2022	FY2023	As compared to the previous fiscal year increase (decrease)
Net sales	59.9	52.7	(12.0%)
Segment income (loss)	15.0	9.2	(38.7%)

In this segment, sales of device interface products and test handlers decreased due to a decline in demand for semiconductor test equipment.

(in billion yen)

	FY2022	FY2023	As compared to the previous fiscal year increase (decrease)
Net sales	96.1	102.3	6.4%
Segment income (loss)	7.6	(2.8)	－

In this segment, maintenance services sales increased as Advantest’s installed base grew. However, in our system-level test (SLT) business, Advantest’s ongoing investments in reinforcing SLT production capabilities in anticipation of mid/long-term business growth resulted in an increase in costs. Moreover, an impairment loss of approximately (Y) 9.0 billion was recorded for a portion of goodwill, as sales forecast related to test sockets for a large-volume customer of Essai, Inc. is weaker than originally expected, causing future cash flow projections to deteriorate. As a result, profit in this segment fell significantly year-on-year. The segment loss in the consolidated fiscal year includes approximately (Y) 3.2 billion in settlement income mainly related to a dispute with the counterparty.