Tower Semiconductor (TSEM) Misses Q4 EPS by 3c, Revenues Miss; Provides Q1 Revenue Outlook

Tower Semiconductor (NASDAQ: TSEM) reported Q4 EPS of $0.22, $0.03 worse than the analyst estimate of $0.25. Revenue for the quarter came in at $306 million versus the consensus estimate of $312.07 million.

Revenues for the fourth quarter of 2019 were $306 million as compared to $334 million in the fourth quarter of 2018, reflecting $36 million non-organic revenue reduction (mainly as a result of the March 2019 announced Panasonic renewed contract), offset by $8 million year over year organic growth (defined as total revenue excluding revenues from Panasonic in the TPSCo fabs and revenues from Maxim in the San Antonio fab), reflecting 4% organic revenue growth.

Gross and operating profits for the fourth quarter of 2019 were $55 million and $19 million, respectively, as compared to $58 million and $23 million respectively, in the prior quarter, and as compared to $76 million and $40 million respectively, in the fourth quarter of 2018; EBITDA for the fourth quarter of 2019 was $75 million, as compared to $75 million in the prior quarter and to $93 million in the fourth quarter of 2018; Net profit for the fourth quarter of 2019 was $21 million, or $0.19 basic and diluted earnings per share, as compared to $22 million or $0.21 basic and diluted earnings per share in the prior quarter. Net profit for the fourth quarter of 2018 was $38 million, or $0.36 diluted earnings per share. The margin decrease, as compared to 2018, is mainly due to the above described reduction in the non-organic revenue components.

Cash flow generated from operations in the fourth quarter of 2019 was $72 million, with $44 million investments in fixed assets, net, resulting in $28 million free cash flow. In the fourth quarter of 2019, the company repaid $3 million of its debt. In the third quarter of 2019, cash generated from operations was $73 million, with investment in fixed assets, net of $43 million, resulting in $30 million free cash flow. In the third quarter of 2019 the company repaid $6 million of its debt.

Mr. Russell Ellwanger, Chief Executive Officer of TowerJazz, commented, “Our strong, long-term customer partnerships with a focus on growing analog market applications, enabled us to achieve organic growth in 2019. Our customer forecast and present orders indicate good overall growth ramping sequentially throughout 2020, resulting in a significant second half 2020 performance as compared to the second half 2019. We expect 2020 to achieve year-over-year growth with low double-digit organic growth, achieved through higher utilization levels in our factories including the ramp of our newer 200mm technology platforms and offerings, an increase in 300mm customer demand supported by capacity increase organically for short to mid-term, and in addition, capacity growth through M&As for long-term demand. We are well-positioned to participate in and benefit from expected markets recovery and present upward business trends.”

GUIDANCE:

Tower Semiconductor sees Q1 2020 revenue of $285-315 million, versus the consensus of $300.9 million.

• TowerJazz expects revenues for the first quarter of 2020 to be $300 million, with an upward or downward range of 5%.

For earnings history and earnings-related data on Tower Semiconductor (TSEM) click here.

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