Ultra Clean Reports Third Quarter 2018 Financial Results
HAYWARD, Calif., Nov. 6, 2018 /PRNewswire/ -- Ultra Clean Holdings, Inc. (Nasdaq: UCTT), a leading developer and supplier of critical subsystems, ultra-high purity cleaning and analytical services for the semiconductor and display capital equipment industries, today reported its financial results for the third quarter ended September 28, 2018.
"The addition of a new, recurring revenue stream from Quantum late in the third quarter helped to offset the pause in the semiconductor capital equipment investment cycle," said Jim Scholhamer, CEO. "By expanding our core products and systems business to include a services component, we can play a larger, more vital role creating and capturing value for our existing and new top-tier OEM and IDM customers. We remain very positive on the industry's long-term drivers and will continue to execute on our growth strategy, extending our position as a leading supplier to the semiconductor market."
GAAP Financial Results
The financial information presented for the third quarter of 2018 includes five weeks of operations of Quantum Global Technologies, which UCT acquired on August 27, 2018.
Total revenue for the third quarter was $234.1 million, a decrease of 19.3% compared to the second quarter and a decrease of 3.5% compared to the same period a year ago.
Gross margin was 15.0% compared to 15.9% last quarter and 17.6% a year ago. Operating margin was 0.4% compared to 7.8% last quarter and 9.6% for the same period last year.
Net loss for the third quarter was $6.0 million or $0.15 per basic and diluted share compared to net income of $19.0 million or $0.49 and $0.48 per basic and diluted share in the previous quarter, and net income of $19.7 million or $0.59 and $0.57 per basic and diluted share last year.
Cash and cash equivalents at the end of the third quarter were $160.3 million, an increase of $19.2 million compared to the second quarter.
Non-GAAP Financial Results
Non-GAAP net income was $11.9 million, or $0.30 per diluted share. This compares to non-GAAP net income of $21.5 million or $0.55 per diluted share in the previous quarter and non-GAAP net income of $21.3 million or $0.62 for the prior year.
Non-GAAP operating margin was 6.4% compared to 8.7% in the previous quarter and 10.1% in the same period a year ago.
The Company has provided a reconciliation of GAAP to non-GAAP financial measures in the financial statement tables included in this press release.
Fourth Quarter 2018 Outlook
The Company expects revenue to be between $240 million to $260 million and GAAP diluted net income per share to be in the range of $0.20 to $0.30. The Company expects non-GAAP net income per diluted share to be in the range of $0.22 to $0.32.
Conference Call
UCT will conduct a conference call today, Tuesday, November 6, 2018, beginning at 1:45 p.m. PT.
The call-in number is (844) 826-3034 (domestic) and (412) 317-5179 (international). A replay of the conference will be available for seven days following the call at (877) 344-7529 (domestic) and (412) 317-0088 (international). The confirmation number for live broadcast and replay is 10124276.
About Ultra Clean Holdings, Inc.
Ultra Clean Holdings, Inc. is a leading developer and supplier of critical subsystems, ultra-high purity cleaning and analytical services primarily for the semiconductor and display related industries. Ultra Clean offers its customers an integrated outsourced solution for major subassemblies, improved design-to-delivery cycle times, design for manufacturability, prototyping and component manufacturing. Ultra Clean is headquartered in Hayward, California. Additional information is available at www.uct.com.
Use of Non-GAAP Measures
Management uses non-GAAP net income and net income per diluted share to evaluate the Company's operating and financial results. We believe the presentation of non-GAAP results is useful to investors for analyzing our core business and business trends and comparing performance to prior periods, along with enhancing investors' ability to view the Company's results from management's perspective. The presentation of this additional information should not be considered a substitute for results prepared in accordance with GAAP. Tables presenting reconciliations of non-GAAP results to U.S. GAAP results are included at the end of this press release. A reconciliation of our guidance for non-GAAP net income per diluted share for the fourth quarter of 2018 is not available due to fluctuations in the geographic mix of our earnings from quarter to quarter, which impacts our tax rate and cannot be reasonably predicted or determined. As a result, such reconciliation is not available without unreasonable efforts and we are unable to determine the probable significance of the unavailable information.
Safe Harbor Statement
The foregoing information contains, or may be deemed to contain, "forward-looking statements" (as defined in the US Private Securities Litigation Reform Act of 1995) which reflect our current views with respect to future events and financial performance. We use words such as "anticipates,", "projection", "outlook", "forecast", "believes," "plan," "expect," "future,"' "intends," "may," "will," "estimates,", "see", "predicts," and similar expressions to identify these forward-looking statements. Forward looking statements included in this press release include our expectations about the semiconductor capital equipment market and our fourth quarter 2018 outlook. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, the Company's actual results may differ materially from the results predicted or implied by these forward-looking statements. These risks, uncertainties and other factors also include, among others, those identified in "Risk Factors", "Management's Discussion and Analysis of Financial Condition and Results of Operations'' and elsewhere in our annual report on Form 10-K for the year ended December 29, 2017 as filed with the Securities and Exchange Commission and subsequently filed quarterly reports on Form 10-Q. Ultra Clean Holdings, Inc. undertakes no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise unless required by law.
Contact:
Rhonda Bennetto Vice President Investor Relations 250-307-9030
ULTRA CLEAN HOLDINGS, INC. | |||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||
(Unaudited; in thousands, except per share data) | |||||||||||
Three months ended | Nine months ended | ||||||||||
September 28, | September 29, | September 28, | September 29, | ||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Sales | $ | 234,079 | $ | 242,610 | $ | 839,134 | $ | 675,465 | |||
Cost of goods sold | 199,084 | 199,914 | 709,270 | 551,903 | |||||||
Gross profit | 34,995 | 42,696 | 129,864 | 123,562 | |||||||
Operating expenses: | |||||||||||
Research and development | 3,284 | 2,722 | 9,228 | 8,402 | |||||||
Sales and marketing | 3,839 | 3,662 | 11,274 | 10,064 | |||||||
General and administrative | 26,950 | 13,050 | 58,868 | 37,656 | |||||||
Total operating expenses | 34,073 | 19,434 | 79,370 | 56,122 | |||||||
Income from operations | 922 | 23,262 | 50,494 | 67,440 | |||||||
Interest and other income (expense), net | (2,766) | (19) | (3,249) | (2,077) | |||||||
Income (loss) before provision for income taxes | (1,844) | 23,243 | 47,245 | 65,363 | |||||||
Income tax provision | 4,596 | 3,527 | 9,984 | 11,127 | |||||||
Net income (loss) | (6,440) | 19,716 | 37,261 | 54,236 | |||||||
Net loss attributable to non-controlling interest | (443) | - | (443) | - | |||||||
Net income (loss) attributable to Ultra Clean Holdings, Inc. | $ | (5,997) | $ | 19,716 | $ | 37,704 | $ | 54,236 | |||
Net income (loss) per share attributable to Ultra Clean Holdings, Inc. common stockholders: | |||||||||||
Basic | $ | (0.15) | $ | 0.59 | $ | 0.99 | $ | 1.63 | |||
Diluted | $ | (0.15) | $ | 0.57 | $ | 0.97 | $ | 1.59 | |||
Shares used in computing net income (loss) per share: | |||||||||||
Basic | 38,930 | 33,540 | 38,152 | 33,342 | |||||||
Diluted | 38,930 | 34,360 | 38,745 | 34,216 | |||||||
ULTRA CLEAN HOLDINGS, INC. | ||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
(Unaudited; in thousands) | ||||||
September 28, | December 29, | |||||
2018 | 2017 | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 160,340 | $ | 68,306 | ||
Accounts receivable, net of allowance | 95,056 | 90,213 | ||||
Inventory | 198,578 | 236,840 | ||||
Other current assets | 30,873 | 12,089 | ||||
Total current assets | 484,847 | 407,448 | ||||
Equipment and leasehold improvements, net | 133,746 | 32,246 | ||||
Goodwill | 151,869 | 85,248 | ||||
Purchased intangibles, net | 203,180 | 31,587 | ||||
Deferred tax assets, net | 4,918 | 4,951 | ||||
Other non-current assets | 8,072 | 1,932 | ||||
Total assets | $ | 986,632 | $ | 563,412 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
Current liabilities: | ||||||
Bank borrowings | $ | 42,818 | $ | 12,381 | ||
Accounts payable | 95,178 | 173,521 | ||||
Other current liabilities | 37,627 | 21,445 | ||||
Total current liabilities | 175,623 | 207,347 | ||||
Bank borrowings, net of current portion | 330,984 | 39,893 | ||||
Deferred tax liability | 9,868 | 9,981 | ||||
Other long-term liabilities | 23,409 | 5,886 | ||||
Total liabilities | 539,884 | 263,107 | ||||
Stockholders' equity: | ||||||
Common stock | 283,995 | 185,336 | ||||
Retained earnings | 150,826 | 113,122 | ||||
Accumulated other comprehensive income | (43) | 1,847 | ||||
Ultra Clean Holdings, Inc. stockholders' equity | 434,778 | 300,305 | ||||
Noncontrolling interest | 11,970 | - | ||||
Total stockholders' equity | 446,748 | 300,305 | ||||
Total liabilities and stockholders' equity | $ | 986,632 | $ | 563,412 | ||
ULTRA CLEAN HOLDINGS, INC. | |||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
(unaudited; in thousands) | |||
Nine Months Ended | |||
September 28, | September 29, | ||
2018 | 2017 | ||
Cash flows from operating activities: | |||
Net income including noncontrolling interests | $ 37,261 | $ 54,236 | |
Adjustments to reconcile net income to net cash provided by operating activities (excluding assets acquired and liabilities assumed): | |||
Depreciation and amortization | 10,730 | 7,703 | |
Stock-based compensation | 7,133 | 5,059 | |
Change in the fair value of financial instruments | (499) | (278) | |
Others | 1,352 | 72 | |
Changes in assets and liabilities: | |||
Accounts receivable | 13,730 | (32,387) | |
Inventories | 37,816 | (60,484) | |
Prepaid expenses and other | (6,292) | (4,386) | |
Deferred income taxes | 68 | (224) | |
Other non-current assets | (297) | (486) | |
Accounts payable | (86,699) | 57,695 | |
Accrued compensation and related benefits | 5,332 | 4,514 | |
Income taxes payable | (3,969) | 4,614 | |
Other liabilities | (335) | 1,978 | |
Net cash provided by operating activities | 15,331 | 37,626 | |
Cash flows from investing activities: | |||
Purchases of equipment and leasehold improvements | (15,526) | (12,534) | |
Acquisition of Quantum, net of cash acquired | (290,462) | — | |
Net cash used for investing activities | (305,988) | (12,534) | |
Cash flows from financing activities: | |||
Proceeds from bank borrowings | 382,184 | 8,172 | |
Proceeds from issuance of common stock | 94,471 | 1,689 | |
Principal payments on bank borrowings | (78,608) | (19,228) | |
Debt issuance costs paid | (12,118) | — | |
Employees' taxes paid upon vesting of restricted stock units | (2,945) | (2,369) | |
Net cash provided by (used for) financing activities | 382,984 | (11,736) | |
Effect of exchange rate changes on cash and cash equivalents | (293) | 118 | |
Net increase in cash and cash equivalents | $ 92,034 | $ 13,474 | |
Cash and cash equivalents at beginning of period | 68,306 | 52,465 | |
Cash and cash equivalents at end of period | $ 160,340 | $ 65,939 | |
ULTRA CLEAN HOLDINGS, INC. | ||||||
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS | ||||||
Three Months Ended | ||||||
September 28, | September 29, | June 29, | ||||
2018 | 2017 | 2018 | ||||
Reconciliation of GAAP Net Income (loss) to Non-GAAP Net Income (in thousands) | ||||||
Reported net income (loss) attributable to Ultra Clean Holdings, Inc. on a GAAP basis | $ (5,997) | $ 19,716 | $ 18,960 | |||
Amortization of intangible assets (1) | 2,411 | 1,231 | 1,098 | |||
Reduction in force (2) | 1,319 | - | - | |||
Product transition fees (3) | 657 | - | - | |||
Executive transition costs (4) | 246 | - | 1,400 | |||
Disposal of business unit (5) | 1,082 | - | - | |||
Bank transaction costs (6) | 99 | - | - | |||
Acquisition costs (7) | 9,391 | - | - | |||
Income tax effect of non-GAAP adjustments (8) | (2,220) | (159) | (296) | |||
Income tax effect of valuation allowance (9) | 4,865 | 524 | 303 | |||
Non-GAAP net income attributable to Ultra Clean Holdings, Inc. | $ 11,853 | $ 21,312 | $ 21,465 | |||
Reconciliation of GAAP Income from operations to Non-GAAP Income from operations (in thousands) | ||||||
Reported income from operations on a GAAP basis | $ 922 | $ 23,262 | $ 22,664 | |||
Amortization of intangible assets (1) | 2,411 | 1,231 | 1,098 | |||
Reduction in force (2) | 1,319 | - | - | |||
Product transition fees (3) | 657 | - | - | |||
Executive transition costs (4) | 246 | - | 1,400 | |||
Acquisition costs (7) | 9,391 | - | - | |||
Non-GAAP income from operations | $ 14,946 | $ 24,493 | $ 25,162 | |||
Reconciliation of GAAP Operating margin to Non-GAAP Operating margin | ||||||
Reported operating margin on a GAAP basis | 0.4% | 9.6% | 7.8% | |||
Amortization of intangible assets (1) | 1.0% | 0.5% | 0.4% | |||
Reduction in force (2) | 0.6% | 0.0% | 0.0% | |||
Product transition fees (3) | 0.3% | 0.0% | 0.0% | |||
Executive transition costs (4) | 0.1% | 0.0% | 0.0% | |||
Acquisition costs (7) | 4.0% | 0.0% | 0.0% | |||
Non-GAAP operating margin | 6.4% | 10.1% | 8.7% | |||
Reconciliation of GAAP Gross profit to Non-GAAP Gross profit (in thousands) | ||||||
Reported gross profit on a GAAP basis | $ 34,995 | $ 42,696 | $ 46,065 | |||
Reduction in force (2) | 1,197 | - | - | |||
Product transition fees (3) | 657 | - | - | |||
Non-GAAP gross profit | $ 36,849 | $ 42,696 | $ 46,065 | |||
Reconciliation of GAAP Gross margin to Non-GAAP Gross margin | ||||||
Reported gross margin on a GAAP basis | 15.0% | 17.6% | 15.9% | |||
Reduction in force (2) | 0.4% | - | 0.0% | |||
Product transition fees (3) | 0.3% | - | 0.0% | |||
Non-GAAP gross margin | 15.7% | 17.6% | 15.9% | |||
Reconciliation of GAAP Interest and other income (expense) to Non-GAAP Interest and other income (expense) (in thousands) | ||||||
Reported interest and other income (expense) on a GAAP basis | $ (2,766) | $ (19) | $ (809) | |||
Disposal of business unit (5) | 1,082 | - | - | |||
Bank transaction costs (6) | 99 | - | - | |||
Non-GAAP interest and other income (expense) | $ (1,585) | $ (19) | $ (809) | |||
1 Amortization of intangible assets related to the Company's acquisitions of AIT, Thermal, FDS and QGT | ||||||
2 Represents severence costs related to the company's reduction in force during the quarter | ||||||
3 One-time product transition payment | ||||||
4 Represents final termination benefits paid to a former executive of the Company | ||||||
5 Represents the loss on disposal of the Companuy's 3D printing operations in Singapore | ||||||
6 Represents the writeoff of debt issuance costs, bank fees related to the payoff of remaining debt with East West Bank. | ||||||
7 Represents costs related to the acquisition of QGT | ||||||
8 Tax effect of items (1) through (7) above based on the non-gaap tax rate shown below | ||||||
9 The Company's GAAP tax expense is generally higher than the Company's non-GAAP tax expense, primarily due to losses in the U.S. with full federal and state valuation allowances. The Company's non-GAAP tax rate and resulting non-GAAP tax expense considers the tax implications as if there was no federal or state valuation allowance position in effect. | ||||||
Three Months Ended | ||||||
September 28, | September 29, | June 29, | ||||
2018 | 2017 | 2018 | ||||
Reconciliation of GAAP Earnings Per Diluted Share to Non-GAAP Earnings Per Diluted Share | ||||||
Reported net income (loss) on a GAAP basis | $ (0.15) | $ 0.57 | $ 0.48 | |||
Amortization of intangible assets | 0.06 | 0.04 | 0.03 | |||
Reduction in force | 0.03 | - | - | |||
Product transition fees | 0.02 | - | 0.00 | |||
Executive transition costs | 0.01 | - | 0.04 | |||
Disposal of business unit | 0.03 | - | - | |||
Bank transaction costs | 0.00 | - | - | |||
Acquisition costs | 0.24 | - | - | |||
Income tax effect of non-GAAP adjustments | (0.06) | (0.01) | (0.01) | |||
Income tax effect of valuation allowance | 0.12 | 0.02 | 0.01 | |||
Non-GAAP net income | $ 0.30 | $ 0.62 | $ 0.55 | |||
Weighted average number of diluted shares (thousands) | 38,930 | 34,360 | 39,297 | |||
ULTRA CLEAN HOLDINGS, INC. | ||||||
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP EFFECTIVE INCOME TAX RATE | ||||||
Three Months Ended | ||||||
September 28, | September 29, | June 29, | ||||
2018 | 2017 | 2018 | ||||
(in thousands, except percentages) | ||||||
Provision for income taxes on a GAAP basis | $ 4,596 | $ 3,527 | $ 2,895 | |||
Income tax effect of non-GAAP adjustments (1) | 2,220 | 159 | 296 | |||
Income tax effect of valuation allowance (2) | (4,865) | (524) | (303) | |||
Non-GAAP provision for income taxes | $ 1,951 | $ 3,162 | $ 2,888 | |||
Income (loss) before income taxes on a GAAP basis | $ (1,844) | $ 23,243 | $ 21,855 | |||
Amortization of intangible assets | 2,411 | 1,231 | 1,098 | |||
Reduction in force | 1,319 | - | - | |||
Product transition fees | 657 | - | - | |||
Executive transition costs | 246 | - | 1,400 | |||
Disposal of business unit | 1,082 | - | - | |||
Bank transaction costs | 99 | - | - | |||
Acquisition costs | 9,391 | - | - | |||
Non-GAAP income before income taxes | $ 13,361 | $ 24,474 | $ 24,353 | |||
Effective income tax rate on a GAAP basis | -249.2% | 15.2% | 13.2% | |||
Non-GAAP effective income tax rate | 14.6% | 12.9% | 11.9% | |||
1 Tax effect of items (1) through (4) above based on the non-gaap tax rate | ||||||
2 The Company's GAAP tax expense is generally higher than the Company's non-GAAP tax expense, primarily due to losses in the U.S. with full federal and state valuation allowances. The Company's non-GAAP tax rate and resulting non-GAAP tax expense considers the tax implications as if there was no federal or state valuation allowance position in effect. | ||||||
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SOURCE Ultra Clean Holdings, Inc.