Ultra Clean Announces Fourth Quarter and Fiscal Year 2017 Financial Results

HAYWARD, Calif., Feb. 21, 2018 /PRNewswire/ -- Ultra Clean Holdings, Inc. (Nasdaq: UCTT), a leading developer and supplier of critical subsystems for the semiconductor and display capital equipment industries, today reported its financial results for the fourth quarter and fiscal year ended December 29, 2017.

"UCT reached a new revenue milestone in the fourth quarter, capping off an extraordinary year of expansion and profitability," said Jim Scholhamer, President and CEO. "Our operational flexibility enabled us to increase the amount of UCT's content on our customers' platforms, allowing us to deliver additional value and outpace the broader semiconductor capital equipment market. With a balance sheet strengthened by our recent equity offering, we are focused on opportunities to further expand our capabilities, broaden our worldwide footprint and enhance long-term shareholder value."

GAAP Financial Results
Total revenue for the fourth quarter of 2017 was $248.9 million, an increase of 2.6% compared to the third quarter of 2017 and 42.6% compared to the same period a year ago. Semiconductor revenue increased 5.8% compared to the third quarter of 2017 and 50.8% compared to the same period a year ago. Total revenue from outside the U.S. rose 5.6% sequentially and 55.0% compared to the same period a year ago. Gross margin for the fourth quarter of 2017 was 17.7%, compared to 17.6% for the prior quarter and 17.0% for the same period a year ago. Net income for the fourth quarter was $20.8 million, or $0.62 and $0.60 per basic and diluted share respectively, compared to net income of $19.7 million, or $0.59 and $0.57 per basic and diluted share respectively, in the third quarter of 2017, and net income of $10.0 million, or $0.30 per basic and diluted share for the same period a year ago.

Net cash at the end of the fourth quarter of 2017 increased $7.4 million compared to the third quarter of 2017. Cash and cash equivalents were $68.3 million, an increase of $2.4 million compared to the third quarter of 2017. Outstanding debt was $52.3 million, a decrease of $5.1 million compared to the third quarter of 2017.

For fiscal year 2017 revenue was $924.4 million, an increase of 64.3% from fiscal year 2016. Semiconductor revenue was 92.9% of total revenue for fiscal year 2017 and 90.3% for fiscal year 2016. Revenue outside the U.S. was 53.6% of total revenue in fiscal year 2017 compared to 48.0% in fiscal year 2016. Gross margin for fiscal year 2017 was 18.1% compared to 15.4% for fiscal year 2016. Net income for fiscal year 2017 was $75.1 million, or $2.25 and $2.19 per basic and diluted share respectively, compared to net income of $10.1 million, or $0.31 and $0.30 per basic and diluted share respectively, in fiscal year 2016.

Non-GAAP Financial Results
Non-GAAP net income for the fourth quarter of 2017 was $20.3 million and non-GAAP net income per diluted share was $0.59. Non-GAAP net income and non-GAAP net income per diluted share exclude pre-tax charges of $1.7 million for intangible assets amortization in addition to the corresponding decrease in tax expense of approximately $2.3 million. This compares to non-GAAP net income of $21.3 million and non-GAAP net income per diluted share of $0.62 for the third quarter of 2017, and non-GAAP net income of $12.0 million and non-GAAP net income per diluted share of $0.36 for the fourth quarter of 2016.

Non-GAAP net income for fiscal year 2017 was $80.3 million and non-GAAP net income per diluted share was $2.34. Non-GAAP net income and non-GAAP net income per diluted share exclude pre-tax charges of $5.4 million for intangible assets amortization in addition to the corresponding decrease in tax expense of approximately $0.2 million. This compares to prior fiscal year non-GAAP net income and non-GAAP net income per diluted share of $21.4 million and $0.65, respectively.

The Company has provided a reconciliation of GAAP to non-GAAP financial measures in the financial statement tables included in this press release.

First Quarter 2018 Outlook
The Company expects revenue to be between $275 million to $290 million. Taking into account the additional shares issued during the recent financing, the Company anticipates GAAP net income per diluted share to be in the range of $0.52 to $0.59 and non-GAAP net income per diluted share to be in the range of $0.56 to $0.63. Non-GAAP operating margin is expected to be within the targeted range of 8% to 10% and the non-GAAP tax rate should be between 14% and 16%.

Conference Call
UCT will conduct a conference call today, Wednesday, February 21, 2018, beginning at 1:45 p.m. PDT. 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 10116511 (all callers).

About Ultra Clean Holdings, Inc.
Ultra Clean Holdings, Inc. is a leading developer and supplier of critical subsystems for the semiconductor and display capital equipment 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 first 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," "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 with respect to our first 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 30, 2016 as filed with the Securities and Exchange Commission and subsequently filed quarterly reports on Form 10-Q. Additional information will also be set forth in our annual report on Form 10-K for the year ended December 29, 2017. 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:
Sheri Savage
UCT Senior VP Finance, CFO
510-576-4705

Annie Leschin/Rhonda Bennetto
Investor Relations
415-775-1788
annie@streetsmartir.com
rhonda@streetsmartir.com

                                                             ULTRA CLEAN HOLDINGS, INC.

                                                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                  (Unaudited; in thousands, except per share data)


                                          Three months ended                                   Twelve months ended
                                          ------------------                                   -------------------

                                 December 29,                December 30,                 December 29,             December 30,

                          2017                      2016            2017                          2016
                          ----                      ----            ----                          ----


    Sales                                         $248,886                                     $174,545                            $924,351     $562,759

    Cost of goods sold                           204,819                                      144,844                             756,722      475,976
                                                 -------                                      -------                             -------      -------

    Gross profit                                  44,067                                       29,701                             167,629       86,783
                                                  ------                                       ------                             -------       ------


    Operating expenses:

      Research and development                     3,264                                        2,818                              11,666        9,900

      Sales and marketing                          3,684                                        3,031                              13,748       11,568

      General and administrative                  15,162                                       11,182                              52,818       42,924
                                                  ------                                       ------                              ------       ------

        Total operating expenses                  22,110                                       17,031                              78,232       64,392
                                                  ------                                       ------                              ------       ------

    Income from operations                        21,957                                       12,670                              89,397       22,391

    Interest and other income
     (expense), net                                (378)                                       (181)                            (2,455)     (3,444)
                                                    ----                                         ----                              ------       ------

    Income before provision for
     income taxes                                 21,579                                       12,489                              86,942       18,947

    Income tax provision                             730                                        2,536                              11,857        8,896
                                                     ---                                        -----                              ------        -----

    Net income                                     $20,849                                       $9,953                             $75,085      $10,051
                                                   =======                                       ======                             =======      =======


    Net income per share:

      Basic                                          $0.62                                        $0.30                               $2.25        $0.31

      Diluted                                        $0.60                                        $0.30                               $2.19        $0.30

    Shares used in computing net
     income per share:

      Basic                                       33,602                                       32,877                              33,409       32,632

      Diluted                                     34,500                                       33,526                              34,303       33,150

                                                        ULTRA CLEAN HOLDINGS, INC.

                                                   CONDENSED CONSOLIDATED BALANCE SHEETS

                                                         (Unaudited; in thousands)


                                                        December 29,                            December 30,

                              2017                              2016
                              ----                              ----

                             ASSETS

    Current assets:

      Cash and cash equivalents                                                         $68,306               $52,465

      Accounts receivable, net of allowance                                              90,213                74,663

      Inventory                                                                         231,771               103,861

      Other current assets                                                               12,089                 6,461
                                                                                         ------                 -----

        Total current assets                                                            402,379               237,450
                                                                                        -------               -------


    Equipment and leasehold improvements,
     net                                                                                 32,246                18,858

    Goodwill                                                                             85,248                85,248

    Purchased intangibles, net                                                           31,587                37,024

    Deferred tax asset, net                                                               4,951                 1,355

    Other non-current assets                                                              1,932                   762
                                                                                          -----                   ---

    Total assets                                                                       $558,343              $380,697
                                                                                       ========              ========


              LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:

      Bank borrowings                                                                   $12,381               $16,819

      Accounts payable                                                                  168,452                71,189

      Other current liabilities                                                          21,445                13,053
                                                                                         ------                ------

        Total current liabilities                                                       202,278               101,061
                                                                                        -------               -------


    Bank borrowings, net of current portion                                              39,893                50,931

    Deferred tax liability                                                                9,981                 9,917

    Other long-term liabilities                                                           5,886                 2,657
                                                                                          -----                 -----

        Total liabilities                                                               258,038               164,566
                                                                                        -------               -------


    Stockholders' equity:

      Common stock                                                                      185,336               178,477

      Retained earnings                                                                 113,122                38,037

      Accumulated other comprehensive income
       (loss)                                                                             1,847                 (383)

        Total stockholders' equity                                                      300,305               216,131
                                                                                        -------               -------

    Total liabilities and stockholders'
     equity                                                                            $558,343              $380,697
                                                                                       ========              ========

                                                                                                                                              ULTRA CLEAN HOLDINGS, INC.

                                                                                                                            UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS


                                                                        Three Months Ended                                                             Twelve Months Ended
                                                                        ------------------                                                             -------------------

                                                                   December 29,                                          September 29,                                                   December 30,                                           December 29,                  December 30,

                                                                                       2017                                                     2017                                                           2016                                                     2017                      2016
                                                                                       ----                                                     ----                                                           ----                                                     ----                      ----


    Reconciliation of GAAP Net Income
     to Non-GAAP Net Income (in
     thousands)
    ---------------------------------

    Reported net income on a GAAP
     basis                                                                          $20,849                                                  $19,716                                                         $9,953                                                  $75,085                   $10,051

    Amortization of intangible
     assets (1)                                                                       1,745                                                    1,231                                                          1,439                                                    5,438                     5,757

    Executive transition costs (2)                                                        -                                                       -                                                             -                                                       -                      925

    Restructuring charges (3)                                                             -                                                       -                                                           109                                                        -                      251

    Impairment of "held for sale"
     assets (4)                                                                           -                                                       -                                                           666                                                        -                      666

    Termination of contractual
     obligation (5)                                                                       -                                                       -                                                           438                                                        -                      438

    Income tax effect of non-GAAP
     adjustments (6)                                                                  (229)                                                   (159)                                                         (549)                                                   (714)                  (1,664)

    Income tax effect of valuation
     allowance (7)                                                                  (2,096)                                                     524                                                           (49)                                                     469                     4,964

    Non-GAAP net income                                                             $20,269                                                  $21,312                                                        $12,007                                                  $80,278                   $21,388
                                                                                    -------                                                  -------                                                        -------                                                  -------                   -------


    Reconciliation of GAAP Income
     from operations to Non-GAAP
     Income from operations (in
     thousands)
    -----------------------------

    Reported income from operations
     on a GAAP basis                                                                $21,957                                                  $23,262                                                        $12,670                                                  $89,397                   $22,391

    Amortization of intangible
     assets (1)                                                                       1,745                                                    1,231                                                          1,439                                                    5,438                     5,757

    Executive transition costs (2)                                                        -                                                       -                                                             -                                                       -                      925

    Restructuring charges (3)                                                             -                                                       -                                                           109                                                        -                      251

    Impairment of "held for sale"
     assets (4)                                                                           -                                                       -                                                           666                                                        -                      666

    Termination of contractual
     obligation (5)                                                                       -                                                       -                                                           438                                                        -                      438

    Non-GAAP income from operations                                                 $23,702                                                  $24,493                                                        $15,322                                                  $94,835                   $30,428
                                                                                    -------                                                  -------                                                        -------                                                  -------                   -------


    Reconciliation of GAAP Operating
     margin to Non-GAAP Operating
     margin
    --------------------------------

    Reported operating margin on a
     GAAP basis                                                                        8.8%                                                    9.6%                                                          7.3%                                                    9.7%                     4.0%

    Amortization of intangible
     assets (1)                                                                        0.7%                                                    0.5%                                                          0.8%                                                    0.6%                     1.0%

    Executive transition costs (2)                                                        -                                                       -                                                             -                                                       -                     0.2%

    Restructuring charges (3)                                                             -                                                       -                                                          0.1%                                                       -                        -

    Impairment of "held for sale"
     assets (4)                                                                           -                                                       -                                                          0.4%                                                       -                     0.1%

    Termination of contractual
     obligation (5)                                                                       -                                                       -                                                          0.2%                                                       -                     0.1%

    Non-GAAP operating margin                                                          9.5%                                                   10.1%                                                          8.8%                                                   10.3%                     5.4%
                                                                                        ---                                                     ----                                                            ---                                                     ----                       ---


    Reconciliation of GAAP Gross
     profit to Non-GAAP Gross profit
     (in thousands)
    --------------------------------

    Reported gross profit on a GAAP
     basis                                                                          $44,067                                                  $42,696                                                        $29,701                                                 $167,629                   $86,783

    Impairment of "held for
     sale"assets (4)                                                                      -                                                       -                                                           636                                                        -                      636

    Non-GAAP gross profit                                                           $44,067                                                  $42,696                                                        $30,337                                                 $167,629                   $87,419
                                                                                    -------                                                  -------                                                        -------                                                 --------                   -------


    Reconciliation of GAAP Gross
     margin to Non-GAAP Gross
     margin
    ----------------------------

    Reported gross margin on a GAAP
     basis                                                                            17.7%                                                   17.6%                                                         17.0%                                                   18.1%                    15.4%

    Impairment of "held for
     sale"assets (4)                                                                      -                                                       -                                                          0.4%                                                       -                     0.1%

    Non-GAAP gross margin                                                             17.7%                                                   17.6%                                                         17.4%                                                   18.1%                    15.5%
                                                                                       ----                                                     ----                                                           ----                                                     ----                      ----


    1  Amortization of intangible assets related to the Company's acquisitions of AIT, Marchi and Miconex

    2  Represents expense for termination benefits paid to former executives of the Company

    3  Adjustment to previous restructuring reserve related to the abandonment of one of the Company's facilities

    4  Impairment of assets classified as "held for sale" related to our 3D printing business in Singapore

    5  Amount paid related to the termination of a long-term contractual obligation related to our 3D printing business in Singapore

    6  Tax effect of items (1) through (5) above based on the non-gaap tax rate shown below

    7  The Company's GAAP tax expense is substantially 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                                                            Twelve Months Ended
                                                                      ------------------                                                            -------------------

                                                                   December 29,                                          September 29,                                                   December 30,                                           December 29,                  December 30,

                                                                                       2017                                                     2017                                                           2016                                                     2017                      2016
                                                                                       ----                                                     ----                                                           ----                                                     ----                      ----


    Reconciliation of GAAP Earnings
     Per Diluted Share to Non-GAAP
     Earnings Per Diluted Share
    -------------------------------

    Reported net income on a GAAP
     basis                                                                            $0.60                                                    $0.57                                                          $0.30                                                    $2.19                     $0.30

    Amortization of intangible
     assets                                                                            0.05                                                     0.04                                                           0.04                                                     0.16                      0.18

    Executive transition costs                                                            -                                                       -                                                             -                                                       -                     0.03

    Restructuring charges                                                                 -                                                       -                                                             -                                                       -                     0.01

    Impairment of "held for sale"
     equipment                                                                            -                                                       -                                                          0.02                                                        -                     0.02

    Termination of contractual
     obligation                                                                           -                                                       -                                                          0.01                                                        -                     0.01

    Income tax effect of non-GAAP
     adjustments                                                                     (0.01)                                                  (0.01)                                                        (0.01)                                                  (0.02)                   (0.05)

    Income tax effect of valuation
     allowance                                                                       (0.05)                                                    0.02                                                              -                                                    0.01                      0.15

    Non-GAAP net income                                                               $0.59                                                    $0.62                                                          $0.36                                                    $2.34                     $0.65
                                                                                      -----                                                    -----                                                          -----                                                    -----                     -----

    Weighted average number of
     diluted shares (thousands)                                                      34,500                                                   34,360                                                         33,526                                                   34,303                    33,150

                                                                                                                                               ULTRA CLEAN HOLDINGS, INC.

                                                                                                                         UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP EFFECTIVE INCOME TAX RATE


                                                                       Three Months Ended                                                               Twelve Months Ended
                                                                       ------------------                                                               -------------------

                                                                  December 29,                                            September 29,                                                   December 30,                                           December 29,                     December 30,

                                                                                       2017                                                      2017                                                           2016                                                     2017                       2016
                                                                                       ----                                                      ----                                                           ----                                                     ----                       ----

    (in thousands, except
     percentages)

    Provision for income taxes on
     a GAAP basis                                                                      $730                                                    $3,527                                                         $2,536                                                  $11,857                     $8,896

    Income tax effect of non-GAAP
     adjustments (1)                                                                    229                                                       159                                                            549                                                      714                      1,664

    Income tax effect of valuation
     allowance (2)                                                                    2,096                                                     (524)                                                            49                                                    (469)                   (4,964)
                                                                                      -----                                                      ----                                                            ---                                                     ----                     ------

    Non-GAAP provision for income
     taxes                                                                           $3,055                                                    $3,162                                                         $3,134                                                  $12,102                     $5,596
                                                                                     ------                                                    ------                                                         ------                                                  -------                     ------


    Income before income taxes on
     a GAAP basis                                                                   $21,579                                                   $23,243                                                        $12,489                                                  $86,942                    $18,947

    Amortization of intangible
     assets                                                                           1,745                                                     1,231                                                          1,439                                                    5,438                      5,757

    Executive transition costs                                                            -                                                        -                                                             -                                                       -                       925

    Restructuring charges                                                                 -                                                        -                                                           109                                                        -                       251

    Impairment of "held for sale"
     assets                                                                               -                                                        -                                                           666                                                        -                       666

    Termination of a long-term
     contractual obligation                                                               -                                                        -                                                           438                                                        -                       438

    Non-GAAP income before income
     taxes                                                                          $23,324                                                   $24,474                                                        $15,141                                                  $92,380                    $26,984
                                                                                    -------                                                   -------                                                        -------                                                  -------                    -------


    Effective income tax rate on a
     GAAP basis                                                                        3.4%                                                    15.2%                                                         20.3%                                                   13.6%                     47.0%
                                                                                        ===                                                      ====                                                           ====                                                     ====                       ====

    Non-GAAP effective income tax
     rate                                                                             13.1%                                                    12.9%                                                         20.7%                                                   13.1%                     20.7%
                                                                                       ====                                                      ====                                                           ====                                                     ====                       ====


    1  Tax effect of items (1) through (5) above based on the non-gaap tax rate

    2  The Company's GAAP tax expense is substantially 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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