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.
