Nov 20, 2018   SOURCE: BusinessWire

Kulicke & Soffa Reports Fourth Quarter & Fiscal Year 2018 Results

Kulicke and Soffa Industries, Inc. (NASDAQ: KLIC) (“Kulicke & Soffa”, “K&S” or the “Company”), today announced financial results of its fourth fiscal quarter and full fiscal year ended September 29, 2018. The Company reported fourth quarter net revenue of $184.8 million, and reported diluted EPS of $0.43 and a non-GAAP diluted EPS of $0.45.

During its fourth fiscal quarter, K&S repurchased $23.7 million of common stock in open market transactions at an average price of $25.74 per share. The Company also recorded a quarterly dividend equivalent to $0.12 per share during its fourth fiscal quarter.

 
Quarterly Results - U.S. GAAP
     

Fiscal Q4 2018

   

Change vs.
Fiscal Q4 2017

    Change vs.
Fiscal Q3 2018
Net Revenue     $184.8 million     down 14.4%     down 31.3%
Gross Profit     $85.8 million     down 20.1%     down 32.4%
Gross Margin     46.4%     down 330 bps     down 80 bps
Income from Operations $24.6 million down 41.1% down 61.9%
Operating Margin     13.3%     down 610 bps     down 1070 bps
Net Income $29.6 million down 28.2% down 50.9%
Net Margin     16.0%     down 310 bps     down 640 bps
EPS – Diluted     $0.43     down 24.6%     down 50.0%
 
           
Quarterly Results - Non-GAAP
     

Fiscal Q4 2018

    Change vs.
Fiscal Q4 2017 		    Change vs.
Fiscal Q3 2018
Income from Operations $27.2 million down 40.0% down 59.0%
Operating Margin     14.7%     down 630 bps     down 1000 bps
Net Income $31.2 million down 30.2% down 49.9%
Net Margin     16.9%     down 380 bps     down 630 bps
EPS - Diluted     $0.45     down 27.4%     down 49.4%
 

* A reconciliation of the GAAP and non-GAAP adjusted results is provided in the financial tables included in this release. See also “Use of Non-GAAP Financial Results” section.

Dr. Fusen Chen, Kulicke & Soffa's President and Chief Executive Officer, stated, “Over the past two years, our organizational redesign and development efforts have diversified our business and provided access to several new and promising growth opportunities. Throughout fiscal year 2018, these fundamental improvements resulted in our ability to deliver record levels of both gross profits and shareholders returns."

Fiscal Year 2018 Financial Highlights

  • Net revenue of $889.1 million.
  • Gross margin of 46.1%.
  • Net income of $56.7 million or $0.80 per share; Non-GAAP net income of $171.1 million or $2.43 per share.
  • The Company repurchased a total of 3.8 million shares of common stock at a cost of $91.1 million.

Fourth Quarter Fiscal 2018 Financial Highlights

  • Net revenue of $184.8 million.
  • Gross margin of 46.4%.
  • Net income of $29.6 million or $0.43 per share; Non-GAAP net income of $31.2 million or $0.45 per share.
  • Cash, cash equivalents, and short-term investments were $613.6 million as of September 29, 2018.

First Quarter Fiscal 2019 Outlook

The Company currently expects net revenue in the first fiscal quarter of 2019 ending December 29, 2018 to be approximately $150 million to $160 million. The midpoint of this guidance exceeds four of the past five first fiscal quarters.

Looking forward, Dr. Fusen Chen commented, "Despite the relative softness anticipated in the December quarter, our fundamental market positions, new product development and significant exposure to major trends supporting connected devices, automotive, LED and advanced packaging provide us with a high-level of confidence as we look ahead."

Use of Non-GAAP Financial Results

In addition to U.S. GAAP results, this press release also contains non-GAAP financial results. The Company's non-GAAP results exclude amortization related to intangible assets acquired through business combinations, goodwill impairment, costs associated with restructuring, income tax expense related to the Tax Cuts and Jobs Act of 2017 as well as tax benefits or expense associated with the foregoing non-GAAP items. These non-GAAP measures are consistent with the way management analyzes and assesses the Company’s operating results. The Company believes these non-GAAP measures enhance investors’ understanding of the Company’s underlying operational performance, as well as their ability to compare the Company’s period-to-period financial results and the Company’s overall performance to that of its competitors.

Management uses both U.S. GAAP metrics as well as non-GAAP operating income, operating margin, net income, net margin and net income per diluted share to evaluate the Company's operating and financial results. Non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in the Company’s industry, as other companies in the industry may calculate non-GAAP financial results differently. In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact on the Company’s reported financial results. The presentation of non-GAAP items is meant to supplement, but not substitute for, GAAP financial measures or information. The Company believes the presentation of non-GAAP results in combination with GAAP results provides better transparency to the investment community when analyzing business trends, providing meaningful comparisons with prior period performance and enhancing investors' ability to view the Company's results from management's perspective. A reconciliation of each available GAAP to non-GAAP financial measure discussed in this press release is contained in the attached exhibit.

About Kulicke & Soffa

Kulicke & Soffa (NASDAQ: KLIC) is a leading provider of semiconductor packaging and electronic assembly solutions supporting the global automotive, consumer, communications, computing and industrial segments. As a pioneer in the semiconductor space, K&S has provided customers with market leading packaging solutions for decades. In recent years, K&S has expanded its product offerings through strategic acquisitions and organic development, adding advanced packaging, electronics assembly, wedge bonding and a broader range of tools to its core offerings. Combined with its extensive expertise in process technology and focus on development, K&S is well positioned to help customers meet the challenges of packaging and assembling the next-generation of electronic devices (www.kns.com).

Caution Concerning Results and Forward Looking Statements

In addition to historical statements, this press release contains statements relating to future events and our future results. These statements are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, and include, but are not limited to, statements that relate to our future expected dividend payouts and growth opportunities. While these forward-looking statements represent our judgments and future expectations concerning our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to: the risk that the Company fails to meet its operational and financial targets in order to adhere to its dividend policy; the risk that customer orders already received may be postponed or canceled, generally without charges; the risk that anticipated customer orders may not materialize; the risk that our suppliers may not be able to meet our demands on a timely basis; the volatility in the demand for semiconductors and our products and services; the risk that identified market opportunities may not grow or developed as we anticipated; volatile global economic conditions, which could result in, among other things, sharply lower demand for products containing semiconductors and for the Company’s products, and disruption of capital and credit markets; the risk of failure to successfully manage our operations; the possibility that we may need to impair the carrying value of goodwill and/or intangibles established in connection with one or more of our prior acquisitions; acts of terrorism and violence; risks, such as changes in trade regulations, currency fluctuations, political instability and war, which may be associated with a substantial non-U.S. customer and supplier base and substantial non-U.S. manufacturing operations; the impact of changes in tax law; the risk that the Company will not identify suitable acquisition opportunities or that any acquisitions will not be successful; the risk that the Company fails to timely remediate the material weaknesses identified in the Company’s internal controls over financial reporting or that new material weaknesses or significant deficiencies emerge; and the factors listed or discussed in Kulicke and Soffa Industries, Inc. 2017 Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission. Kulicke and Soffa Industries, Inc. is under no obligation to (and expressly disclaims any obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise.

   
KULICKE & SOFFA INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(In thousands, except per share and employee data)

(Unaudited)

 
Three months ended Twelve months ended
September 29,   September 30, September 29,   September 30,
2018 2017 2018 2017
Net revenue $ 184,824 $ 215,892 $ 889,121 $ 809,041
Cost of sales 99,001   108,491   479,680   426,947  
Gross profit 85,823   107,401   409,441   382,094  
 
Operating expenses:
Selling, general and administrative 27,854 34,334 113,338 123,234
Research and development 30,740 27,698 119,621 100,203
Impairment charges — — — 35,207
Amortization of intangible assets 1,899 1,989 7,826 6,554
Restructuring 756   1,531   2,024   3,813  
Total operating expenses 61,249   65,552   242,809   269,011  
Income from operations 24,574 41,849 166,632 113,083
Other income (expense):
Interest income 3,551 1,989 11,971 6,491
Interest expense (255 ) (272 ) (1,054 ) (1,059 )
Income before income taxes 27,870 43,566 177,549 118,515
Income tax (benefit)/expense (1,750 ) 2,539 120,744 (7,394 )
Share of results of equity-method investee, net of tax (15 ) (197 ) 129   (190 )
Net income $ 29,635   $ 41,224   $ 56,676   $ 126,099  
 
Net income per share:
Basic $ 0.44   $ 0.58   $ 0.82   $ 1.78  
Diluted $ 0.43   $ 0.57   $ 0.80   $ 1.75  
 
Cash dividends declared per share $ 0.12   $ —   $ 0.24   $ —  
 
Weighted average shares outstanding:
Basic 67,462 70,742 69,380 70,906
Diluted 68,675 72,071 70,419 72,063
 
         
Three months ended Twelve months ended
September 29,   September 30, September 29,   September 30,

Supplemental financial data:

2018 2017 2018 2017
Depreciation and amortization $ 4,852 $ 4,518 $ 19,015 $ 16,257
Capital expenditures 3,960 3,779 20,441 25,688
Equity-based compensation expense:
Cost of sales 131 119 515 463
Selling, general and administrative 2,671 1,652 8,548 9,015
Research and development 659   481   2,622   2,244
Total equity-based compensation expense $ 3,461   $ 2,252   $ 11,685   $ 11,722
 
                       
As of
September 29, 2018   September 30, 2017
Backlog of orders 1 $ 141,665 $ 190,702
Number of employees 2,912 3,055
1.   Represents customer purchase commitments. While the Company believes these orders are firm, they are generally cancellable by customers without penalty.
 
 
KULICKE & SOFFA INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands)

(Unaudited)

 
As of
September 29, 2018   September 30, 2017
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 320,630 $ 392,410
Restricted cash 518 530
Short-term investments 293,000 216,000
Accounts and notes receivable, net of allowance for doubtful accounts of $385 and $79, respectively 243,373 198,480
Inventories, net 115,191 122,023
Prepaid expenses and other current assets 14,561 23,939
TOTAL CURRENT ASSETS 987,273 953,382
 
Property, plant and equipment, net 76,067 67,762
Goodwill 56,550 56,318
Intangible assets, net 52,871 62,316
Deferred income taxes 9,017 27,771
Equity investments 1,373 1,502
Other assets 2,589   2,056  
TOTAL ASSETS $ 1,185,740   $ 1,171,107  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 48,527 $ 51,354
Accrued expenses and other current liabilities 105,978 124,847
Income taxes payable 19,571   16,780  
TOTAL CURRENT LIABILITIES 174,076 192,981
 
Financing obligation 15,187 16,074
Deferred income taxes 25,591 27,152
Income taxes payable 81,491 6,438
Other liabilities 9,188   8,432  
TOTAL LIABILITIES 305,533   251,077  
 
SHAREHOLDERS' EQUITY
Common stock, no par value 519,244 506,515
Treasury stock, at cost (248,664 ) (157,604 )
Retained earnings 613,529 569,080
Accumulated other comprehensive (loss) / income (3,902 ) 2,039  
TOTAL SHAREHOLDERS' EQUITY $ 880,207   $ 920,030  
   
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,185,740   $ 1,171,107  
 
   
KULICKE & SOFFA INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 
Three months ended Twelve months ended
September 29,   September 30, September 29,   September 30,
2018 2017 2018 2017
Net cash provided by operating activities $ 29,656 $ 68,144 $ 123,499 $ 136,310
Net cash provided used in investing activities, continuing operations (39,344 ) (136,657 ) (96,871 ) (144,669 )
Net cash used in financing activities, continuing operations (33,330 ) (21,879 ) (99,135 ) (22,684 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash 966   (597 ) 715   76  
Changes in cash, cash equivalents and restricted cash (42,052 ) (90,989 ) (71,792 ) (30,967 )
Cash, cash equivalents and restricted cash, beginning of period* 363,200   483,929   392,940   423,907  
Cash, cash equivalents and restricted cash, end of period $ 321,148   $ 392,940   $ 321,148   $ 392,940  
 
Short-term investments 293,000   216,000   293,000   216,000  
Total cash, cash equivalents, restricted cash and short-term investments $ 614,148   $ 608,940   $ 614,148   $ 608,940  
*Certain time deposits as at October 1, 2016 have been corrected from cash equivalents to short-term investments for comparative purposes.
 
 
Reconciliation of U.S. GAAP Income from Operating
to Non-GAAP Income from Operation and Operating Margin
(in thousands, except percentages)
(unaudited)
 
Three months ended
September 29, 2018   September 30, 2017   June 30, 2018
Net revenue $ 184,824 $ 215,892 $ 268,834
U.S. GAAP Income from operations 24,574 41,849 64,463
U.S. GAAP operating margin 13.3 % 19.4 % 24.0 %
 
Pre-tax non-GAAP items:
Amortization related to intangible assets acquired through business combination- selling, general and administrative 1,899 1,989 1,962
Restructuring 756 1,531 (39 )
Impairment charges —   —   —  
Non-GAAP Income from operations $ 27,229   $ 45,369   $ 66,386  
Non-GAAP operating margin 14.7 % 21.0 % 24.7 %
 
   
Reconciliation of U.S. GAAP Net Income to Non-GAAP Net Income and
U.S. GAAP net income per share to Non-GAAP net income per share
(in thousands, except per share data)
(unaudited)
 

Twelve
months ended

Three months ended

September 29,
2018

September 29,
2018

 

September 30,
2017

  June 30, 2018
Net revenue $ 889,121 $ 184,824 $ 215,892 $ 268,834
U.S. GAAP net income

 

56,676 29,635 41,224 60,256
U.S. GAAP net margin 6.4 % 16.0 % 19.1 % 22.4 %
 
Pre-tax non-GAAP adjustments:
Amortization related to intangible assets acquired through business combination- selling, general and administrative 7,826 1,899 1,989 1,962
Restructuring 2,024 756 1,531 (39 )
Income tax expense- Tax Reform 104,550 (1,137 ) — —
Net income tax (benefit)/expense on non-GAAP items (25 ) 44   (44 ) 78  
Total non-GAAP adjustments 114,375   1,562   3,476   2,001  
Non-GAAP net income 171,051   31,197   44,700   62,257  
Non-GAAP net margin 19.2 % 16.9 % 20.7 % 23.2 %
 
U.S. GAAP net income per share:
Basic 0.82 0.44 0.58 0.87
Diluted 0.80 0.43 0.57 0.86
 
Non-GAAP adjustments per share:
Basic 1.65 0.02 0.05 0.03
Diluted 1.62 0.02 0.05 0.03
 
Non-GAAP net income per share:
Basic $ 2.47   $ 0.46   $ 0.63   $ 0.90  
Diluted $ 2.43   $ 0.45   $ 0.62   $ 0.89  
 
Weighted average shares outstanding:
Basic 69,380   67,462   70,742   69,125  
Diluted 70,419   68,675   72,071   70,302