Ultra Clean Reports Fourth Quarter and Full Year 2018 Financial Results
HAYWARD, Calif., Feb. 21, 2019 /PRNewswire/ -- Ultra Clean Holdings, Inc. (Nasdaq: UCTT), today reported its financial results for the fourth quarter and full year ended December 28, 2018.
"A full quarter of revenue from our new services business, driven by our acquisition of Quantum, contributed to top line growth for the fourth quarter and delivered greater than 18 percent revenue growth for the year," said Jim Scholhamer, CEO. "We expect the overall semiconductor industry to remain challenged for the near-term so we are implementing a series of rigorous cost structure improvements. These initiatives will improve profitability without compromising our ability to react quickly by seizing opportunities with IDM's and OEM's when industry growth resumes."
Fourth Quarter 2018 GAAP Financial Results
Total revenue was $257.4 million, an increase of 10.0% compared to the third quarter and an increase of 3.4% compared to the same period a year ago.
Gross margin was 17.9% compared to 15.0% last quarter and 17.7% a year ago. Operating margin was 4.0% compared to 0.4% last quarter and 8.8% for the same period last year.
Net loss was $1.1 million or $0.03 per basic and diluted share. This compares to net loss of $6.0 million or $0.15 per basic and diluted share in the previous quarter, and net income of $20.8 million or $0.62 and $0.60 per basic and diluted share last year.
Cash and cash equivalents were $144.1 million, a decrease of $16.2 million compared to the end of the third quarter.
Fourth Quarter Non-GAAP Financial Results
Non-GAAP net income was $8.7 million, or $0.23 per diluted share. This compares to non-GAAP net income of $11.9 million or $0.30 per diluted share in the previous quarter and non-GAAP net income of $20.3 million or $0.59 for the prior year.
Non-GAAP operating margin was 6.5% compared to 6.4% in the previous quarter and 9.5% 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.
Full Year 2018 GAAP Financial Results
Total revenue was $1,096.5 million, an increase of 18.6% from fiscal year 2017. Gross margin was 16.0% compared to 18.1% a year ago. Operating margin was 5.5% compared to 9.7% in fiscal year 2017. Net income was $36.6 million or $0.95 and $0.94 per basic and diluted share. This compares to net income of $75.1 million or $2.25 and $2.19 per basic and diluted share last year.
Full Year 2018 Non-GAAP Financial Results
Non-GAAP net income was $64.7 million, or $1.66 per diluted share. This compares to non-GAAP net income of $80.3 million or $2.34 per diluted share in the previous fiscal year. Non-GAAP operating margin was 7.8% compared to 10.3% a year ago.
First Quarter 2019 Outlook
The Company expects revenue to be between $230.0 million to $250.0 million and GAAP diluted net (loss) income per share to be in the range of ($0.03) to $0.07. The Company expects non-GAAP net income per diluted share to be in the range of $0.09 to $0.19.
Conference Call
The call will take place at 1:45 p.m. PT and can be accessed by dialing 1-844-826-3034 or 1-412-317-5179 (international). No passcode is required. A replay of the call will be available by dialing 1-877-344-7529 or 1-412-317-0088 (international) and entering the confirmation code 10128320. The Webcast will be available on the Investor Relations section of the Company's website at http://uct.com/investors/events/.
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 industry. 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, and tool chamber parts cleaning and coating, as well as microcontamination analytical services. 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 2019 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 first quarter 2019 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. Additional information will also be set forth in our annual report on Form 10-K for the year ended December 28, 2018. 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
rbennetto@uct.com
ULTRA CLEAN HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands, except per share data)
Three months ended Twelve months ended
---
December 28, December 29, December 28, December 29,
2018 2017 2018 2017
---
Sales $
257,389 $
248,886 $
1,096,523 $
924,351
Cost of goods sold 211,412 204,819 920,682 756,722
Gross profit 45,977 44,067 175,841 167,629
Operating expenses:
Research and development 4,059 3,264 13,287 11,666
Sales and marketing 5,032 3,684 16,306 13,748
General and administrative 26,676 15,162 85,544 52,818
Total operating expenses 35,767 22,110 115,137 78,232
Income from operations 10,210 21,957 60,704 89,397
Interest and other income
(expense), net (5,187) (378) (8,436) (2,455)
Income before provision for
income taxes 5,023 21,579 52,268 86,942
Income tax provision 5,335 730 15,319 11,857
Net income (loss) (312) 20,849 36,949 75,085
Net income (loss) attributable
to non-controlling interest 796 353
Net income (loss)
attributable to
Ultra Clean
Holdings, Inc. $
(1,108) $
20,849 $
36,596 $
75,085
===
Net income (loss) per share
attributable to Ultra Clean
Holdings, Inc. common
stockholders:
Basic $
(0.03) $
0.62 $
0.95 $
2.25
Diluted $
(0.03) $
0.60 $
0.94 $
2.19
Shares used in computing net
income (loss) per share:
Basic 39,009 33,602 38,366 33,409
Diluted 39,009 34,500 38,919 34,303
ULTRA CLEAN HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands)
December 28, December 29,
2018 2017
--- ---
ASSETS
Current assets:
Cash and cash equivalents $
144,145 $
68,306
Accounts receivable, net of allowance 108,024 90,213
Inventory 186,116 236,840
Other current assets 21,088 12,089
Total current assets 459,373 407,448
Equipment and leasehold improvements,
net 142,922 32,246
Goodwill 155,472 85,248
Purchased intangibles, net 193,707 31,587
Deferred tax assets, net 2,323 4,951
Other non-current assets 8,110 1,932
Total assets $
961,907 $
563,412
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank borrowings $
9,671 $
12,381
Accounts payable 99,011 173,521
Other current liabilities 33,542 21,445
Total current liabilities 142,224 207,347
Bank borrowings, net of current portion 331,549 39,893
Deferred tax liability 7,990 9,981
Other long-term liabilities 28,497 5,886
Total liabilities 510,260 263,107
Stockholders' equity:
Common stock 287,127 185,336
Retained earnings 149,718 113,122
Accumulated other comprehensive income
(loss) (886) 1,847
Ultra Clean Holdings, Inc. stockholders'
equity 435,959 300,305
Noncontrolling interest 15,688
Total stockholders' equity 451,647 300,305
Total liabilities and stockholders'
equity $
961,907 $
563,412
ULTRA CLEAN HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)
Twelve Months Ended
December 28,
December 29,
2018 2017
Cash flows from operating activities:
Net income including
noncontrolling interests $36,949 $75,085
Adjustments to reconcile net income to net cash provided by
operating activities (excluding assets acquired and liabilities
assumed):
Depreciation and amortization 21,907 10,865
Stock-based compensation 10,272 7,757
Others (308) (206)
Changes in assets and liabilities:
Accounts receivable 7,694 (14,930)
Inventories 50,151 (131,874)
Prepaid expenses and other (2,407) (4,911)
Deferred income taxes (82) (3,755)
Other non-current assets (162) (582)
Accounts payable (82,951) 99,569
Accrued compensation and
related benefits 2,048 2,777
Income taxes payable 798 8,177
Other liabilities 1,474 933
Net cash provided by operating
activities 45,383 48,905
Cash flows from investing activities:
Purchases of equipment and
leasehold improvements (29,487) (16,149)
Acquisition of Quantum, net of
cash acquired (319,781) -
Net cash used for investing
activities (349,268) (16,149)
Cash flows from financing activities:
Proceeds from bank borrowings 387,054 15,076
Proceeds from issuance of
common stock 94,611 1,816
Principal payments on bank
borrowings (86,354) (31,248)
Debt issuance costs paid (12,144) -
Employees' taxes paid upon
vesting of restricted stock
units (3,092) (2,714)
Net cash provided by (used for)
financing activities 380,075 (17,070)
Effect of exchange rate changes
on cash and cash equivalents (351) 155
Net increase in cash and cash
equivalents $75,839 $15,841
---
Cash and cash equivalents at
beginning of period 68,306 52,465
Cash and cash equivalents at
end of period $144,145 $68,306
===
ULTRA CLEAN HOLDINGS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
Three Months Ended
Twelve Months Ended
December 28,
December 29,
September 28,
December 28,
December 29,
2018 2017 2018 2018 2017
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 $(1,108) $20,849 $(5,997) $36,596 $75,085
Amortization of intangible
assets (1) 4,973 1,745 2,411 9,580 5,438
Reduction in force (2) 297 1,319 2,640
Product transition fees (3) 657 657
Executive transition costs (4) 418 246 2,064
Disposal of business unit (5) 1,082 1,082
Bank transaction costs (6) 99 99
Acquisition costs (7) 613 9,391 10,003
Facility lease early exit costs
(8) 117 117
Income tax effect of non-GAAP
adjustments (9) (1,101) (229) (2,220) (4,501) (714)
Income tax effect of valuation
allowance (10) 4,474 (2,096) 4,865 6,355 469
Non-GAAP net income
attributable to Ultra Clean
Holdings, Inc. $8,683 $20,269 $11,853 $64,692 $80,278
Reconciliation of GAAP Income
from operations to Non-GAAP
Income from operations (in
thousands)
---
Reported income from operations
on a GAAP basis $10,210 $21,957 $922 $60,704 $89,397
Amortization of intangible
assets (1) 4,973 1,745 2,411 9,580 5,438
Reduction in force (2) 297 1,319 2,640
Product transition fees (3) 657 657
Executive transition costs (4) 418 246 2,064
Acquisition costs (7) 613 9,391 10,003
Facility lease early exit costs
(8) 117 117
Non-GAAP income from operations $16,628 $23,702 $14,946 $85,765 $94,835
Reconciliation of GAAP Operating
margin to Non-GAAP Operating
margin
---
Reported operating margin on a
GAAP basis 4.0% 8.8% 0.4% 5.5% 9.7%
Amortization of intangible
assets (1) 1.9% 0.7% 1.0% 0.9% 0.6%
Reduction in force (2) 0.1% 0.0% 0.6% 0.2% 0.0%
Product transition fees (3) 0.0% 0.0% 0.3% 0.1% 0.0%
Executive transition costs (4) 0.2% 0.0% 0.1% 0.2% 0.0%
Acquisition costs (7) 0.3% 0.0% 4.0% 0.9% 0.0%
Facility lease early exit costs
(8) 0.0% 0.0% 0.0% 0.0% 0.0%
Non-GAAP operating margin 6.5% 9.5% 6.4% 7.8% 10.3%
Reconciliation of GAAP Gross
profit to Non-GAAP Gross profit
(in thousands)
---
Reported gross profit on a GAAP
basis $45,977 $44,067 $34,995 $175,841 $167,629
Amortization of intangible
assets (1) 1,363 1,363
Reduction in force (2) 297 1,197 2,431
Product transition fees (3) 657 657
Executive transition costs (4) 418 418
Non-GAAP gross profit $48,055 $44,067 $36,849 $180,710 $167,629
Reconciliation of GAAP Gross
margin to Non-GAAP Gross
margin
---
Reported gross margin on a GAAP
basis 17.9% 17.7% 15.0% 16.0% 18.1%
Amortization of intangible
assets (1) 0.5% 0.0% 0.0% 0.1% 0.0%
Reduction in force (2) 0.0% 0.0% 0.4% 0.2% 0.0%
Product transition fees (3) 0.1% 0.0% 0.3% 0.1% 0.0%
Executive transition costs (4) 0.2% 0.0% 0.0% 0.1% 0.0%
Non-GAAP gross margin 18.7% 17.7% 15.7% 16.5% 18.1%
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 $(5,187) $(378) $(2,766) $(8,436) $(2,455)
Disposal of business unit (5) 1,082 1,082
Bank transaction costs (6) 99 99
Non-GAAP interest and other
income (expense) $(5,187) $(378) $(1,585) $(7,255) $(2,455)
1 Amortization of intangible
assets related to the Company's
acquisitions of AIT, Thermal,
FDS and QGT
2 Represents severance costs
related to the company's
reduction in force during the
quarter
3 One-time product
transition payment
4 Represents termination
benefits paid to a former
executive of the Company
5 Represents the loss on
disposal of the Company'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 Represents lease related
costs due to the early exit of
a facility
9 Tax effect of items (1)
through (8) above based on the
non-GAAP tax rate shown below
10 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.
ULTRA CLEAN HOLDINGS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
Three Months Ended
Twelve Months Ended
December 28,
December 29,
September 28,
December 28,
December 29,
2018 2017 2018 2018 2017
Reconciliation of GAAP
Earnings Per Diluted Share to
Non-GAAP Earnings Per
Diluted Share
---
Reported net income (loss) on
a GAAP basis (0.03) $0.60 $(0.15) $0.94 $2.19
Amortization of intangible
assets 0.13 0.05 0.06 0.25 0.16
Reduction in force 0.01 0.03 0.07
Product transition fees 0.02 0.02
Executive transition costs 0.01 0.01 0.05
Disposal of business unit 0.03 0.03
Bank transaction costs 0.00
Acquisition costs 0.02 0.24 0.26
Facility lease early exit
costs 0.00 0.00
Income tax effect of non-GAAP
adjustments (0.03) (0.01) (0.06) (0.12) (0.02)
Income tax effect of valuation
allowance 0.12 (0.05) 0.12 0.16 0.01
Non-GAAP net income $0.23 $0.59 $0.30 $1.66 $2.34
Weighted average number of
diluted shares (thousands) 39,009 34,500 38,930 38,919 34,303
ULTRA CLEAN HOLDINGS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP EFFECTIVE INCOME TAX RATE
Three Months Ended
Twelve Months Ended
December 28,
December 29,
September 28,
December 28,
December 29,
2018 2017 2018 2018 2017
(in thousands, except
percentages)
Provision for income taxes on
a GAAP basis $5,335 $730 $4,596 $15,319 $11,857
Income tax effect of non-GAAP
adjustments (1) 1,101 229 2,220 4,501 714
Income tax effect of valuation
allowance (2) (4,474) 2,096 (4,865) (6,355) (469)
Non-GAAP provision for income
taxes $1,962 $3,055 $1,951 $13,465 $12,102
Income (loss) before income
taxes on a GAAP basis $5,023 $21,579 $(1,844) $52,268 $86,942
Amortization of intangible
assets 4,973 1,745 2,411 9,580 5,438
Reduction in force 297 1,319 2,640
Product transition fees 657 657
Executive transition costs 418 246 2,064
Disposal of business unit 1,082 1,082
Bank transaction costs 99 99
Acquisition costs 613 9,391 10,003
Facility lease early exit
costs 117 117
Non-GAAP income before income
taxes $11,441 $23,324 $13,361 $78,510 $92,380
Effective income tax rate on a
GAAP basis 106.2% 3.4% -249.2% 29.3% 13.6%
Non-GAAP effective income tax
rate 17.2% 13.1% 14.6% 17.2% 13.1%
1 Tax effect of items (1)
through (8) 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.
