Ultra Clean Reports Third Quarter 2019 Financial Results
HAYWARD, Calif., Oct. 30, 2019 /PRNewswire/ -- Ultra Clean Holdings, Inc. (Nasdaq: UCTT), today reported its financial results for the third quarter ended September 27, 2019.
"UCT again delivered strong performance in the third quarter with top and bottom line results at the high end of our guided range," said Jim Scholhamer, CEO. "We continue to focus on execution while driving towards improved profitability over the longer term."
In the third quarter, the Company generated $23.0 million of cash from operations, paid down an additional $25.0 million in debt and ended the quarter with a cash balance of $158.7 million.
Third Quarter 2019 GAAP Financial Results
Total revenue was $254.3 million, a decrease of 4.2% compared to the prior quarter and an increase of 8.6% over the same period a year ago. SPS contributed $200.0 million and SSB added $54.3 million.
Total gross margin was 18.7% compared to 18.2% last quarter and 15.0% for the same period a year ago. GAAP operating margin was 3.2% compared to 3.4% last quarter and 0.4% a year ago.
Net income was $0.5 million or $0.01 per basic and diluted share. This compares to a net loss of $0.2 million or ($0.01) per basic and diluted share in the previous quarter, and net loss of $6.0 million or ($0.15) per basic and diluted share for the same period last year.
Third Quarter 2019 Non-GAAP Financial Results
Non-GAAP gross margin was 19.2% compared to 18.8% last quarter and 15.7% for the prior year. Non-GAAP operating margin was 5.8% compared to 6.2% in the previous quarter and 6.4% in the same period a year ago.
Non-GAAP net income was $8.5 million or $0.21 per diluted share. Non-GAAP net income for the prior quarter was $8.2 million, or $0.21 per diluted share and $11.9 million or $0.30 for the prior year.
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 2019 Outlook
The Company expects revenue in the range of $260.0 million to $280.0 million and GAAP diluted net income per share to be between $0.02 and $0.04. The Company expects non-GAAP diluted net income per share to be between $0.20 and $0.30. Excluding stock-based compensation, non-GAAP net income per share is expected to be between $0.26 and $0.36.
Conference Call
The call will take place at 1:45 p.m. PT today and can be accessed by dialing 1-844-826-3034 or 1-412-317-5179. No passcode is required. A replay of the call will be available by dialing 1-877-344-7529 or 1-412-317-0088 and entering the confirmation code 10135270. For international replay numbers, select from this link https://services.choruscall.com/ccforms/replay.html. 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 micro-contamination analytical services. Ultra Clean is headquartered in Hayward, California. Additional information is available at www.uct.com.
Use of Non-GAAP Measures
In addition to providing results that are determined in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP), management uses non-GAAP net income, non-GAAP gross margin, non-GAAP operating margin and non-GAAP net income 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 from GAAP results to non-GAAP results are included at the end of this press release.
The Company currently defines non-GAAP net income as net income (loss) before amortization of intangible assets, restructuring charges, executive transition costs, acquisition costs, fair value adjustments, depreciation adjustments and the tax effects of the foregoing adjustments. In our first quarter of fiscal 2020, we will begin reporting non-GAAP net income under a new definition that excludes the foregoing adjustments, as well as the impact of stock-based compensation.
A reconciliation of our guidance for non-GAAP net income per diluted share for the following quarter 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 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 28, 2018 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
rbennetto@uct.com
ULTRA CLEAN HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands, except per share data)
Three months ended Nine months ended
---
September 27, September 28, September 27, September 28,
2019 2018 2019 2018
---
Revenues $
254,323 $
234,079 $
779,831 $
839,134
Cost of goods sold 206,819 199,084 639,361 709,270
Gross profit 47,504 34,995 140,470 129,864
Operating expenses:
Research and development 3,634 3,284 10,986 9,228
Sales and marketing 5,877 3,839 16,638 11,274
General and administrative 29,735 26,950 87,437 58,868
Total operating expenses 39,246 34,073 115,061 79,370
Income from operations 8,258 922 25,409 50,494
Interest and other income
(expense), net (3,492) (2,766) (15,201) (3,249)
Income (loss) before provision
for income taxes 4,766 (1,844) 10,208 47,245
Income tax provision 3,878 4,596 8,220 9,984
Net income (loss) 888 (6,440) 1,988 37,261
Net income (loss) attributable
to non-controlling interest 375 (443) 1,072 (443)
Net income (loss)
attributable to
Ultra Clean
Holdings, Inc. $
513 $
(5,997) $
916 $
37,704
===
Net income (loss) per share
attributable to Ultra Clean
Holdings, Inc. common
stockholders:
Basic $
0.01 $
(0.15) $
0.02 $
0.99
Diluted $
0.01 $
(0.15) $
0.02 $
0.97
Shares used in computing net
income (loss) per share:
Basic 39,557 38,930 39,363 38,152
Diluted 40,025 38,930 39,746 38,745
ULTRA CLEAN HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands)
September 27, December 28,
2019 2018
--- ---
ASSETS
Current assets:
Cash and cash equivalents $
158,690 $
144,145
Accounts receivable, net of allowance 110,388 106,956
Inventories 153,549 186,116
Prepaid expenses and other 20,283 25,708
Total current assets 442,910 462,925
Property, plant and equipment, net 143,719 143,459
Goodwill 169,557 150,226
Purchased intangibles, net 185,409 193,507
Deferred tax assets, net 12,274 10,167
Operating lease right-of-use assets 33,055
Other non-current assets 5,953 5,193
Total assets $
992,877 $
965,477
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank borrowings $
9,013 $
9,671
Accounts payable 101,008 99,011
Operating lease liabilities 11,578
Other current liabilities 41,048 30,616
Total current liabilities 162,647 139,298
Bank borrowings, net of current portion 304,172 331,549
Deferred tax liability 23,411 15,834
Operating lease liabilities 23,809
Other long-term liabilities 22,112 27,808
Total liabilities 536,151 514,489
Stockholders' equity:
Common stock 294,679 287,127
Retained earnings 150,634 149,718
Accumulated other comprehensive loss (4,349) (547)
Ultra Clean Holdings, Inc. stockholders'
equity 440,964 436,298
Noncontrolling interest 15,762 14,690
Total stockholders' equity 456,726 450,988
Total liabilities and stockholders'
equity $
992,877 $
965,477
ULTRA CLEAN HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)
Nine Months Ended
September 27,
September 28,
2019 2018
Cash flows from operating activities:
Net income including noncontrolling
interests $1,988 $37,261
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 32,152 10,730
Stock-based compensation 9,078 7,133
Others (3,695) 853
Changes in assets and liabilities:
Accounts receivable (2,376) 13,730
Inventories 42,489 37,816
Prepaid expenses and other 1,994 (6,292)
Deferred income taxes (2,115) 68
Other non-current assets (776) (297)
Accounts payable (282) (86,699)
Accrued compensation and related
benefits 8,757 5,332
Income taxes payable (1,473) (3,969)
Other liabilities 3,332 (335)
Net cash provided by operating
activities 89,073 15,331
Cash flows from investing activities:
Purchases of property, plant and
equipment (12,665) (15,526)
Acquisition of businesses, net of
cash acquired (29,873) (290,462)
Proceeds from sale of equipment,
including insurance proceeds 2,698 -
Net cash used for investing
activities (39,840) (305,988)
Cash flows from financing activities:
Proceeds from bank borrowings 34,805 382,184
Proceeds from issuance of common
stock 126 94,471
Payments on bank borrowings and
finance leases (64,534) (78,608)
Debt issuance costs paid - (12,118)
Employees' taxes paid upon vesting of
restricted stock units (1,652) (2,945)
Net cash provided by (used for)
financing activities (31,255) 382,984
Effect of exchange rate changes on
cash and cash equivalents (3,433) (293)
Net increase in cash and cash
equivalents $14,545 $92,034
---
Cash and cash equivalents at
beginning of period 144,145 68,306
Cash and cash equivalents at end of
period $158,690 $160,340
===
ULTRA CLEAN HOLDINGS, INC.
REPORTABLE SEGMENTS
GAAP TO NON-GAAP RECONCILIATION
(Unaudited; Dollars in thousands)
GAAP
Non-GAAP
Three months ended
Three months ended
September 27, 2019
September 27, 2019
SPS
SSB
Consolidated
SPS
SSB Consolidated
Revenues $200,025 $54,298 $254,323 $200,025 $54,298 $254,323
Gross profit $29,880 $17,624 $47,504 $30,163 $18,647 $48,810
Gross margin 14.9% 32.5% 18.7% 15.1% 34.3% 19.2%
Operating profit $7,365 $893 $8,258 $9,289 $5,345 $14,634
Operating margin 3.7% 1.6% 3.2% 4.6% 9.8% 5.8%
Three months ended
September 27, 2019
SPS
SSB Consolidated
Reconciliation of GAAP Gross profit to Non-GAAP Gross profit (in thousands)
---
Reported gross profit on a GAAP basis $29,880 $17,624 $47,504
Amortization of intangible assets (1) 1,023 1,023
Restructuring charges (2) 154 154
Fair value adjustments (4) 129 129
Non-GAAP gross profit $30,163 $18,647 $48,810
Reconciliation of GAAP Gross margin to Non-GAAP Gross margin
---
Reported gross margin on a GAAP basis 14.9% 32.5% 18.7%
Amortization of intangible assets (1) 0.0% 1.9% 0.4%
Restructuring charges (2) 0.1% 0.1%
Fair value adjustments (4) 0.1% 0.1%
Non-GAAP gross margin 15.1% 34.3% 19.2%
Reconciliation of GAAP Income from operations to Non-GAAP Income from operations (in thousands)
---
Reported income from operations on a GAAP basis $7,365 $893 $8,258
Amortization of intangible assets (1) 1,268 3,825 5,093
Restructuring charges (2) 327 627 954
Acquisition related costs (3) 200 200
Fair value adjustments (4) 129 129
Non-GAAP income from operations $9,289 $5,345 $14,634
Reconciliation of GAAP Operating margin to Non-GAAP Operating margin
---
Reported operating margin on a GAAP basis 3.7% 1.6% 3.2%
Amortization of intangible assets (1) 0.6% 7.0% 2.0%
Restructuring charges (2) 0.2% 1.2% 0.4%
Acquisition related costs (3) 0.1% 0.0% 0.1%
Fair value adjustments (4) 0.1% 0.0% 0.1%
Non-GAAP operating margin 4.6% 9.8% 5.8%
1 Amortization of intangible assets related to the Company's acquisitions of AIT, Thermal, FDS, QGT and DMS
2 Represents severance costs and costs related to facility closures
3 Represents costs related to the QGT and DMS acquisitions
4 Fair value adjustment related to DMS' sold inventories
ULTRA CLEAN HOLDINGS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
Three Months Ended
September 27,
September 28,
June 28,
2019 2018 2019
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 $513 $(5,997) $(202)
Amortization of intangible
assets (1) 5,093 2,411 5,053
Restructuring charges (2) 1,393 1,565 774
Acquisition related costs (3) 200 9,490 1,211
Fair value adjustments (4) 129 766
Depreciation adjustments (5) (360)
Product transition fees (6) 657
Disposal of business unit (7) 1,082
Income tax effect of non-GAAP
adjustments (8) (1,567) (2,220) (1,407)
Income tax effect of valuation
allowance (9) 2,781 4,865 2,344
Non-GAAP net income
attributable to Ultra Clean
Holdings, Inc. $8,542 $11,853 $8,179
Reconciliation of GAAP Income
from operations to Non-GAAP
Income from operations (in
thousands)
---
Reported income from operations
on a GAAP basis $8,258 $922 $8,971
Amortization of intangible
assets (1) 5,093 2,411 5,053
Restructuring charges (2) 954 1,565 749
Acquisition related costs (3) 200 9,391 1,211
Fair value adjustments (4) 129 766
Depreciation adjustments (5) (360)
Product transition fees (6) 657
Non-GAAP income from operations $14,634 $14,946 $16,390
Reconciliation of GAAP Operating
margin to Non-GAAP Operating
margin
---
Reported operating margin on a
GAAP basis 3.2% 0.4% 3.4%
Amortization of intangible
assets (1) 2.0% 1.0% 1.9%
Restructuring charges (2) 0.4% 0.7% 0.2%
Acquisition related costs (3) 0.1% 4.0% 0.5%
Fair value adjustments (4) 0.1% 0.0% 0.3%
Depreciation adjustments (5) 0.0% 0.0% -0.1%
Product transition fees (6) 0.0% 0.3% 0.0%
Non-GAAP operating margin 5.8% 6.4% 6.2%
Reconciliation of GAAP Gross
profit to Non-GAAP Gross
profit (in thousands)
---
Reported gross profit on a GAAP
basis $47,504 $34,995 $48,169
Amortization of intangible
assets (1) 1,023 1,023
Restructuring charges (2) 154 1,197 350
Fair value adjustments (4) 129 766
Depreciation adjustments (5) (316)
Product transition fees (6) 657
Non-GAAP gross profit $48,810 $36,849 $49,992
Reconciliation of GAAP Gross
margin to Non-GAAP Gross
margin
---
Reported gross margin on a GAAP
basis 18.7% 15.0% 18.2%
Amortization of intangible
assets (1) 0.4% 0.0% 0.4%
Restructuring charges (2) 0.1% 0.4% 0.1%
Fair value adjustments (4) 0.0% 0.0% 0.2%
Depreciation adjustments (5) 0.0% 0.0% -0.1%
Product transition fees (6) 0.0% 0.3% 0.0%
Non-GAAP gross margin 19.2% 15.7% 18.8%
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 $(3,492) $(2,766) $(6,390)
Restructuring charges (2) 439 (25)
Acquisition related costs (3) 99
Disposal of business unit (7) 1,082
Non-GAAP interest and other
income (expense) $(3,053) $(1,585) $(6,415)
1 Amortization of intangible assets related to the Company's acquisitions of AIT, Thermal, FDS, QGT and DMS
2 Represents severance costs and costs related to facility closures
3 Represents costs related to the QGT and DMS acquisitions
4 Fair value adjustment related to DMS' sold inventories
5 Depreciation adjustments related to QGT's fixed assets
6 One-time product transition payment
7 Represents the loss on disposal of the Company's 3D printing operations in Singapore
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 27,
September 28,
June 28,
2019 2018 2019
Reconciliation of GAAP Earnings
Per Diluted Share to Non-GAAP
Earnings Per Diluted Share
---
Reported net income (loss) on a
GAAP basis $0.01 $(0.15) $(0.01)
Amortization of intangible
assets 0.13 0.06 0.13
Restructuring charges 0.03 0.04 0.02
Acquisition related costs 0.01 0.24 0.03
Fair value adjustments 0.02
Depreciation adjustments (0.01)
Product transition fees 0.02
Disposal of business unit 0.03
Income tax effect of non-GAAP
adjustments (0.04) (0.06) (0.03)
Income tax effect of valuation
allowance 0.07 0.12 0.06
Non-GAAP net income $0.21 $0.30 $0.21
Weighted average number of
diluted shares (thousands) on a
non-GAAP basis 40,025 38,930 39,734
ULTRA CLEAN HOLDINGS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP EFFECTIVE INCOME TAX RATE
Three Months Ended
September 27,
September 28,
June 28,
2019 2018 2019
(in thousands, except
percentages)
Provision for income taxes on
a GAAP basis $3,878 $4,596 $2,835
Income tax effect of non-GAAP
adjustments (1) 1,567 2,220 1,407
Income tax effect of valuation
allowance (2) (2,781) (4,865) (2,344)
Non-GAAP provision for income
taxes $2,664 $1,951 $1,898
Income (loss) before income
taxes on a GAAP basis $4,766 $(1,844) $2,581
Amortization of intangible
assets 5,093 2,411 5,053
Restructuring charges 1,393 1,565 774
Acquisition related costs 200 9,490 1,211
Fair value adjustments 129 766
Depreciation adjustments (360)
Product transition fees 657
Disposal of business unit 1,082
Non-GAAP income before income
taxes $11,581 $13,361 $10,025
Effective income tax rate on a
GAAP basis 81.4% -249.2% 109.8%
Non-GAAP effective income tax
rate 23.0% 14.6% 18.9%
1 Tax effect of items (1) through (7) 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.
