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BE Semiconductor Industries Announces Q1-18 Results

Solid Performance as Revenue and Net Income Up 40.5% and 52.7%, Respectively, vs. Q1-17

DUIVEN, The Netherlands, April 26, 2018 (GLOBE NEWSWIRE) -- BE Semiconductor Industries N.V. (the “Company" or "Besi") (Euronext Amsterdam:BESI) (OTC markets:BESIY) (Nasdaq International Designation), a leading manufacturer of assembly equipment for the semiconductor industry, today announced its results for the first quarter ended March 31, 2018.

Key Highlights

  • Revenue of € 154.9 million, up 1.1% vs. Q4-17 and within guidance. Up 40.5% vs. Q1-17 due to growth across product portfolio, favorable industry conditions and continued market share gains
  • Orders of € 205.8 million, up 37.8% vs. Q4-17 due primarily to capacity additions for smart phone applications. Bookings down 14.2% vs. exceptionally high levels in Q1-17
  • Gross margin of 56.5% up 0.2 points vs. Q4-17 and 0.8 points vs. Q1-17 despite adverse forex influences from decline of USD vs. euro. Within guidance
  • Net income of € 37.1 million, down € 6.5 million vs. Q4-17 primarily due to higher share based compensation expense and a 5.7 point higher effective tax rate as such expenses are not tax deductible. Up € 12.8 million (+52.7%) vs. Q1-17
  • Net cash and deposits reach € 290.1 million, an increase of € 114.4 million (+65.1%) year over year as cash generation remains strong

Outlook  

  • Q2-18 revenue expected to grow by 10-15% vs. Q1-18. H1-18 revenue anticipated to increase approximately 17% vs. H1-17 at the midpoint of guidance  
           
(€ millions, except EPS) Q1-2018 Q4-2017 Δ Q1-2017 Δ
Revenue 154.9 153.2 +1.1% 110.2 +40.5%
Orders 205.8 149.4 +37.8% 239.8 -14.2%
Operating Income 48.6 52.1 -6.7% 30.8 +57.8%
EBITDA 52.0 55.5 -6.3% 34.2 +52.0%
Net Income 37.1 43.6 -14.9% 24.3 +52.7%
EPS (basic) 1.00 1.17 -14.5% 0.65 +53.8%
EPS (diluted) 0.91 1.09 -16.5% 0.60 +51.7%
Net Cash 290.1 247.6 +17.2% 175.7 +65.1%
           

Richard W. Blickman, President and Chief Executive Officer of Besi, commented:
“Besi’s Q1-18 results were positively influenced by a continuation of many favorable trends from 2017. Our financial performance benefited from an extended industry upturn, ongoing customer investment in advanced packaging applications and Besi’s favorable market position with key customers and supply chains. As such, revenue and net income increased by 40.5% and 52.7%, respectively, vs. Q1-17. In addition, gross and net margins showed further steady improvement vs. last year due to increased production efficiencies and the strategic execution of cost reduction initiatives despite adverse forex influences from the significant decline in the US dollar vs. the euro.”

Revenue growth this quarter was broad based across Besi’s die bonding and packaging portfolio and reflected increased demand by Asian customers for smart phone and high performance computing applications and by North American and European IDMs for automotive and cloud server applications. In addition, Q1-18 orders grew by 37.8% vs. Q4-17 to reach € 205.8 million due primarily to capacity additions for smart phone applications by both IDMs and Asian subcontractors.

Besi’s cash generation was also strong in Q1-18 with net cash and deposits expanding to € 290.1 million, an increase of € 114.4 million, or 65.1%, compared to the end of Q1-17. We utilized € 6.0 million of excess cash flow this quarter to enhance shareholder value via regular share repurchase activities.  

For Q2-18, we estimate that Besi’s revenue will grow by 10-15% vs. Q1-18 and that H1-18 revenue will rise by approximately 17% vs. H1-17 at the midpoint of Q2-18 revenue guidance. We also expect significantly higher operating profit both on a sequential quarterly and half year comparative basis given anticipated revenue growth and the efficiency of our business model. Looking forward, leading industry analysts expect continued growth of the assembly equipment market into 2018. However, subsequent to quarter end, VLSI Research downwardly revised its 2018 market growth estimate from 18.1% in January to 12.5% based on announcements by several semiconductor manufacturers indicating a softening of demand trends from 2017.“

First Quarter Results of Operations

           
  Q1-2018 Q4-2017 Δ Q1-2017 Δ
Revenue 154.9 153.2 +1.1% 110.2 +40.5%
Orders 205.8 149.4 +37.8% 239.8 -14.2%
Backlog 215.2 164.4 +30.9% 205.9 +4.5%
Book to Bill Ratio 1.3x 1.0x +0.3  2.2x -0.9 
           

Besi’s Q1-18 revenue increased by 1.1% vs. Q4-17 and was within guidance (-5% to +5%). Revenue increased by 40.5% on a year over year basis reflecting broad based demand across Besi’s die bonding and packaging portfolio, a continuation of favorable market conditions and market share gains. In addition, it reflected increased demand by Asian customers for smart phone and high performance computing applications and automotive and cloud server applications by North American and European IDMs. 

Orders of € 205.8 million increased by 37.8% vs. Q4-17 due primarily to capacity additions by both IDMs and Asian subcontractors for smart phone applications. Q1-18 orders declined by 14.2% vs. exceptionally high levels in Q1-17. Per customer type, IDM orders increased sequentially by € 36.4 million, or 48.7%, vs. Q4-17 while subcontractor orders increased by € 20.0 million, or 26.8%. IDM and subcontractor orders represented 54% and 46%, respectively, of total Q1-18 bookings vs. 82% and 18%, respectively, of total Q1-17 bookings.  

           
  Q1-2018 Q4-2017 Δ Q1-2017 Δ
Gross Margin 56.5% 56.3% +0.2  55.7% +0.8 
Operating Expenses 39.1 34.2 +14.3% 30.5 +28.2%
Financial Expense, net 4.3 3.3 +30.3% 2.0 +115%
EBITDA 52.0 55.5 -6.3% 34.2 +52.0%
           

Besi’s gross margin in Q1-18 increased by 0.2 points vs. Q4-17 and was within guidance (55-57%). As compared to Q1-17, the 0.8 point gross margin increase was due primarily to production cost efficiencies. In both comparable periods, gross margin was adversely affected by a significant decline in the value of the USD vs. the euro. 

Q1-18 operating expenses increased by € 4.9 million (+14.3%) vs. Q4-17 due to higher share based compensation expense associated with Besi’s 2017 performance. Vs. Q1-17, operating expenses increased by € 8.6 million (+28.2%) primarily due to € 4.6 million of increased share based compensation expense and higher headcount and variable overhead expenses necessary to support increased revenue levels. Total headcount at March 31, 2018 increased by 13.5% (+254 employees) vs. March 31, 2017 principally due to higher fixed and temporary Asian personnel necessary to support Besi’s revenue growth and an expansion of its Asian sales and service operations.

Financial expense, net increased by € 1.0 million vs. Q4-17 and € 2.3 million vs. Q1-17 due primarily to higher net interest expense associated with Besi’s issuance of € 175 million of Convertible Notes in December 2017. On a year over year basis, net financial expense also grew due to higher hedging costs related to increased sales volume.  

           
  Q1-2018 Q4-2017 Δ Q1-2017 Δ
Net Income 37.1 43.6 -14.9% 24.3 +52.7%
Net Margin 23.9% 28.4% -4.5 22.0% +1.9
Tax Rate 16.3% 10.6% +5.7 15.9% +0.4
           

Besi’s Q1-18 net income declined by € 6.5 million vs. Q4-17 due to higher share based compensation expense and a higher effective tax rate as such expenses are not tax deductible. Excluding such charges, Besi’s effective tax rate would have been 14.0%, 14.6% and 10.3%, respectively, in Q1-18, Q1-17 and Q4-17. As compared to Q1-17, net income increased by € 12.8 million (+52.7%) and net margins rose 1.9 points to 23.9% as significant revenue and gross margin improvement more than offset higher operating expenses.   

Financial Condition

           
  Q1-2018 Q4-2017 Δ Q1-2017 Δ
Net Cash 290.1 247.6 +17.2% 175.7 +65.1%
Cash flow from Ops. 54.9 77.8 -29.4% 18.6 +195%
           

Besi’s net cash rose to € 290.1 million at the end of Q1-18, an increase of € 42.5 million, or 17.2%, vs. Q4-17 and € 114.4 million, or 65.1%, vs. Q1-17. The Company generated cash flow from operations of € 54.9 million in Q1-18 which was utilized primarily to fund (i) € 6.0 million of share repurchases, (ii) € 2.6 million of capitalized development spending and (iii) € 1.9 million of capital expenditures.

During the quarter, Besi repurchased 71,738 of its ordinary shares at an average price of € 78.73 per share. Cumulatively as of March 31, 2018, a total of 678,374 shares have been purchased under the current 1.0 million share repurchase authorization at an average price of € 47.78 per share for a total of € 32.4 million.

Outlook

Based on its March 31, 2018 backlog and feedback from customers, Besi forecasts for Q2-18 that:

  • Revenue will increase by 10%-15% vs. the € 154.9 million reported in Q1-18.
  • Gross margin will range between 55-57% vs. the 56.5% realized in Q1-18.
  • Operating expenses will decrease approximately 5%-10% vs. the € 39.1 million reported in Q1-18.
 
Investor and media conference call
A conference call and webcast for investors and media will be held today at 4:00 pm CET (10:00 am EST). The dial-in for the conference call is (31) 20 531 5853. To access the audio webcast and webinar slides, please visit www.besi.com.
 

About Besi
Besi is a leading supplier of semiconductor assembly equipment for the global semiconductor and electronics industries offering high levels of accuracy, productivity and reliability at a low cost of ownership. The Company develops leading edge assembly processes and equipment for leadframe, substrate and wafer level packaging applications in a wide range of end-user markets including electronics, mobile internet, cloud server, computing, automotive, industrial, LED and solar energy. Customers are primarily leading semiconductor manufacturers, assembly subcontractors and electronics and industrial companies. Besi’s ordinary shares are listed on Euronext Amsterdam (symbol: BESI). Its Level 1 ADRs are listed on the OTC markets (symbol: BESIY Nasdaq International Designation) and its headquarters are located in Duiven, the Netherlands. For more information, please visit our website at www.besi.com.

   
Contacts:  
Richard W. Blickman, President & CEO
Cor te Hennepe, SVP Finance
Tel. (31) 26 319 4500
investor.relations@besi.com 
CFF Communications
Frank Jansen
Tel. (31) 20 575 4024
besi@cffcommunications.nl 
   

Caution Concerning Forward Looking Statements
This press release contains statements about management's future expectations, plans and prospects of our business that constitute forward-looking statements, which are found in various places throughout the press release, including, but not limited to, statements relating to expectations of orders, net sales, product shipments, backlog, expenses, timing of purchases of assembly equipment by customers, gross margins, operating results and capital expenditures. The use of words such as “anticipate”, “estimate”, “expect”, “can”, “intend”, “believes”, “may”, “plan”, “predict”, “project”, “forecast”, “will”, “would”, and similar expressions are intended to identify forward looking statements, although not all forward looking statements contain these identifying words. The financial guidance set forth under the heading “Outlook” contains such forward looking statements. While these forward looking statements represent our judgments and expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from those contained in forward looking statements, including any inability to maintain continued demand for our products; failure of anticipated orders to materialize or postponement or cancellation of orders, generally without charges; the volatility in the demand for semiconductors and our products and services; failure to develop new and enhanced products and introduce them at competitive price levels; failure to adequately decrease costs and expenses as revenues decline; loss of significant customers, including through industry consolidation or the emergence of industry alliances; lengthening of the sales cycle; acts of terrorism and violence; disruption or failure of our information technology systems; inability to forecast demand and inventory levels for our products; the integrity of product pricing and protection of our intellectual property in foreign jurisdictions; risks, such as changes in trade regulations, currency fluctuations, political instability and war, associated with substantial foreign customers, suppliers and foreign manufacturing operations, particularly to the extent occurring in the Asia Pacific region; potential instability in foreign capital markets; the risk of failure to successfully manage our diverse operations; any inability to attract and retain skilled personnel; those additional risk factors set forth in Besi's annual report for the year ended December 31, 2017 and other key factors that could adversely affect our businesses and financial performance contained in our filings and reports, including our statutory consolidated statements. We expressly disclaim any obligation to update or alter our forward-looking statements whether as a result of new information, future events or otherwise.

     
Consolidated Statements of Operations
     
(euro in thousands, except share and per share data)

 
  Three Months Ended
 (unaudited)
  March 31,
(unaudited)
December 31,
(unaudited)
March 31,
(unaudited)
  2018 2017 2017
Revenue 154,937 153,244 110,241
Cost of sales 67,327 67,010 48,872
       
Gross profit 87,610 86,234 61,369
       
Selling, general and administrative expenses 29,242 24,618 22,211
Research and development expenses 9,812 9,535 8,335
       
Total operating expenses 39,054 34,153 30,546
       
Operating income 48,556 52,081 30,823
       
Financial expense (income), net 4,272 3,345 1,958
       
Income before taxes 44,284 48,736 28,865
       
Income tax expense 7,205 5,152 4,585
       
Net income 37,079 43,584 24,280
       
Net income per share – basic 1.00 1.17 0.65
Net income per share – diluted 0.91 1.09 0.60
       
Number of shares used in computing per share amounts:      
- basic 37,238,405 37,316,355 37,241,357
- diluted1 42,389,214 41,129,857 40,799,822
       

1 The calculation of diluted income per share assumes the exercise of equity settled share based payments and the conversion of the Convertible Notes.

     
Consolidated Balance Sheets
(euro in thousands) March 31, 2018
(unaudited)
December 31, 2017
(audited)
ASSETS    
     
Cash and cash equivalents 440,983 527,806
Deposits 130,000 -
Accounts receivable 159,624 151,654
Inventories 81,575 70,947
Income tax receivable 304 370
Other current assets 11,894 11,652
     
Total current assets 824,380 762,429
     
     
Property, plant and equipment 26,918 26,517
Goodwill 44,443 44,687
Other intangible assets 34,604 34,140
Deferred tax assets 4,707 4,660
Other non-current assets 2,746 2,520
     
Total non-current assets 113,418 112,524
     
Total assets 937,798 874,953
     
LIABILITIES AND SHAREHOLDERS’ EQUITY
     
Notes payable to banks 969 1,742
Current portion of long-term debt and financial leases 11,547 11,228
Accounts payable 73,428 62,721
Accrued liabilities 81,942 70,595
     
Total current liabilities 167,886 146,286
     
Other long-term debt and financial leases 268,415 267,274
Deferred tax liabilities 12,045 10,050
Other non-current liabilities 17,125 17,211
     
Total non-current liabilities 297,585 294,535
     
Total equity 472,327 434,132
     
Total liabilities and equity 937,798 874,953
     


 
Consolidated Cash Flow Statements
 
(euro in thousands)

Three Months Ended March 31,
(unaudited)
  2018   2017  
     
Cash flows from operating activities:    
     
Operating income 48,556   30,823  
     
Depreciation and amortization 3,414   3,359  
Share based compensation expense 7,161   2,560  
Other non-cash items -   427  
     
Change in working capital (2,022 ) (18,185 )
Income tax received (paid) (1,877 ) (509 )
Interest received (paid) (309 ) 88  
     
Net cash provided by operating activities 54,923   18,563  
     
Cash flows from investing activities:    
Capital expenditures (1,926 ) (1,121 )
Capitalized development expenses (2,640 ) (1,884 )
Investment in deposits 1 (130,000 ) (25,000 )
     
Net cash provided by (used in) investing activities (134,566 ) (28,005 )
     
Cash flows from financing activities:    
Proceeds from (payments of) bank lines of credit (463 ) (3,855 )
Proceeds from (payments of) debt and financial leases 307   74  
Proceeds from reissuance (purchase) of treasury shares (6,000 ) (7,500 )
     
Net cash provided by (used in) financing activities (6,156 ) (11,281 )
     
Net increase (decrease) in cash and cash equivalents (85,799 ) (20,723 )
Effect of changes in exchange rates on cash and cash equivalents (1,024 ) (49 )
Cash and cash equivalents at beginning of the period 527,806   224,790  
     
Cash and cash equivalents at end of the period 440,983   204,018  

1 Reclassification from financing activities in Q1-17 to investing activities in Q2-17.

 

                     
Supplemental Information (unaudited)
(euro in millions, unless stated otherwise)
                     
REVENUE Q1-2017 Q2-2017 Q3-2017 Q4-2017 Q1-2018
                     
Per geography:                    
Asia Pacific 89.4 81% 112.4 66% 103.5 65% 111.8 73% 120.5 78%
EU / USA 20.9 19% 57.6 34% 55.8 35% 41.4 27% 34.4 22%
Total 110.3 100% 170.0 100% 159.3 100% 153.2 100% 154.9 100%
                     
ORDERS  Q1-2017 Q2-2017 Q3-2017 Q4-2017 Q1-2018
                     
Per geography:                    
Asia Pacific 153.5 64% 109.8 84% 114.3 71% 116.5 78% 120.8 59%
EU / USA 86.3 36% 20.3 16% 47.3 29% 32.9 22% 85.0 41%
Total 239.8 100% 130.1 100% 161.6 100% 149.4 100% 205.8 100%
                     
Per customer type:                    
IDM 196.6 82% 83.3 64% 88.8 55% 74.7 50% 111.1 54%
Subcontractors 43.2 18% 46.8 36% 72.7 45% 74.7 50% 94.7 46%
Total 239.8 100% 130.1 100% 161.5 100% 149.4 100% 205.8 100%
                     
BACKLOG   Mar 31, 2017  Jun 30, 2017  Sep 30, 2017  Dec 31, 2017  Mar 31, 2018
                     
Backlog 205.9 166.0 168.2 164.4 215.2
                     
HEADCOUNT  Mar 31, 2017  Jun 30, 2017  Sep 30, 2017  Dec 31, 2017  Mar 31, 2018
                     
Fixed staff (FTE)                    
Asia Pacific 1,112 69% 1,164 70% 1,199 70% 1,222 71% 1,254 71%
EU / USA 505 31% 505 30% 502 30% 502 29% 500 29%
Total 1,617 100% 1,669 100% 1,701 100% 1,724 100% 1,754 100%
                     
Temporary staff (FTE)                    
Asia Pacific 211 79% 269 80% 247 74% 229 72% 290 76%
EU / USA 55 21% 67 20% 85 26% 87 28% 93 24%
Total 266 100% 336 100% 332 100% 316 100% 383 100%
                     
Total fixed and temporary staff (FTE) 1,883   2,005   2,033   2,040   2,137  
                     
OTHER FINANCIAL DATA Q1-2017 Q2-2017 Q3-2017 Q4-2017 Q1-2018
Gross profit                    
As reported   61.4 55.7%   97.4 57.3%   93.6 58.8%   86.2 56.3%   87.6 56.5%
Restructuring charges / (gains)   0.0 0.0%   (0.0) -0.0%   -  -   -  -   -  -
Gross profit as adjusted   61.4 55.7%   97.4 57.3%   93.6 58.8%   86.2 56.3%   87.6 56.5%
                     
Selling, general and admin expenses:                    
As reported   22.2 20.1%   25.5 15.0%   21.0 13.2%   24.6 16.1%   29.2 18.8%
Amortization of intangibles   (0.1) -0.1%   (0.1) -0.1%   (0.1) -0.1%   (0.1) -0.1%   (0.1) -0.1%
Restructuring gains / (charges)   (0.0) 0.0%   0.0 0.0%   (0.0) 0.0%   0.0 0.0%   0.0 0.0%
SG&A expenses as adjusted   22.1 20.1%   25.4 14.9%   20.9 13.1%   24.5 16.0%   29.1 18.8%
                     
Research and development expenses:                    
As reported   8.3 7.5%   8.7 5.1%   9.3 5.8%   9.5 6.2%   9.8 6.3%
Capitalization of R&D charges   1.9 1.7%   1.8 1.1%   1.1 0.7%   1.8 1.2%   2.6 1.7%
Amortization of intangibles   (2.0) -1.8%   (2.0) -1.2%   (2.0) -1.3%   (2.1) -1.4%   (2.1) -1.4%
Restructuring gains / (charges)   -  -   -  -   -  -   -  -   -  -
R&D expenses as adjusted   8.2 7.4%   8.5 5.0%   8.4 5.3%   9.2 6.0%   10.3 6.6%
                     
Financial expense (income), net:                    
Interest expense (income), net 1.1   1.2   1.6   1.0   2.5  
Foreign exchange effects 0.9   1.4   0.7   2.3   1.8  
Total 2.0   2.6   2.3   3.3   4.3  
                     
Operating income (loss)                    
  as % of net sales 30.8 27.9% 63.3 37.2% 63.2 39.7% 52.1 34.0% 48.6 31.4%
                     
EBITDA                     
  as % of net sales 34.2 31.0% 66.6 39.2% 66.5 41.7% 55.5 36.2% 52.0 33.6%
                     
Net income (loss)                    
  as % of net sales 24.3 22.0% 52.4 30.7% 52.9 33.2% 43.6 28.5% 37.1 23.9%
                     
Income per share                    
Basic 0.65   1.40   1.41   1.17   1.00  
Diluted 0.60   1.29   1.30   1.09   0.91  
                     

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