Besi Posts Strong Q3-17 and YTD-17 Results

DUIVEN, the Netherlands, Oct. 26, 2017 (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 third quarter and nine months ended September 30, 2017.

Key Highlights Q3-17

• Revenue of € 159.3 million, down 6.3% vs. Q2-17. Up 68.9% vs. Q3-16 due to more favorable industry conditions and customer build out of advanced packaging capacity
• Orders of € 161.5 million, up 24.1% vs. Q2-17 due to increased demand for high-end computing and mobile applications. Up 107% vs. Q3-16 due to broad based growth across Besi’s product portfolio for leading edge advanced packaging applications and increased market share
• Gross margin of 58.7% up 1.4% vs. Q2-17 and 8.2% vs. Q3-16 primarily due to strong market position
• Net income of € 52.9 million grew € 0.5 million or 1.0% vs. Q2-17. Up 219% (€ 36.3 million) vs. Q3-16 due to strong revenue growth, continued gross margin improvement and ongoing cost control efforts
• Net margin rose to 33.2% vs. 30.8% in Q2-17. Up substantially vs. 17.6% in Q3-16
• Net cash and deposits increased by € 33.5 million, or 25.4% year over year, to reach € 165.4 million

Key Highlights YTD-17

• Revenue of € 439.5 million, up € 157.2 million (55.7%) vs. YTD-16 due to substantial build out of advanced packaging capacity for mobile, automotive, cloud server and memory applications
• Orders of € 531.5 million, up € 249.1 million (88.2%), due to increased demand for Besi’s assembly equipment portfolio, more favorable industry conditions and increased market share
• Gross margin rose to 57.4% vs. 50.3%
• YTD-17 net income of € 129.6 million grew € 81.0 million (+167%) exceeding full year 2016 by € 64.3 million (98.5%). Similarly, net margin expanded to 29.5% vs. 17.2% in YTD-16

Outlook  

• Q4-17 revenue estimated to decrease 0-10% vs. Q3-17 consistent with H2 seasonal trends. Q4-17 revenue and operating income to significantly exceed Q4-16 levels
  
  

Richard W. Blickman, President and Chief Executive Officer of Besi, commented: “Besi’s financial performance continued to improve in Q3-17 due to the strength and market position of our advanced packaging portfolio and the achievement of new benchmark levels of revenue and net income. For the quarter, revenue and net income reached € 159.3 million and € 52.9 million, respectively, up 68.9% and 219% vs. Q3-16. Similarly, for the nine months ended September 30, 2017, Besi’s revenue and net income reached € 439.5 million and € 129.6 million, respectively, up 55.7% and 167% vs. YTD-16. The nine month 2017 net income level was almost double that recorded for all of 2016.

Orders for semiconductor assembly equipment continued to develop positively in Q3-17 reflecting an uptrend which first commenced in H2-16. Besi’s orders grew strongly, reaching € 161.5 million in Q3-17 and € 531.5 million for the first nine months of 2017, representing increases of 107% and 88.2%, respectively, vs. the comparable periods of 2016. In a quarter typically weaker than Q2, Q3-17 orders actually grew sequentially by 24.1% vs. Q2-17 primarily due to increased orders from Asian subcontractors for high end computing and mobile applications and renewed capacity purchases by IDMs for advanced mobile applications. In general, our order growth this year has reflected market share gains as well as the continued benefits of a new technology upgrade cycle wherein customers are significantly building out their advanced packaging capacity for leading edge smart phone, automotive, cloud server, memory and computing applications. Market growth in 2017 has also been driven by new device introductions, many of which require new investments in assembly equipment.  

In Q3-17, gross and net margins reached new industry benchmarks of 58.7% and 33.2%, respectively. Similarly, gross and net margins rose to 57.4% and 29.5%, respectively, for the first nine months of this year. Enhanced margin levels reflect Besi’s strong technology position, successful optimization of its production strategy and ongoing realization of cost control initiatives. Cash flow generation has also increased significantly in 2017 with net cash and deposits at the end of Q3-17 reaching € 165.4 million, a 25.4% increase vs. the end of Q3-16 despite the return to shareholders of € 82.5 million so far this year in the form of dividends and share repurchases.  

At present, the industry outlook remains positive as per leading analysts with continued customer investment in advanced packaging capacity for leading edge electronics applications. Based on our current backlog and feedback from customers, we expect that Q4-17 revenue and operating income will significantly exceed Q4-16 levels. ”

Third Quarter Results of Operations

Besi’s Q3-17 revenue decreased by 6.3% vs. Q2-17. The sequential revenue decline followed typical seasonal patterns and was within prior guidance (-5 to -15%). Q3-17 revenue increased by 68.9% on a year over year basis reflecting more favorable industry conditions, a significant capacity expansion by IDMs and their respective supply chains for next generation mobile devices with enhanced features and market share gains. In addition, Besi experienced continued growth for automotive and high-end cloud server applications.   

Orders of € 161.5 million in Q3-17 were up 24.1% vs. Q2-17. Sequential growth this quarter was due primarily to increased bookings by Asian subcontractors for high-end computing and mobile applications as well as renewed demand by IDMs for advanced mobile applications. Per customer type, IDM orders increased sequentially by € 5.5 million, or 6.6%, while subcontractor orders increased by € 25.9 million, or 55.3%. IDM and subcontractor orders represented 55% and 45%, respectively, of total Q3-17 bookings. Order growth of 107% vs. Q3-16 was primarily due to more favorable industry conditions and market share gains as well as a strong customer build out of advanced packaging capacity this year.

Besi’s gross margin of 58.7% in Q3-17 increased by 1.4 points vs. Q2-17 and 8.2 points vs. Q3-16. Gross margin improvement in 2017 was partially offset by adverse forex influences primarily resulting from the decrease in the value of the USD vs. the euro.  

Q3-17 operating expenses decreased by € 3.7 million, or 10.9%, vs. Q2-17 and were better than prior guidance (-5-10%). The sequential decline was due primarily to lower personnel related expenses and lower variable expenses associated with the sequential 6.3% revenue decrease. Operating expenses grew by € 2.2 million, or 7.8%, vs. Q3-16 due primarily to higher personnel and variable sales related expenses to support the 68.9% year over year revenue increase. Total headcount at September 30, 2017 increased by 1.4% vs. June 30, 2017 and by 21.8% vs. year-end 2016 primarily as a result of the hiring of additional Asian temporary production personnel to support significant order growth and expanded Asian operations.

Financial expense, net decreased by € 0.3 million vs. Q2-17 due primarily to lower foreign exchange losses but increased by € 1.4 million vs. Q3-16 principally as a result of higher interest expense associated with Besi’s issuance of € 125 million of Convertible Notes in December 2016.

Q3-17 net income of € 52.9 million increased by € 0.5 million, or 1.0%, vs. Q2-17 and by € 36.3 million, or 219%, vs. Q3-16. Sequentially, net income grew despite the 6.3% revenue decrease principally as a result of continued gross margin improvement, ongoing cost control efforts and a lower effective tax rate. The strong profit comparison vs. Q3-16 resulted from substantial revenue growth and gross margin improvement as well as ongoing cost control efforts. Similarly, net margins increased to 33.2% in Q3-17 vs. 30.8% in Q2-17 and 17.6% in Q3-16.

Nine Month Results of Operations

* In Q2-16, the effective tax rate was favorably influenced by a € 1.0 million upward revaluation of net operating loss carry forwards at Besi Switzerland. Excluding this benefit, the effective 2016 tax rate was 11.6%.

For the first nine months of 2017, Besi’s revenue and orders rose by 55.7% and 88.2%, respectively, vs. the comparable period of the prior year, due to more favorable industry conditions, a substantial build out of advanced packaging capacity by global IDM customers for mobile, automotive, cloud server, memory and computing applications and market share gains. Orders by IDMs and subcontractors represented 69% and 31%, respectively, of Besi’s total YTD-17 orders vs. 50% and 50%, respectively, in YTD-16.

Similarly, Besi’s nine month 2017 net income of € 129.6 million increased by € 81.0 million (167%) vs. YTD-16 due primarily to (i) revenue growth of € 157.2 million and (ii) gross margin improvement of 7.1 points. Net income development also benefited from Besi’s ongoing cost control efforts which limited operating expense growth to 9.8%, most of which was variable based tied to increased sales levels.  

Financial Condition

At the end of Q3-17, Besi’s cash and deposits aggregated € 297.4 million, an increase of € 34.3 million vs. Q2-17. Similarly, net cash and deposits increased by € 33.9 million to reach € 165.4 million. As compared to Q3-16, Besi’s net cash and deposits increased by € 33.5 million, or 25.4%. During Q3-17, Besi generated cash flow from operations of € 42.2 million which was utilized to fund (i) € 5.0 million of share repurchases, (ii) € 1.1 million of capitalized development spending and (iii) € 0.6 million of capital expenditures. During the quarter, Besi repurchased 108,120 of its ordinary shares.

Share Repurchase Program Extension
From program inception through September 30, 2017, Besi has repurchased a cumulative total of 521,565 shares under its current 1.0 million share repurchase authorization at an average price of € 40.50 per share for a total of € 21.1 million. This compares with a total of 1.0 million shares repurchased under Besi’s prior program (which expired on October 20, 2016) for a total of € 22.5 million. Besi has decided to extend the current program until October 30, 2018. The current share repurchase program was initiated for capital reduction purposes and to help offset dilution associated with share issuance under employee stock plans and will be funded using Besi’s available cash resources.

Outlook
Based on its September 30, 2017 backlog of € 168.2 million and feedback from customers, Besi forecasts for Q4-17 that:

• Revenue will decrease by 0-10% vs. the € 159.3 million reported in Q3-17.
• Gross margin will range between 55-57% vs. the 58.7% realized in Q3-17.
• Operating expenses will increase 5-10% vs. the € 30.4 million reported in Q3-17.

As a result, Besi expects that Q4-17 revenue and operating income will significantly exceed levels reached in Q4-16.

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 EDT). The dial-in for the conference call is (31) 20 531 5871. 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, computer, 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; 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; 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, 2016 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.      

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