BE Semiconductor Industries Announces Q1-18 Results

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  

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

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.  

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.  

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

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.

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.

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.

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

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