BE Semiconductor Industries N.V. Announces Q2-20 and H1-20 Results

Q2-20 Revenue of € 124.3 Million and Net Income of € 39.8 Million Up 34.1% and 110.6%, Respectively, vs. Q2-19. Results Exceed Expectations
Share Buyback Program Extended and Increased to € 125 Million

DUIVEN, The Netherlands, July 28, 2020 (GLOBE NEWSWIRE) -- BE Semiconductor Industries NV (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 second quarter and first half year ended June 30, 2020.

Key Highlights Q2-20

• Revenue of € 124.3 million, up 36.1% vs. Q1-20 and 34.1% vs. Q2-19 primarily due to higher shipments for mobile and, to a lesser extent, high-end logic applications and increased demand from Chinese customers. Exceeded high end of guidance range
• Orders of € 101.3 million, down 14.6% vs. Q1-20 but up 22.5% vs. Q2-19. The sequential order decrease was primarily due to lower demand for high end mobile applications generally, partially offset by increased orders from Chinese subcontractors for mobile and other electronics applications
• Gross margin reached 62.0%, up 5.3 points vs. Q1-20 and 6.0 points vs. Q2-19 primarily due to a more favorable product mix, increased labor efficiencies and, to a lesser extent, forex benefits
• Net income of € 39.8 million grew € 25.9 million (186.3%) vs. Q1-20 and € 20.9 million (110.6%) vs. Q2-19 primarily due to significantly higher revenue and gross margins. Net margin more than doubled to 32.0% vs. 15.2% in Q1-20 and 13.5% in Q2-19
• Share buyback program extended until October 2021 and increased by € 50 million to € 125 million

Key Highlights H1-20

• Revenue of € 215.6 million, up 23.8% vs. H1-19 reflecting improved market conditions and higher demand for mobile and, to a lesser extent, high end logic applications
• Orders of € 219.9 million grew € 53.9 million (+ 32.5%) primarily due to higher demand for mobile applications
• Gross margin reached 59.7%, up 3.8 points vs. H1-19 primarily due to Besi's strong advanced packaging market position, more favorable product mix and increased labor efficiencies
• Net income of € 53.7 million increased € 25.3 million (+ 89.1%) vs. H1-19. Net margin grew strongly to 24.9% vs. 16.3% in H1-19
• Net cash of € 93.6 million rose € 7.5 million (+ 8.7%) vs. June 30, 2019

Outlook

• Q3-20 revenue estimated to decrease by approximately 10-25% vs. Q2-20 due to typical seasonal influences, lower demand for mobile applications post H1-20 build and ongoing uncertainty as to the development of the COVID-19 pandemic. Gross margin anticipated to range between 58% -60%

* Reflects cash dividend payments of € 73.5 million and € 122.4 million in Q2-20 and Q2-19, respectively

Richard W. Blickman, President and Chief Executive Officer of Besi, commented:
“Besi reported strong Q2-20 and first half year results in an improving industry environment. Revenue and net income for Q2-20 were € 124.3 million and € 39.8 million, respectively, increases of 34.1% and 110.6% versus Q2-19. Besi exceeded the high end of revenue guidance as we resumed full operations globally despite the COVID-19 pandemic, achieved higher than anticipated shipments for mobile applications and benefited from increased demand by Chinese subcontractors for mobile and other electronics applications, continuing a trend starting in H2 -19.

Profitability and efficiency also increased significantly in Q2-20 and for the first half year. Gross and operating margins in Q2-20 increased to 62.0% and 39.0%, respectively, increases of 6.0 and 11.9 points, respectively, versus the comparable period of the prior year. Besi's solid financial performance primarily reflected improved industry conditions, our strong advanced packaging market position and a favorable product mix. On the operational front, it reflected strategic execution in a difficult production environment, labor efficiencies associated with a 5.2% decrease in year over year fixed headcount levels and lower travel, service and other overhead costs associated with the shift to a work at home business environment . Similarly, H1-20 revenue of € 215.6 million and net income of € 53.7 million grew by 23.8% and 89.1%, respectively.

Orders for the first half year were € 219.9 million, an increase of 32.5% versus H1-19 as industry overcapacity lessened and mobile customers increased demand in anticipation of new handset introductions later this year with advanced features and functionality. To a lesser extent, orders also benefited from continued demand growth for high end logic applications such as cloud infrastructure, artificial intelligence and high-performance computing as we move more rapidly into the digital society. Automotive end market demand remained at depressed levels as consumers react to the economic fall-out from the pandemic. For the quarter, orders were € 101.3 million, a 22.5% increase versus Q2-19 but a decrease of 14.6% versus Q1-20 primarily as a result of reduced spending by high end mobile customers after their H1-20 capacity build. 

Besi ended the first half year with a strong balance sheet and continues to return excess capital to shareholders. At June 30, 2020, cash and deposits totaled € 366.6 million after the payment of € 76.6 million in the form of cash dividends and share repurchases. Net cash and deposits of € 93.6 million at quarter end grew by 8.7% versus the end of Q2-19. Given continued strong profitability and cash flow generation this year, Besi will extend its current share buyback program until October 30, 2021 and increase its size by € 50 million to € 125 million.

Looking ahead, we estimate that Q3-20 revenue will decrease by approximately 10-25% due to typical seasonal influences, lower demand for mobile applications post the H1-20 build and customer caution as to the development of the COVID-19 pandemic. Gross margin is estimated to range between 58-60% based on the forecasted product mix. Operating expenses are expected to decrease by 10-15% versus Q2-20 as we carefully control costs in an uncertain environment. We are cautiously optimistic about Besi’s prospects for the remainder of 2020 given our better than anticipated first half results and Q3-20 guidance. We temper this optimism, however, given the current unpredictable course, recurrence and severity of the pandemic and its implications for semiconductor demand.

Longer-term, we are encouraged about Besi’s prospects in the next investment cycle given our strong performance in a difficult environment and by strong secular growth drivers for our business. Further, we have a leading position in advanced packaging which is an important enabler of the digital society and the new applications to be generated along with it. ”

Second Quarter Results of Operations

Q2-20 revenue of € 124.3 million increased by 36.1% and 34.1% versus Q1-20 and Q2-19, respectively, primarily due to higher shipments for mobile and, to a lesser extent, high-end logic and cloud infrastructure applications. In addition, shipments to Chinese customers increased relative to each respective period, continuing a favorable trend which began in H2-19. Q2-20 revenue growth exceeded the high end of guidance (+ 5% to + 25%) primarily due to higher than anticipated shipments for mobile applications as Besi and its main customers resumed full operations amidst the global pandemic.

Orders of € 101.3 million were down 14.6% versus Q1-20 primarily due to lower demand for high end mobile applications generally, partially offset by increased orders by Chinese subcontractors for mobile and other electronics applications. In contrast, orders grew by 22.5% versus Q2-19 primarily due to improved market conditions and higher bookings for mobile and computing applications. Per customer type, IDM orders decreased € 2.8 million, or 5.9%, versus Q1-20 and represented 44% of total orders for the period. Subcontractor orders decreased by € 14.5 million, or 20.4%, versus Q1-20 and represented 56% of total orders.

Besi's gross margin reached 62.0% in Q2-20, an increase of 5.3 points vs Q1-20 and 6.0 points versus Q2-19 primarily due to a more favorable product mix, increased labor efficiencies from lower fixed Asian production headcount, and, to a lesser extent, forex benefits from favorable changes in the euro versus the USD, MYR and CHN currencies. The Q2-20 gross margin significantly exceeded guidance (56% -58%) due to higher than anticipated shipments for mobile applications during the period.

Q2-20 operating expenses declined by € 4.4 million (-13.3%) versus Q1-20 and was in-line with guidance. The decrease was primarily due to (i) a € 2.5 million reduction in variable compensation expense, (ii) € 1.0 million lower development expense due to higher R&D capitalization, net in the quarter and (iii) lower consulting expenses. Operating expenses increased by € 1.8 million (+ 6.7%) versus Q2-19 due to increased variable compensation expense of € 2.4 million.

Net income of € 39.8 million grew by € 25.9 million (186.3%) versus Q1-20 and € 20.9 million (110.6%) versus Q2-19 primarily due to higher revenue and gross margin levels realized along with operating leverage from tight controls of fixed overhead levels relative to revenue growth. Similarly, Besi’s net margin increased to 32.0% in Q2-20, a significant increase versus the 15.2% and 20.4% realized in Q1-20 and Q2-19, respectively.

Half Year Results of Operations

H1-20 revenue reached € 215.6 million, up 23.8% versus H1-19 reflecting improved industry conditions and higher demand for mobile and, to a lesser extent, high end logic and cloud infrastructure applications . Similarly, orders of € 219.9 million grew € 53.9 million (+ 32.5%) versus H1-19. Revenue and order growth were partially offset by reduced demand for automotive applications due to the adverse impact on consumer demand from the pandemic.

Besi’s gross margin rose 3.8 points versus H1-19 to reach 59.7% primarily due to its strong advanced packaging market position, more favorable product mix and increased labor efficiencies. In addition, Besi’s net income of € 53.7 million and net margin of 24.9% increased by 89.1% and 8.6 points, respectively, versus H1-19 as increased revenue and gross margin more than offset € 4.0 million of higher operating expenses, principally associated with increased share-based compensation expense.

Financial Condition

At the end of Q2-20, cash and deposits aggregated € 366.6 million. As compared to Q1-20, Besi’s net cash and deposits decreased by € 54.7 million due primarily to the payment of (i) € 73.5 million in cash dividends to shareholders, (ii) € 4.3 million of capitalized development spending and (ii) € 3.1 million of share repurchases which was partially offset by cash flow from operations of € 22.9 million. Net cash of € 93.6 million at quarter end grew € 7.5 million (+ 8.7%) versus June 30, 2019. During the quarter, € 7.0 million principal amount of the 2016 Convertible Notes were converted into 351,186 ordinary shares. As a result, the principal outstanding amount of the 2016 Convertible Notes declined from € 125.0 million to € 118.0 million.

Share Repurchase Activity / Extension and Increase of Share Repurchase Program
During the quarter, Besi repurchased 90,844 of its ordinary shares at an average price of € 33.54 per share for a total of € 3.1 million. Cumulatively, as of June 30, 2020, 3.2 million shares have been purchased under the current € 75 million share repurchase program at an average price of € 22.58 per share for a total of € 73.3 million. As of such date, Besi held approximately 7.3 million shares in treasury at an average cost of € 15.48, equal to 9.1% of its outstanding shares.

Besi will extend the duration of its current share buyback program until October 30, 2021 and increase the total amount from € 75 million to € 125 million. The share repurchase program was initiated for capital reduction purposes and to help offset dilution related to Besi's 2016 and 2017 Convertible Notes and shares issued under employee stock plans. It will be funded using Besi's available cash resources and be effective immediately. At present, Besi has authority until October 30, 2021 to purchase up to 10% of its outstanding shares (approximately 8.0 million shares).

The share repurchase program will be executed in accordance with industry best practices and in compliance with European buyback rules and regulations and may be suspended or discontinued at any time. Besi has engaged an independent broker for the program and all purchases will be executed through Euronext Amsterdam (the “Main Exchange”) and Multilateral Trading Facilities as defined by Directive 2014/65 / EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments (each being referred to as “Exchanges”) and subject to the rules of the relevant Exchange. The timing and amount of any shares repurchased under this program will be determined by the independent broker independently of, and without influence by, Besi. The maximum purchase price to be paid per share under the program will not exceed the higher of the last independent trade price of the shares and the highest current independent bid price of the shares on the venue to which the purchase was carried out. Any repurchased shares will be available in the future for use in connection with Besi's stock plans and other general corporate purposes, including acquisitions. The information included in this press release is made public under the Market Abuse Regulation (No. 596/2014 / EU).

Prospective Member of the Supervisory Board
Effective August 1, 2020, Dr. Laura Oliphant will join Besi's Supervisory Board as a prospective member. It is the Board’s intention to nominate her for appointment as a member of the Supervisory Board at Besi’s 2021 AGM (April 2021). Dr. Oliphant (57) has extensive experience in the semiconductor, semiconductor equipment and other technology industries as a senior manager, investor and board director. Currently, she is an independent consultant with Serendibite Partners, where she provides expertise to early stage businesses, Fortune 500 companies and venture capital firms. Previously, Dr. Oliphant served as CEO of Translarity, Inc., a venture backed, advanced probe card startup focused on RF applications. Prior thereto, she was with Intel Corporation for almost 25 years including as an Investment Director of Intel Capital and as a Supply Chain Program Manager in Intel's supplier management organization. Dr. Oliphant currently serves on the board of directors of the following US and European corporations: Aehr Test Systems (NASDAQ: AEHR, Fremont, CA), Feasible Inc. (Emeryville, CA), Novelda AS (Oslo, Norway) and Numascale AS (Oslo, Norway). She has a PhD in Chemical Engineering from the University of California, Berkeley and is a holder of the National Association of Corporate Directors Board Leadership Fellowship. Novelda AS (Oslo, Norway) and Numascale AS (Oslo, Norway). She has a PhD in Chemical Engineering from the University of California, Berkeley and is a holder of the National Association of Corporate Directors Board Leadership Fellowship. Novelda AS (Oslo, Norway) and Numascale AS (Oslo, Norway). She has a PhD in Chemical Engineering from the University of California, Berkeley and is a holder of the National Association of Corporate Directors Board Leadership Fellowship.

Outlook

Based on its June 30, 2020 order backlog and feedback from customers, Besi forecasts for Q3-20 that:

• Revenue will decrease by approximately 10-25% vs. € 124.3 million reported in Q2-20.
• Gross margin will range between 58-60% vs. the 62.0% realized in Q2-20.
• Operating expenses will decrease by 10-15% vs. the € 28.6 million reported in Q2-20.

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 5851. To access the audio webcast and webinar slides, please visit www.besi.com .

Basis of Presentation
The accompanying condensed Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union. Reference is made to the Summary of Significant Accounting Policies to the Notes to the Consolidated Financial Statements as included in our 2019 Annual Report, which is available on 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.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, 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; the extent and duration of the COVID-19 pandemic and measures taken to contain the outbreak, and the associated adverse impacts on the global economy, financial markets, and our operations as well as those of our customers and suppliers; 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, 2019 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. 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, 2019 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. 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, 2019 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

Consolidated Balance Sheets

Consolidated Cash Flow Statements

Supplemental Information (unaudited)
(euro in millions, unless stated otherwise)

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^{1 )}    The calculation of diluted income per share assumes the exercise of equity settled share based payments and the full conversion of the Convertible Notes