Ultra Clean Reports Second Quarter 2018 Financial Results

News provided by

Ultra Clean Holdings, Inc.

Jul 26, 2018, 16:05 ET

HAYWARD, Calif., July 26, 2018 /PRNewswire/ -- Ultra Clean Holdings, Inc. (Nasdaq: UCTT), a leading developer and supplier of critical subsystems for the semiconductor and display capital equipment industries, today reported its financial results for the second quarter ended June 29, 2018.

"The second quarter came in largely as expected, with a moderate sequential decline in our semiconductor capital equipment business off of an excellent first quarter," said Jim Scholhamer, CEO. "Based on recent announcements of spending push-outs from large semiconductor manufacturers, we expect some lower near-term capital equipment forecasts. On Tuesday, we announced that we had entered into an agreement for the acquisition of Quantum Global Technologies ("Quantum"). Upon completion of the acquisition, Quantum will diversify our revenue streams as Fab services grow with the installed base and are less reliant on capital investment timing. Looking ahead, we see a wide range of opportunities to solve our customers' complex challenges across much larger, more diversified and growing end markets."

GAAP Financial Results
Total revenue for the second quarter of 2018 was $290.2 million, a decrease of 7.8% compared to the first quarter of 2018 and an increase of 27.1% compared to the same period a year ago. Semiconductor revenue decreased 9.3% compared to the first quarter of 2018 and increased 29.4% compared to the same period a year ago. Total revenue from outside the U.S. decreased 6.2% sequentially and increased 43.1% compared to the same period a year ago. Gross margin for the second quarter of 2018 was 15.9% compared to 15.5% for the prior quarter and 19.0% for the same period a year ago. Net income for the second quarter was $19.0 million, or $0.49 and $0.48 per basic and diluted share compared to net income of $24.7 million, or $0.67 and $0.66 per basic and diluted share in the previous quarter, and net income of $20.2 million, or $0.60 and $0.59 per basic and diluted share for the same period a year ago.

Cash and cash equivalents were $141.1 million, a decrease of $21.2 million compared to the first quarter of 2018.

Non-GAAP Financial Results
Non-GAAP net income for the second quarter of 2018 was $21.5 million, or $0.55 per diluted share based on 39.3 million weighted shares outstanding. Non-GAAP net income and non-GAAP net income per diluted share exclude pre-tax charges of $1.1 million for intangible assets amortization and $1.4 million of costs related to executive transition. This compares to previous quarter non-GAAP net income of $25.7 million and non-GAAP net income per diluted share of $0.69 based on 37.5 million weighted shares outstanding, and non-GAAP net income of $21.3 million and non-GAAP net income per diluted share of $0.62 based on 34.1 million weighted shares outstanding for the second quarter of 2017.

The Company has provided a reconciliation of GAAP to non-GAAP financial measures in the financial statement tables included in this press release.

Third Quarter 2018 Outlook
The Company expects revenue to be between $200.0 million to $220.0 million and GAAP diluted net income per share to be in the range of $0.26 to $0.36. The Company expects non-GAAP net income per diluted share to be in the range of $0.28 to $0.38. This outlook does not include guidance from the addition of Quantum Global Technologies. The transaction is expected to close in the third quarter of fiscal 2018, subject to customary closing conditions.

Conference Call
UCT will conduct a conference call today, Thursday, July 26, 2018, beginning at 3:30 p.m. PT. The call-in number is (844) 826-3034 (domestic) and (412) 317-5179 (international). A replay of the conference will be available for seven days following the call at (877) 344-7529 (domestic) and (412) 317-0088 (international). The confirmation number for live broadcast and replay is 10122356 (all callers). 

About Ultra Clean Holdings, Inc.
Ultra Clean Holdings, Inc. is a leading developer and supplier of critical subsystems for the semiconductor and display capital equipment industries. 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. Ultra Clean is headquartered in Hayward, California. Additional information is available at www.uct.com.

Use of Non-GAAP Measures
Management uses non-GAAP net income and net income per diluted share 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 of non-GAAP results to U.S. GAAP results are included at the end of this press release. A reconciliation of our guidance for non-GAAP net income per diluted share for the third quarter of 2018 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, our third quarter 2018 outlook, our ability to consummate the acquisition of Quantum and related transactions, including the financing for the transaction, and the expected benefits of the acquisition of Quantum on our business. 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 29, 2017 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:
Sheri Savage
UCT Senior VP Finance, CFO
510-576-4705

Rhonda Bennetto
Investor Relations
250-307-9030

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in thousands, except per share data)













Three months ended

Six months ended

June 29, 

June 30, 

June 29, 

June 30, 

2018

2017

2018

2017












Sales

$

290,213

$

228,261

$

605,055

$

432,855

Cost of goods sold

244,148

184,890

510,186

351,989

Gross profit

46,065

43,371

94,869

80,866












Operating expenses:










  Research and development

2,915

2,774

5,944

5,680

  Sales and marketing

3,630

3,351

7,435

6,402

  General and administrative

16,856

12,841

31,918

24,606

    Total operating expenses

23,401

18,966

45,297

36,688

Income from operations

22,664

24,405

49,572

44,178

Interest and other income (expense), net

(809)

(1,120)

(483)

(2,058)

Income before provision for income taxes

21,855

23,285

49,089

42,120

Income tax provision

2,895

3,106

5,388

7,600

Net income

$

18,960

$

20,179

$

43,701

$

34,520












Net income per share:










  Basic

$

0.49

$

0.60

$

1.16

$

1.04

  Diluted

$

0.48

$

0.59

$

1.14

$

1.01

Shares used in computing net income per share:










  Basic

38,802

33,433

37,763

33,247

  Diluted

39,297

34,064

38,418

34,017

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands)









June 29,

December 29,

2018

2017

ASSETS





Current assets:





  Cash and cash equivalents

$

141,146

$

68,306

  Accounts receivable, net of allowance

98,608

90,213

  Inventory

228,570

236,840

  Other current assets

15,115

12,089

    Total current assets

483,439

407,448







Equipment and leasehold improvements, net

38,769

32,246

Goodwill

85,248

85,248

Purchased intangibles, net

29,392

31,587

Deferred tax asset, net

5,067

4,951

Other non-current assets

1,830

1,932

Total assets

$

643,745

$

563,412







LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities:





  Bank borrowings

$

54,826

$

12,381

  Accounts payable

113,803

173,521

  Other current liabilities

20,239

21,445

    Total current liabilities

188,868

207,347







Bank borrowings, net of current portion

-

39,893

Deferred tax liability

9,868

9,981

Other long-term liabilities

5,682

5,886

    Total liabilities

204,418

263,107







Stockholders' equity:





  Common stock

282,092

185,336

  Retained earnings

156,823

113,122

  Accumulated other comprehensive income

412

1,847

    Total stockholders' equity

439,327

300,305

Total liabilities and stockholders' equity

$

643,745

$

563,412

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in thousands)





Six Months Ended

June 29,

June 30,

2018

2017

Cash flows from operating activities:


Net income

$  43,701

$34,520

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

5,188

5,124

Stock-based compensation

4,920

2,762

Change in the fair value of financial instruments

(228)

619

Others

201

—

Changes in assets and liabilities:


Accounts receivable

(8,758)

(26,717)

Inventories

7,766

(35,174)

Prepaid expenses and other

(3,558)

13

Deferred income taxes

(113)

(40)

Other non-current assets

(313)

(337)

Accounts payable

(59,490)

31,350

Accrued compensation and related benefits

(1,332)

3,010

Income taxes payable

(3,933)

3,993

Other liabilities

3,903

1,058

Net cash provided by (used for) operating activities

(12,046)

20,181

Cash flows from investing activities:


Purchases of equipment and leasehold improvements

(9,666)

(5,770)

Net cash used for investing activities

(9,666)

(5,770)

Cash flows from financing activities:


Proceeds from bank borrowings

21,886

5,205

Proceeds from issuance of common stock

94,454

1,677

Principal payments on bank borrowings

(19,148)

(12,607)

Employees' taxes paid upon vesting of restricted stock units

(2,618)

(1,810)

Net cash provided by (used for) financing activities

94,574

(7,535)

Effect of exchange rate changes on cash and cash equivalents

(22)

141

Net increase in cash and cash equivalents

$  72,840

$  7,017

Cash and cash equivalents at beginning of period

68,306

52,465

Cash and cash equivalents at end of period

$141,146

$59,482

ULTRA CLEAN HOLDINGS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS



Three Months Ended


June 29,

June 30,

March 30,


2018

2017

2018

Reconciliation of GAAP Net Income to Non-GAAP Net Income (in thousands)





Reported net income on a GAAP basis

$  18,960

$  20,179

$   24,741

Amortization of intangible assets (1)

1,098

1,231

1,098

Restructuring charges (2)

-

-

874

Consulting fees (3)

-

-

150

Executive transition costs (4)

1,400

-

-

Income tax effect of non-GAAP adjustments (5)

(296)

(163)

(262)

Income tax effect of valuation allowance (6)

303

18

(873)

Non-GAAP net income

$  21,465

$  21,265

$   25,728







Reconciliation of GAAP Income from operations to Non-GAAP Income from operations (in thousands)





Reported income from operations on a GAAP basis

$  22,664

$  24,405

$   26,908

Amortization of intangible assets (1)

1,098

1,231

1,098

Restructuring charges (2)

-

-

874

Consulting fees (3)

-

-

150

Executive transition costs (4)

1,400

-

-

Non-GAAP income from operations

$  25,162

$  25,636

$   29,030







Reconciliation of GAAP Operating margin to Non-GAAP Operating margin





Reported operating margin on a GAAP basis

7.8%

10.7%

8.5%

Amortization of intangible assets (1)

0.4%

0.5%

0.4%

Restructuring charges (2)

-

-

0.3%

Consulting fees (3)

-

-

0.0%

Executive transition costs (4)

0.5%

-

-

Non-GAAP operating margin

8.7%

11.2%

9.2%







Reconciliation of GAAP Gross profit to Non-GAAP Gross profit (in thousands)





Reported gross profit on a GAAP basis

$  46,065

$  43,371

$   48,804

Restructuring charges (2)

-

-

787

Consulting fees (3)

-

-

150

Non-GAAP gross profit

$  46,065

$  43,371

$   49,741







Reconciliation of GAAP Gross margin to Non-GAAP Gross margin





Reported gross margin on a GAAP basis

15.9%

19.0%

15.5%

Restructuring charges (2)

-

-

0.2%

Consulting fees (3)

-

-

0.1%

Non-GAAP gross margin

15.9%

19.0%

15.8%







1    Amortization of intangible assets related to the Company's acquisitions of AIT, Marchi and Miconex 

2    Reserve for severance and other costs related to the closure of the Company's machining operations in China

3    One time consulting fees related to the expansion of the Company's operations in Singapore

4    Represents expense for termination benefits paid to former executives of the Company

5    Tax effect of items (1) through (4) above based on the non-gaap tax rate shown below

6    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


June 29,

June 30,

March 30,


2018

2017

2018

Reconciliation of GAAP Earnings Per Diluted Share to Non-GAAP Earnings Per Diluted Share





Reported net income on a GAAP basis

$      0.48

$      0.59

$       0.66

Amortization of intangible assets

0.03

0.04

0.03

Restructuring charges

-

-

0.02

Consulting fees

-

-

0.01

Executive transition costs

0.04



Income tax effect of non-GAAP adjustments

(0.01)

(0.01)

(0.01)

Income tax effect of valuation allowance

0.01

-

(0.02)

Non-GAAP net income

$      0.55

$      0.62

$       0.69

Weighted average number of diluted shares (thousands)

39,297

34,064

37,491







ULTRA CLEAN HOLDINGS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP EFFECTIVE INCOME TAX RATE



Three Months Ended


June 29,

June 30,

March 30,


2018

2017

2018

(in thousands, except percentages)





Provision for income taxes on a GAAP basis

$    2,895

$    3,106

$     2,493

Income tax effect of non-GAAP adjustments (1)

296

163

262

Income tax effect of valuation allowance (2)

(303)

(18)

873

Non-GAAP provision for income taxes

$    2,888

$    3,251

$     3,628







Income before income taxes on a GAAP basis

$  21,855

$  23,285

$   27,234

Amortization of intangible assets

1,098

1,231

1,098

Restructuring charges

-

-

874

Consulting fees

-

-

150

Executive transition costs

1,400

-

-

Non-GAAP income before income taxes

$  24,353

$  24,516

$   29,356







Effective income tax rate on a GAAP basis

13.2%

13.3%

9.2%

Non-GAAP effective income tax rate

11.9%

13.3%

12.4%

1    Tax effect of items (1) through (4) 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. 

SOURCE Ultra Clean Holdings, Inc.

Related Links

http://www.uct.com