BE Semiconductor Industries N.V. Announces Q3-18 Results

Revenue and Net Income of € 116.7 Million and € 29.3 Million, Respectively
Operating Profit Exceeds Expectations. Orders Up 25.0% vs. Q2-18

DUIVEN, the Netherlands, Oct. 25, 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 third quarter and nine months ended September 30, 2018.

Key Highlights Q3-18

• Revenue of € 116.7 million at midpoint of guidance. Down 27.6% and 26.7% vs. Q2-18 and Q3-17, respectively. Lower die bonding shipments for mobile applications were partially offset by growth in automotive end user markets
• Orders of € 107.9 million were up 25.0% vs. Q2-18 due to higher bookings for mobile applications as well as increased demand for high end logic and memory markets. Down 33.2% vs. Q3-17 due primarily to reduced mobile demand and less favorable market conditions
• Gross margin of 58.0% is higher than Q2-18 (56.5%) and above guidance despite lower revenue levels due primarily to more favorable product mix
• Operating expenses down 8.5% vs. Q2-18 due primarily to lower temporary headcount and personnel costs. Down 4.3% vs. Q3-17. Better than prior guidance
• Net income of € 29.3 million and net margin of 25.1% reached in face of challenging market conditions
• Net cash up € 49.9 million (+45.3%) vs. Q2-18 to reach € 160.1 million

Key Highlights YTD-18/YTD-17

• Revenue of € 432.7 million, down 1.5% reflecting lower die bonding shipments for mobile applications partially offset by strength in computing and automotive end markets
• Orders decreased by 24.7% due primarily to reduced demand for high end smart phone capacity post significant 2017 ramp and less favorable market conditions
• Gross margin decreased slightly to 56.9% vs. 57.4%  
• Net income of € 113.5 million declined 12.4% vs. YTD-17. Net margin of 26.2% remained at peer leading levels

Outlook  

• Q4-18 revenue estimated to decrease 20%-25% vs. Q3-18 reflecting typical H2 seasonal patterns and weaker assembly equipment market conditions

* Reflects cash dividend payment of € 174.0 million in Q2-18.

Richard W. Blickman, President and Chief Executive Officer of Besi, commented:
“Besi’s nine month 2018 results reflect solid performance and strategic execution in an assembly equipment market less favorable than 2017. Revenue of € 432.7 million and net income of € 113.5 million declined by 1.5% and 12.4%, respectively, vs. the comparable period of the prior year. Our 2018 revenue development was affected by a first half slow-down in high end mobile demand followed by weakness in memory end-user markets in Q3-18 partially offset by more favorable trends experienced in automotive and computing applications.

Besi responded to such challenges by rapidly aligning production, supply chain and personnel levels to changing market conditions. As a result, we have been able to maintain high levels of profitability in the current market environment. In addition, we returned € 196.5 million to shareholders via dividends and share repurchases to date this year which reflects the strong cash flow generation of our business model and Besi’s ongoing commitment to enhancing shareholder value. In fact, total cash and deposits grew to € 5.97 per share at quarter end (€ 2.15 net of debt outstanding).

For Q3-18, revenue of € 116.7 million and net income of € 29.3 million compared favorably to expectations. A higher than anticipated gross margin of 58.0% and an 8.5% decrease in sequential operating expenses helped keep Besi’s net margin in excess of 25% despite a 27.6% revenue decrease vs. Q2-18. In addition, orders of € 107.9 million increased 25.0% vs. Q2-18 as demand recovered for mobile applications by Asian customers. Cash generation recovered as well, with net cash increasing by € 49.9 million vs. Q2-18 (+45.3%) to reach € 160.1 million. Cash flow generation helped support share repurchases of € 11.2 million during the quarter.

Looking to Q4-18, we estimate that revenue will decline by 20-25% sequentially due to typical second half seasonal patterns and less favorable industry conditions generally. It is unclear whether the present environment reflects simply a temporary pause after the large capacity build in 2017 or a more traditional downturn.

Periodic revenue volatility is nothing new to our industry. In fact, periods of less robust growth let us further refine our strategy and financial potential to capitalize on the next major industry upturn. At present, we are keenly focused on strategic objectives to increase Besi’s market presence, revenue growth and market share in the next customer investment round while reducing structural costs by € 15-20 million over the next 3 years. Similarly, our development efforts are focused on providing customers leading edge advanced packaging processes such as TCB, FOWLP, Panel and Wafer Molding for next generation devices. The adoption of such processes are essential to the progress of the digital society in the years ahead.”  

Third Quarter Results of Operations

Besi’s Q3-18 revenue decreased 27.6% vs. Q2-18 primarily due to lower die bonding demand for mobile applications and less favorable market conditions partially offset by strength in shipments for automotive applications. Q3-18 revenue was at the midpoint of prior guidance. Similarly, revenue decreased by 26.7% vs. Q3-17.

Orders of € 107.9 million were up 25.0% vs. Q2-18 as demand for mobile applications by Asian customers recovered vs. depressed levels in Q2-18. In addition, order growth benefited from increased demand by IDM customers for high end logic and memory applications. In contrast, orders decreased by 33.2% vs. Q3-17 due to various factors including lower demand for mobile and high performance computing applications and less favorable market conditions. Per customer type, IDM orders increased sequentially by € 11.2 million, or 15.8%, while subcontractor orders increased by € 10.4 million, or 67.1%. IDM and subcontractor orders represented 76% and 24%, respectively, of total Q3-18 bookings.

Besi’s gross margin of 58.0% in Q3-18 was 1.5 points higher sequentially primarily due to a more favorable product mix. Gross margin decreased by 0.7 points vs. Q3-17 principally due to an under absorption of labor costs in the face of significantly lower revenue levels vs. the year earlier period.

Q3-18 operating expenses decreased by € 2.7 million, or 8.5%, vs. Q2-18 due primarily to lower personnel costs from headcount reduction efforts. Operating expenses also decreased by € 1.3 million, or 4.3%, vs. Q3-17 primarily as a result of lower warranty costs and increased R&D capitalization related to new product development. Total headcount at September 30, 2018 decreased by 8.7% vs. June 30, 2018 principally due to a reduction in temporary production personnel as Besi aligned its organization to more challenging market conditions.

Financial expense, net decreased by € 0.9 million vs. Q2-18 due primarily to lower forex hedging costs related to lower revenue levels. As compared to Q3-17, such expenses increased by € 1.9 million inclusive of higher interest expense associated with Besi’s December 2017 Convertible Note issuance as well as higher forex hedging costs.

Besi’s net income decreased by € 17.9 million in Q3-18 vs. Q2-18 principally due to a 27.6% reduction in revenue and a higher effective tax rate partially offset by improved gross margins and lower operating expenses. Net margin also declined to 25.1% vs. 29.3% in Q2-18. Similarly, net income decreased by € 23.6 million vs. Q3-17 due to significantly reduced revenue levels, lower gross margins and a higher effective tax rate partially offset by lower operating expenses.

Nine Months Results of Operations

For the first nine months of 2018, Besi’s revenue decreased by 1.5% primarily as a result of lower customer demand for mobile applications. This revenue decrease was partially offset by strength in automotive and high end logic and memory applications principally for cloud server markets. In contrast, YTD-18 orders decreased by 24.7% vs. YTD-17 principally due to lower demand for die bonding systems in high end smart phone applications post customers’ significant 2017 capacity build and less favorable market conditions. Orders by IDMs and subcontractors represented 66% and 34%, respectively, of Besi’s total YTD-18 orders vs. 69% and 31%, respectively, in YTD-17.

Besi’s YTD-18 net income of € 113.5 million decreased by € 16.1 million, or 12.4% vs. YTD-17 due primarily to its (i) 1.5% year over year revenue decrease, (ii) € 6.7 million increase in net financial expense associated with higher interest expense and forex hedging costs, (iii) € 4.8 million of higher operating expenses principally due to higher share based compensation expense as well as (iv) a gross margin decrease of 0.5 points.

Financial Condition

Besi Q3-18 cash flow from operations of € 65.7 million increased by € 58.7 million vs. Q2-18 due primarily to reduced working capital needs. In Q3-18, Besi used cash flow from operations to fund (i) € 11.0 million of share repurchases, (ii) € 2.9 million of debt retirement, € 2.7 million of capitalized development spending and (iii) € 1.2 million of capital expenditures.

At the end of Q3-18, cash and deposits aggregated € 443.5 million and net cash was € 160.1 million. As compared to Q2-18, Besi’s net cash and deposits increased by € 49.9 million primarily due to a reduction of accounts receivable and inventories by € 37.0 million and € 12.5 million, respectively. Reduced working capital levels related primarily to lower shipment activity and a re-alignment of Besi’s supply chain to current market conditions.

Share Repurchase Activity
During Q3-18, Besi repurchased 592,813 of its ordinary shares at an average price of € 18.90 per share for a total of € 11.2 million. Of that amount, 517,914 ordinary shares (average price of € 18.51 per share for a total of € 9.6 million) related to the new repurchase program announced on July 26, 2018. The 2018 Program was initiated for capital reduction purposes and to help offset dilution related to Besi’s Convertible Notes and shares issued under employee stock plans. Since the start of 2018, Besi has repurchased a total of 916,247 ordinary shares at an average price of € 24.57 per share for a total of € 22.5 million.

Outlook

Based on its September 30, 2018 backlog of € 131.7 million and feedback from customers, Besi forecasts for Q4-18 that:

• Revenue will decrease by 20-25% vs. the € 116.7 million reported in Q3-18.
• Gross margin will range between 54-56% vs. the 58.0% realized in Q3-18.
• Operating expenses will be approximately flat vs. the € 29.1 million reported in Q3-18.

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.

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(1)}  Share amounts in 2017 have been adjusted for the 2-for-1stock split effective May 4, 2018
⁽²⁾  The calculation of diluted income per share assumes the exercise of equity settled share based payments and the conversion of the Convertible Notes.