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10/25/2017

Ultra Clean Reports Third Quarter 2017 Financial Results

Solid Momentum in Semiconductor Capital Equipment Market Continues

HAYWARD, Calif., Oct. 25, 2017 /PRNewswire/ -- Ultra Clean Holdings, Inc. (Nasdaq: UCTT), a leading developer and supplier of critical systems and subsystems for the semiconductor capital equipment and flat panel industries, today reported its financial results for the third quarter ended September 29, 2017.

 (PRNewsfoto/Ultra Clean Holdings, Inc.)

"The semiconductor capital equipment market continued to show strength as reflected in our solid third quarter performance," said Jim Scholhamer, President and CEO. "During this dynamic time in the industry, we are broadening our presence on customers' platforms, increasing our business in Asia and expanding our SAM. Ongoing momentum from multiple technological advances is driving the semiconductor industry and we continue to be excited about the prospects for UCT."

GAAP Financial Results
Total revenue for the third quarter of 2017 was $242.6 million, an increase of 6.3% compared to the second quarter of 2017 and 66.0% compared to the same period a year ago. Semiconductor revenue increased 5.7% compared to the second quarter of 2017 and 71.8% compared to the same period a year ago. Total revenue from outside the U.S. rose 11.3% sequentially and 81.6% compared to the same period a year ago. Gross margin for the third quarter of 2017 was 17.6% compared to 19.0% for the prior quarter and 16.1% for the same period a year ago. Net income for the third quarter was $19.7 million, or $0.59 and $0.57 per basic and diluted share, compared to net income of $20.2 million, or $0.60 and $0.59 per basic and diluted share in the previous quarter, and net income of $2.6 million, or $0.08 per basic and diluted share for the same period a year ago.

Net cash for the third quarter 2017 increased $9.9 million compared to the second quarter of 2017. Cash and cash equivalents were $65.9 million, an increase of $6.4 million compared to the second quarter of 2017. Outstanding debt was $57.3 million, a decrease of $3.5 million compared to the second quarter of 2017.

Non-GAAP Financial Results
Non-GAAP net income for the third quarter of 2017 was $21.3 million, or $0.62 per diluted share. Non-GAAP net income and non-GAAP net income per diluted share exclude pre-tax charges of $1.2 million for intangible assets amortization in addition to the corresponding increase in tax expense of approximately $0.4 million.

This compares to non-GAAP net income for the second quarter of 2017 of $21.3 million, or $0.62 per diluted share, and non-GAAP net income for the third quarter of 2016 of $5.7 million, or $0.17 per diluted share.

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

Fourth Quarter 2017 Outlook
The Company expects revenue to be between $240.0 million to $250.0 million and GAAP diluted net income per share to be in the range of $0.54 to $0.60. The Company expects non-GAAP net income per diluted share to be in the range of $0.57 to $0.63.

Conference Call
UCT will conduct a conference call today, Wednesday, October 25, 2017, beginning at 1:45 p.m. PDT. 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 10113052 (all callers). 

About Ultra Clean Holdings, Inc.
Ultra Clean Holdings, Inc. is a leading developer and supplier of critical systems and subsystems for the semiconductor capital equipment and flat panel industries. Ultra Clean offers its customers an integrated outsourced solution for gas delivery systems and other subassemblies, improved design-to-delivery cycle times, component neutral design and manufacturing and component testing capabilities. 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 fourth quarter of 2017 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," "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 and with respect to our fourth quarter 2017 outlook. 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 30, 2016 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

Annie Leschin
Investor Relations
415-775-1788

 

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in thousands, except per share data)



Three months ended


Nine months ended


September 29,


September 23,


September 29,


September 23,

2017


2016

2017


2016













Sales

$

242,610


$

146,154


$

675,465


$

388,214

Cost of goods sold


199,914



122,663



551,903



331,132

Gross profit


42,696



23,491



123,562



57,082













Operating expenses:












  Research and development


2,722



2,447



8,402



7,082

  Sales and marketing


3,662



2,819



10,064



8,537

  General and administrative


13,050



11,525



37,656



31,742

    Total operating expenses


19,434



16,791



56,122



47,361

Income from operations


23,262



6,700



67,440



9,721

Interest and other income (expense), net


(19)



(1,336)



(2,077)



(3,263)

Income before provision for income taxes


23,243



5,364



65,363



6,458

Income tax provision


3,527



2,750



11,127



6,360

Net income

$

19,716


$

2,614


$

54,236


$

98













Net income per share:












  Basic

$

0.59


$

0.08


$

1.63


$

0.00

  Diluted

$

0.57


$

0.08


$

1.59


$

0.00

Shares used in computing net income per share:

  Basic


33,540



32,759



33,342



32,544

  Diluted


34,360



33,100



34,216



32,887

 

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands)










September 29,


December 30,

2017

2016

ASSETS







Current assets:







  Cash and cash equivalents


$

65,939


$

52,465

  Accounts receivable, net of allowance



107,662



74,663

  Inventory



165,303



103,861

  Other current assets



11,460



6,461

    Total current assets



350,364



237,450








Equipment and leasehold improvements, net



28,943



18,858

Goodwill



85,248



85,248

Purchased intangibles, net



33,331



37,024

Deferred tax asset, net



1,098



1,355

Other non-current assets



1,769



762

Total assets


$

500,753


$

380,697








LIABILITIES AND STOCKHOLDERS' EQUITY







Current liabilities:







  Bank borrowings


$

15,518


$

16,819

  Accounts payable



130,539



71,189

  Other current liabilities



24,191



13,053

    Total current liabilities



170,248



101,061








Bank borrowings, net of current portion



41,810



50,931

Deferred tax liability



9,607



9,917

Other long-term liabilities



2,408



2,657

    Total liabilities



224,073



164,566








Stockholders' equity:







  Common stock



182,856



178,477

  Retained earnings



92,273



38,037

  Accumulated other comprehensive income (loss)



1,551



(383)

    Total stockholders' equity



276,680



216,131

Total liabilities and stockholders' equity


$

500,753


$

380,697

 

ULTRA CLEAN HOLDINGS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS




Three Months Ended



September 29,


September 23,


June 30,



2017


2016


2017

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







Reported net income on a GAAP basis


$          19,716


$            2,614


$  20,179

Amortization of intangible assets (1)


1,231


1,438


1,231

Restructuring charges (2)


-


(105)


-

Executive transition costs (3)


-


925


-

Income tax effect of non-GAAP adjustments (4)


(159)


(574)


(163)

Income tax effect of valuation allowance (5)


524


1,391


18

Non-GAAP net income


$          21,312


$            5,689


$  21,265








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







Reported income  from operations on a GAAP basis


$          23,262


$            6,700


$  24,405

Amortization of intangible assets (1)


1,231


1,438


1,231

Restructuring charges (2)


-


(105)


-

Executive transition costs (3)


-


925


-

Non-GAAP income from operations


$          24,493


$            8,958


$  25,636








Reconciliation of GAAP Operating margin to Non-GAAP Operating margin







Reported operating margin on a GAAP basis


9.6%


4.6%


10.7%

Amortization of intangible assets (1)


0.5%


1.0%


0.5%

Restructuring charges (2)


0.0%


(0.1%)


0.0%

Executive transition costs (3)


0.0%


0.6%


0.0%

Non-GAAP operating margin


10.1%


6.1%


11.2%


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

2    Adjustment to previous restructuring reserve related to the abandonment of one of the Company's facilities

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

4    Tax effect of items (1) through (3) above based on the non-gaap tax rate shown below

5    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



September 29,


September 23,


June 30,



2017


2016


2017

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







Reported net income on a GAAP basis


$              0.57


$              0.08


$      0.59

Amortization of intangible assets


0.04


0.04


0.04

Restructuring charges


-


-


-

Executive transition costs


-


0.03


-

Income tax effect of non-GAAP adjustments


(0.01)


(0.02)


(0.01)

Income tax effect of valuation allowance


0.02


0.04


-

Non-GAAP net income


$              0.62


$              0.17


$      0.62

Weighted average number of diluted shares (thousands)

34,360


33,100


34,064









 

ULTRA CLEAN HOLDINGS, INC.

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




Three Months Ended



September 29,


September 23,


June 30,



2017


2016


2017

(in thousands, except percentages)







Provision for income taxes on a GAAP basis


$            3,527


$            2,750


$    3,106

Income tax effect of non-GAAP adjustments (1)


159


574


163

Income tax effect of valuation allowance (2)


(524)


(1,391)


(18)

Non-GAAP provision for income taxes


$            3,162


$            1,933


$    3,251








Income before income taxes on a GAAP basis


$          23,243


$            5,364


$  23,285

Amortization of intangible assets


1,231


1,438


1,231

Restructuring charges


-


(105)


-

Executive transition costs


-


925



Non-GAAP income before income taxes


$          24,474


$            7,622


$  24,516








Effective income tax rate on a GAAP basis


15.2%


51.3%


13.3%

Non-GAAP effective income tax rate


12.9%


25.4%


13.3%


1   Tax effect of items (1) through (3) 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. 

 

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SOURCE Ultra Clean Holdings, Inc.

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