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02/21/2018

Ultra Clean Announces Fourth Quarter and Fiscal Year 2017 Financial Results

Delivers record performance in 2017

HAYWARD, Calif., Feb. 21, 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 fourth quarter and fiscal year ended December 29, 2017.

 (PRNewsfoto/Ultra Clean Holdings, Inc.)

"UCT reached a new revenue milestone in the fourth quarter, capping off an extraordinary year of expansion and profitability," said Jim Scholhamer, President and CEO. "Our operational flexibility enabled us to increase the amount of UCT's content on our customers' platforms, allowing us to deliver additional value and outpace the broader semiconductor capital equipment market. With a balance sheet strengthened by our recent equity offering, we are focused on opportunities to further expand our capabilities, broaden our worldwide footprint and enhance long-term shareholder value."

GAAP Financial Results
Total revenue for the fourth quarter of 2017 was $248.9 million, an increase of 2.6% compared to the third quarter of 2017 and 42.6% compared to the same period a year ago. Semiconductor revenue increased 5.8% compared to the third quarter of 2017 and 50.8% compared to the same period a year ago. Total revenue from outside the U.S. rose 5.6% sequentially and 55.0% compared to the same period a year ago. Gross margin for the fourth quarter of 2017 was 17.7%, compared to 17.6% for the prior quarter and 17.0% for the same period a year ago. Net income for the fourth quarter was $20.8 million, or $0.62 and $0.60 per basic and diluted share respectively, compared to net income of $19.7 million, or $0.59 and $0.57 per basic and diluted share respectively, in the third quarter of 2017, and net income of $10.0 million, or $0.30 per basic and diluted share for the same period a year ago.

Net cash at the end of the fourth quarter of 2017 increased $7.4 million compared to the third quarter of 2017. Cash and cash equivalents were $68.3 million, an increase of $2.4 million compared to the third quarter of 2017. Outstanding debt was $52.3 million, a decrease of $5.1 million compared to the third quarter of 2017.

For fiscal year 2017 revenue was $924.4 million, an increase of 64.3% from fiscal year 2016. Semiconductor revenue was 92.9% of total revenue for fiscal year 2017 and 90.3% for fiscal year 2016. Revenue outside the U.S. was 53.6% of total revenue in fiscal year 2017 compared to 48.0% in fiscal year 2016. Gross margin for fiscal year 2017 was 18.1% compared to 15.4% for fiscal year 2016. Net income for fiscal year 2017 was $75.1 million, or $2.25 and $2.19 per basic and diluted share respectively, compared to net income of $10.1 million, or $0.31 and $0.30 per basic and diluted share respectively, in fiscal year 2016.

Non-GAAP Financial Results
Non-GAAP net income for the fourth quarter of 2017 was $20.3 million and non-GAAP net income per diluted share was $0.59. Non-GAAP net income and non-GAAP net income per diluted share exclude pre-tax charges of $1.7 million for intangible assets amortization in addition to the corresponding decrease in tax expense of approximately $2.3 million. This compares to non-GAAP net income of $21.3 million and non-GAAP net income per diluted share of $0.62 for the third quarter of 2017, and non-GAAP net income of $12.0 million and non-GAAP net income per diluted share of $0.36 for the fourth quarter of 2016.

Non-GAAP net income for fiscal year 2017 was $80.3 million and non-GAAP net income per diluted share was $2.34. Non-GAAP net income and non-GAAP net income per diluted share exclude pre-tax charges of $5.4 million for intangible assets amortization in addition to the corresponding decrease in tax expense of approximately $0.2 million. This compares to prior fiscal year non-GAAP net income and non-GAAP net income per diluted share of $21.4 million and $0.65, respectively.

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

First Quarter 2018 Outlook
The Company expects revenue to be between $275 million to $290 million. Taking into account the additional shares issued during the recent financing, the Company anticipates GAAP net income per diluted share to be in the range of $0.52 to $0.59 and non-GAAP net income per diluted share to be in the range of $0.56 to $0.63. Non-GAAP operating margin is expected to be within the targeted range of 8% to 10% and the non-GAAP tax rate should be between 14% and 16%.

Conference Call
UCT will conduct a conference call today, Wednesday, February 21, 2018, 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 10116511 (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 first 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," "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 first quarter 2018 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. Additional information will also be set forth in our annual report on Form 10-K for the year ended December 29, 2017. 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/Rhonda Bennetto
Investor Relations
415-775-1788 
annie@streetsmartir.com 
rhonda@streetsmartir.com

   

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in thousands, except per share data)



Three months ended


Twelve months ended


December 29, 


December 30, 


December 29, 


December 30, 

2017


2016

2017


2016













Sales

$

248,886


$

174,545


$

924,351


$

562,759

Cost of goods sold


204,819



144,844



756,722



475,976

Gross profit


44,067



29,701



167,629



86,783













Operating expenses:












  Research and development


3,264



2,818



11,666



9,900

  Sales and marketing


3,684



3,031



13,748



11,568

  General and administrative


15,162



11,182



52,818



42,924

    Total operating expenses


22,110



17,031



78,232



64,392

Income from operations


21,957



12,670



89,397



22,391

Interest and other income (expense), net


(378)



(181)



(2,455)



(3,444)

Income before provision for income taxes


21,579



12,489



86,942



18,947

Income tax provision


730



2,536



11,857



8,896

Net income 

$

20,849


$

9,953


$

75,085


$

10,051













Net income per share:












  Basic

$

0.62


$

0.30


$

2.25


$

0.31

  Diluted

$

0.60


$

0.30


$

2.19


$

0.30

Shares used in computing net income per share:












  Basic


33,602



32,877



33,409



32,632

  Diluted


34,500



33,526



34,303



33,150

 

 

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands)










December 29,


December 30,

2017

2016

ASSETS







Current assets:







  Cash and cash equivalents


$

68,306


$

52,465

  Accounts receivable, net of allowance



90,213



74,663

  Inventory



231,771



103,861

  Other current assets



12,089



6,461

    Total current assets



402,379



237,450








Equipment and leasehold improvements, net



32,246



18,858

Goodwill



85,248



85,248

Purchased intangibles, net



31,587



37,024

Deferred tax asset, net



4,951



1,355

Other non-current assets



1,932



762

Total assets


$

558,343


$

380,697








LIABILITIES AND STOCKHOLDERS' EQUITY







Current liabilities:







  Bank borrowings


$

12,381


$

16,819

  Accounts payable



168,452



71,189

  Other current liabilities



21,445



13,053

    Total current liabilities



202,278



101,061








Bank borrowings, net of current portion



39,893



50,931

Deferred tax liability



9,981



9,917

Other long-term liabilities



5,886



2,657

    Total liabilities



258,038



164,566








Stockholders' equity:







  Common stock



185,336



178,477

  Retained earnings



113,122



38,037

  Accumulated other comprehensive income (loss)



1,847



(383)

    Total stockholders' equity



300,305



216,131

Total liabilities and stockholders' equity


$

558,343


$

380,697

 

 

ULTRA CLEAN HOLDINGS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS




Three Months Ended


Twelve Months Ended



December 29, 


September 29,


December 30, 


December 29, 


December 30, 



2017


2017


2016


2017


2016












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











Reported net income on a GAAP basis


$       20,849


$        19,716


$         9,953


$        75,085


$        10,051

Amortization of intangible assets (1)


1,745


1,231


1,439


5,438


5,757

Executive transition costs (2)


-


-


-


-


925

Restructuring charges (3)


-


-


109


-


251

Impairment of "held for sale" assets (4)


-


-


666


-


666

Termination of contractual obligation (5)


-


-


438


-


438

Income tax effect of non-GAAP adjustments (6)


(229)


(159)


(549)


(714)


(1,664)

Income tax effect of valuation allowance (7)


(2,096)


524


(49)


469


4,964

Non-GAAP net income


$       20,269


$        21,312


$       12,007


$        80,278


$        21,388












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











Reported income from operations on a GAAP basis


$       21,957


$        23,262


$       12,670


$        89,397


$        22,391

Amortization of intangible assets (1)


1,745


1,231


1,439


5,438


5,757

Executive transition costs (2)


-


-


-


-


925

Restructuring charges (3)


-


-


109


-


251

Impairment of "held for sale" assets (4)


-


-


666


-


666

Termination of contractual obligation (5)


-


-


438


-


438

Non-GAAP income from operations


$       23,702


$        24,493


$       15,322


$        94,835


$        30,428












Reconciliation of GAAP Operating margin to Non-GAAP Operating margin











Reported operating margin on a GAAP basis


8.8%


9.6%


7.3%


9.7%


4.0%

Amortization of intangible assets (1)


0.7%


0.5%


0.8%


0.6%


1.0%

Executive transition costs (2)


-


-


-


-


0.2%

Restructuring charges (3)


-


-


0.1%


-


-

Impairment of "held for sale" assets (4)


-


-


0.4%


-


0.1%

Termination of contractual obligation (5)


-


-


0.2%


-


0.1%

Non-GAAP operating margin


9.5%


10.1%


8.8%


10.3%


5.4%












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











Reported gross profit on a GAAP basis


$       44,067


$        42,696


$       29,701


$      167,629


$        86,783

Impairment of "held for sale"assets (4)


-


-


636


-


636

Non-GAAP gross profit


$       44,067


$        42,696


$       30,337


$      167,629


$        87,419












Reconciliation of GAAP Gross margin to Non-GAAP Gross margin











Reported gross margin on a GAAP basis


17.7%


17.6%


17.0%


18.1%


15.4%

Impairment of "held for sale"assets (4)


-


-


0.4%


-


0.1%

Non-GAAP gross margin


17.7%


17.6%


17.4%


18.1%


15.5%












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

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

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

4  Impairment of assets classified as "held for sale" related to our 3D printing business in Singapore

Amount paid related to the termination of a long-term contractual obligation related to our 3D printing business in Singapore

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

7  The Company's GAAP tax expense is substantially 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


Twelve Months Ended



December 29, 


September 29,


December 30, 


December 29, 


December 30, 



2017


2017


2016


2017


2016












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











Reported net income on a GAAP basis


$            0.60


$              0.57


$            0.30


$              2.19


$              0.30

Amortization of intangible assets


0.05


0.04


0.04


0.16


0.18

Executive transition costs


-


-


-


-


0.03

Restructuring charges


-


-


-


-


0.01

Impairment of "held for sale" equipment


-


-


0.02


-


0.02

Termination of contractual obligation 


-


-


0.01


-


0.01

Income tax effect of non-GAAP adjustments


(0.01)


(0.01)


(0.01)


(0.02)


(0.05)

Income tax effect of valuation allowance


(0.05)


0.02


-


0.01


0.15

Non-GAAP net income


$            0.59


$              0.62


$            0.36


$              2.34


$              0.65

Weighted average number of diluted shares (thousands)

34,500


34,360


33,526


34,303


33,150

 

 

ULTRA CLEAN HOLDINGS, INC.

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




Three Months Ended


Twelve Months Ended



December 29, 


September 29,


December 30, 


December 29, 


December 30, 



2017


2017


2016


2017


2016

(in thousands, except percentages)











Provision for income taxes on a GAAP basis


$             730


$             3,527


$           2,536


$          11,857


$             8,896

Income tax effect of non-GAAP adjustments (1)


229


159


549


714


1,664

Income tax effect of valuation allowance (2)


2,096


(524)


49


(469)


(4,964)

Non-GAAP provision for income taxes


$           3,055


$             3,162


$           3,134


$          12,102


$             5,596












Income before income taxes on a GAAP basis


$         21,579


$           23,243


$         12,489


$          86,942


$           18,947

Amortization of intangible assets


1,745


1,231


1,439


5,438


5,757

Executive transition costs


-


-


-


-


925

Restructuring charges


-


-


109


-


251

Impairment of "held for sale" assets


-


-


666


-


666

Termination of a long-term contractual obligation


-


-


438


-


438

Non-GAAP income before income taxes


$         23,324


$           24,474


$         15,141


$          92,380


$           26,984












Effective income tax rate on a GAAP basis


3.4%


15.2%


20.3%


13.6%


47.0%

Non-GAAP effective income tax rate


13.1%


12.9%


20.7%


13.1%


20.7%












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

2  The Company's GAAP tax expense is substantially 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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