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10/30/2019

Ultra Clean Reports Third Quarter 2019 Financial Results

HAYWARD, Calif., Oct. 30, 2019 /PRNewswire/ -- Ultra Clean Holdings, Inc. (Nasdaq: UCTT), today reported its financial results for the third quarter ended September 27, 2019.

(PRNewsfoto/Ultra Clean Holdings, Inc.)

"UCT again delivered strong performance in the third quarter with top and bottom line results at the high end of our guided range," said Jim Scholhamer, CEO. "We continue to focus on execution while driving towards improved profitability over the longer term."

In the third quarter, the Company generated $23.0 million of cash from operations, paid down an additional $25.0 million in debt and ended the quarter with a cash balance of $158.7 million.  

Third Quarter 2019 GAAP Financial Results

Total revenue was $254.3 million, a decrease of 4.2% compared to the prior quarter and an increase of 8.6% over the same period a year ago. SPS contributed $200.0 million and SSB added $54.3 million.

Total gross margin was 18.7% compared to 18.2% last quarter and 15.0% for the same period a year ago. GAAP operating margin was 3.2% compared to 3.4% last quarter and 0.4% a year ago.

Net income was $0.5 million or $0.01 per basic and diluted share. This compares to a net loss of $0.2 million or ($0.01) per basic and diluted share in the previous quarter, and net loss of $6.0 million or ($0.15) per basic and diluted share for the same period last year.

Third Quarter 2019 Non-GAAP Financial Results

Non-GAAP gross margin was 19.2% compared to 18.8% last quarter and 15.7% for the prior year. Non-GAAP operating margin was 5.8% compared to 6.2% in the previous quarter and 6.4% in the same period a year ago.

Non-GAAP net income was $8.5 million or $0.21 per diluted share. Non-GAAP net income for the prior quarter was $8.2 million, or $0.21 per diluted share and $11.9 million or $0.30 for the prior year. 

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 2019 Outlook

The Company expects revenue in the range of $260.0 million to $280.0 million and GAAP diluted net income per share to be between $0.02 and $0.04. The Company expects non-GAAP diluted net income per share to be between $0.20 and $0.30. Excluding stock-based compensation, non-GAAP net income per share is expected to be between $0.26 and $0.36.

Conference Call

The call will take place at 1:45 p.m. PT today and can be accessed by dialing 1-844-826-3034 or 1-412-317-5179. No passcode is required. A replay of the call will be available by dialing 1-877-344-7529 or 1-412-317-0088 and entering the confirmation code 10135270. For international replay numbers, select from this link https://services.choruscall.com/ccforms/replay.html. The Webcast will be available on the Investor Relations section of the Company's website at http://uct.com/investors/events/.

About Ultra Clean Holdings, Inc.

Ultra Clean Holdings, Inc. is a leading developer and supplier of critical subsystems, ultra-high purity cleaning and analytical services primarily for the semiconductor industry. 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, and tool chamber parts cleaning and coating, as well as micro-contamination analytical services. Ultra Clean is headquartered in Hayward, California. Additional information is available at www.uct.com.

Use of Non-GAAP Measures

In addition to providing results that are determined in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP), management uses non-GAAP net income, non-GAAP gross margin, non-GAAP operating margin and non-GAAP net income 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 from GAAP results to non-GAAP results are included at the end of this press release.

The Company currently defines non-GAAP net income as net income (loss) before amortization of intangible assets, restructuring charges, executive transition costs, acquisition costs, fair value adjustments, depreciation adjustments and the tax effects of the foregoing adjustments. In our first quarter of fiscal 2020, we will begin reporting non-GAAP net income under a new definition that excludes the foregoing adjustments, as well as the impact of stock-based compensation.

A reconciliation of our guidance for non-GAAP net income per diluted share for the following quarter 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 and 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 28, 2018 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:

Rhonda Bennetto
Vice President Investor Relations
rbennetto@uct.com

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in thousands, except per share data)














Three months ended


Nine months ended


September 27, 


September 28, 


September 27, 


September 28, 

2019


2018

2019


2018













Revenues

$

254,323


$

234,079


$

779,831


$

839,134

Cost of goods sold


206,819



199,084



639,361



709,270

Gross profit


47,504



34,995



140,470



129,864













Operating expenses:












  Research and development


3,634



3,284



10,986



9,228

  Sales and marketing


5,877



3,839



16,638



11,274

  General and administrative


29,735



26,950



87,437



58,868

    Total operating expenses


39,246



34,073



115,061



79,370

Income from operations


8,258



922



25,409



50,494

  Interest and other income (expense), net


(3,492)



(2,766)



(15,201)



(3,249)

Income (loss) before provision for income taxes


4,766



(1,844)



10,208



47,245

  Income tax provision


3,878



4,596



8,220



9,984

Net income (loss)


888



(6,440)



1,988



37,261

Net income (loss) attributable to non-controlling interest


375



(443)



1,072



(443)

Net income (loss) attributable to Ultra Clean Holdings, Inc. 

$

513


$

(5,997)


$

916


$

37,704













Net income (loss) per share attributable to Ultra Clean Holdings, Inc. common stockholders:












  Basic

$

0.01


$

(0.15)


$

0.02


$

0.99

  Diluted

$

0.01


$

(0.15)


$

0.02


$

0.97

Shares used in computing net income (loss) per share:












  Basic


39,557



38,930



39,363



38,152

  Diluted


40,025



38,930



39,746



38,745

 

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands)










September 27,


December 28,

2019

2018

ASSETS







Current assets:







  Cash and cash equivalents


$

158,690


$

144,145

  Accounts receivable, net of allowance



110,388



106,956

  Inventories



153,549



186,116

  Prepaid expenses and other



20,283



25,708

    Total current assets



442,910



462,925








Property, plant and equipment, net



143,719



143,459

Goodwill



169,557



150,226

Purchased intangibles, net



185,409



193,507

Deferred tax assets, net



12,274



10,167

Operating lease right-of-use assets



33,055



Other non-current assets



5,953



5,193

Total assets


$

992,877


$

965,477








LIABILITIES AND STOCKHOLDERS' EQUITY







Current liabilities:







  Bank borrowings


$

9,013


$

9,671

  Accounts payable



101,008



99,011

  Operating lease liabilities



11,578



  Other current liabilities



41,048



30,616

    Total current liabilities



162,647



139,298








Bank borrowings, net of current portion



304,172



331,549

Deferred tax liability



23,411



15,834

Operating lease liabilities



23,809



Other long-term liabilities



22,112



27,808

    Total liabilities



536,151



514,489








Stockholders' equity:







  Common stock



294,679



287,127

  Retained earnings



150,634



149,718

  Accumulated other comprehensive loss



(4,349)



(547)

  Ultra Clean Holdings, Inc. stockholders' equity



440,964



436,298

  Noncontrolling interest



15,762



14,690

    Total stockholders' equity



456,726



450,988

Total liabilities and stockholders' equity


$

992,877


$

965,477

 

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in thousands)






Nine Months Ended


September 27,


September 28,


2019


2018

Cash flows from operating activities:




Net income including noncontrolling interests

$           1,988


$          37,261

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




Depreciation and amortization

32,152


10,730

Stock-based compensation

9,078


7,133

Others

(3,695)


853

Changes in assets and liabilities:




Accounts receivable

(2,376)


13,730

Inventories

42,489


37,816

Prepaid expenses and other

1,994


(6,292)

Deferred income taxes

(2,115)


68

Other non-current assets

(776)


(297)

Accounts payable

(282)


(86,699)

Accrued compensation and related benefits

8,757


5,332

Income taxes payable

(1,473)


(3,969)

Other liabilities

3,332


(335)

Net cash provided by operating activities

89,073


15,331

Cash flows from investing activities:




Purchases of property, plant and equipment

(12,665)


(15,526)

Acquisition of businesses, net of cash acquired

(29,873)


(290,462)

Proceeds from sale of equipment, including insurance proceeds

2,698


Net cash used for investing activities

(39,840)


(305,988)

Cash flows from financing activities:




Proceeds from bank borrowings

34,805


382,184

Proceeds from issuance of common stock

126


94,471

Payments on bank borrowings and finance leases

(64,534)


(78,608)

Debt issuance costs paid


(12,118)

Employees' taxes paid upon vesting of restricted stock units

(1,652)


(2,945)

Net cash provided by (used for) financing activities

(31,255)


382,984

Effect of exchange rate changes on cash and cash equivalents

(3,433)


(293)

Net increase in cash and cash equivalents

$          14,545


$          92,034

Cash and cash equivalents at beginning of period

144,145


68,306

Cash and cash equivalents at end of period

$        158,690


$        160,340

 

ULTRA CLEAN HOLDINGS, INC.

REPORTABLE SEGMENTS

GAAP TO NON-GAAP RECONCILIATION 

(Unaudited; Dollars in thousands)
















GAAP


Non-GAAP



Three months ended


Three months ended



September 27, 2019


September 27, 2019



SPS


SSB


Consolidated


SPS


SSB


Consolidated

Revenues


$200,025


$54,298


$          254,323


$200,025


$ 54,298


$     254,323

Gross profit


$   29,880


$17,624


$             47,504


$   30,163


$ 18,647


$       48,810

Gross margin


14.9%


32.5%


18.7%


15.1%


34.3%


19.2%

Operating profit


$     7,365


$      893


$               8,258


$     9,289


$   5,345


$       14,634

Operating margin


3.7%


1.6%


3.2%


4.6%


9.8%


5.8%






















Three months ended









September 27, 2019









SPS


SSB


Consolidated

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







Reported gross profit on a GAAP basis




$   29,880


$ 17,624


$       47,504

Amortization of intangible assets (1)




-


1,023


1,023

Restructuring charges (2)




154


-


154

Fair value adjustments (4)




129


-


129

Non-GAAP gross profit


$   30,163


$ 18,647


$       48,810














Reconciliation of GAAP Gross margin to Non-GAAP Gross margin






Reported gross margin on a GAAP basis



14.9%


32.5%


18.7%

Amortization of intangible assets (1)


0.0%


1.9%


0.4%

Restructuring charges (2)



0.1%


-


0.1%

Fair value adjustments (4)



0.1%


-


0.1%

Non-GAAP gross margin



15.1%


34.3%


19.2%














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






Reported income from operations on a GAAP basis


$     7,365


$       893


$         8,258

Amortization of intangible assets (1)


1,268


3,825


5,093

Restructuring charges (2)



327


627


954

Acquisition related costs (3)



200


-


200

Fair value adjustments (4)





129


-


129

Non-GAAP income from operations




$     9,289


$   5,345


$       14,634














Reconciliation of GAAP Operating margin to Non-GAAP Operating margin







Reported operating margin on a GAAP basis


3.7%


1.6%


3.2%

Amortization of intangible assets (1)


0.6%


7.0%


2.0%

Restructuring charges (2)



0.2%


1.2%


0.4%

Acquisition related costs (3)



0.1%


0.0%


0.1%

Fair value adjustments (4)



0.1%


0.0%


0.1%

Non-GAAP operating margin



4.6%


9.8%


5.8%














1    Amortization of intangible assets related to the Company's acquisitions of AIT, Thermal, FDS, QGT and DMS

2    Represents severance costs and costs related to facility closures

3    Represents costs related to the QGT and DMS acquisitions

4    Fair value adjustment related to DMS' sold inventories

 

ULTRA CLEAN HOLDINGS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS











Three Months Ended




September 27,


September 28,


June 28,




2019


2018


2019


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








Reported net income (loss) attributable to Ultra Clean Holdings, Inc. on a GAAP basis


$               513


$          (5,997)


$     (202)


Amortization of intangible assets (1)


5,093


2,411


5,053


Restructuring charges (2)


1,393


1,565


774


Acquisition related costs (3)


200


9,490


1,211


Fair value adjustments (4)


129


-


766


Depreciation adjustments (5)


-


-


(360)


Product transition fees (6)


-


657


-


Disposal of business unit (7)


-


1,082


-


Income tax effect of non-GAAP adjustments (8)


(1,567)


(2,220)


(1,407)


Income tax effect of valuation allowance (9)


2,781


4,865


2,344


Non-GAAP net income attributable to Ultra Clean Holdings, Inc.


$            8,542


$          11,853


$   8,179










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








Reported income from operations on a GAAP basis


$            8,258


$               922


$   8,971


Amortization of intangible assets (1)


5,093


2,411


5,053


Restructuring charges (2)


954


1,565


749


Acquisition related costs (3)


200


9,391


1,211


Fair value adjustments (4)


129


-


766


Depreciation adjustments (5)


-


-


(360)


Product transition fees (6)


-


657


-


Non-GAAP income from operations


$          14,634


$          14,946


$ 16,390










Reconciliation of GAAP Operating margin to Non-GAAP Operating margin








Reported operating margin on a GAAP basis


3.2%


0.4%


3.4%


Amortization of intangible assets (1)


2.0%


1.0%


1.9%


Restructuring charges (2)


0.4%


0.7%


0.2%


Acquisition related costs (3)


0.1%


4.0%


0.5%


Fair value adjustments (4)


0.1%


0.0%


0.3%


Depreciation adjustments (5)


0.0%


0.0%


-0.1%


Product transition fees (6)


0.0%


0.3%


0.0%


Non-GAAP operating margin


5.8%


6.4%


6.2%










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








Reported gross profit on a GAAP basis


$          47,504


$          34,995


$ 48,169


Amortization of intangible assets (1)


1,023


-


1,023


Restructuring charges (2)


154


1,197


350


Fair value adjustments (4)


129


-


766


Depreciation adjustments (5)


-


-


(316)


Product transition fees (6)


-


657


-


Non-GAAP gross profit


$          48,810


$          36,849


$ 49,992










Reconciliation of GAAP Gross margin to Non-GAAP Gross margin








Reported gross margin on a GAAP basis


18.7%


15.0%


18.2%


Amortization of intangible assets (1)


0.4%


0.0%


0.4%


Restructuring charges (2)


0.1%


0.4%


0.1%


Fair value adjustments (4)


0.0%


0.0%


0.2%


Depreciation adjustments (5)


0.0%


0.0%


-0.1%


Product transition fees (6)


0.0%


0.3%


0.0%


Non-GAAP gross margin


19.2%


15.7%


18.8%










Reconciliation of GAAP Interest and other income (expense) to Non-GAAP Interest and other income (expense) (in thousands)







Reported interest and other income (expense) on a GAAP basis


$          (3,492)


$          (2,766)


$  (6,390)


Restructuring charges (2)


439


-


(25)


Acquisition related costs (3)


-


99


-


Disposal of business unit (7)


-


1,082


-


Non-GAAP interest and other income (expense)


$          (3,053)


$          (1,585)


$  (6,415)










1    Amortization of intangible assets related to the Company's acquisitions of AIT, Thermal, FDS, QGT and DMS


2    Represents severance costs and costs related to facility closures


3    Represents costs related to the QGT and DMS acquisitions


4    Fair value adjustment related to DMS' sold inventories


5    Depreciation adjustments related to QGT's fixed assets


6    One-time product transition payment  


7    Represents the loss on disposal of the Company's 3D printing operations in Singapore


8    Tax effect of items (1) through (7) above based on the non-GAAP tax rate shown below


9    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 27,


September 28,


June 28,




2019


2018


2019


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








Reported net income (loss) on a GAAP basis


$              0.01


$             (0.15)


$    (0.01)


Amortization of intangible assets


0.13


0.06


0.13


Restructuring charges


0.03


0.04


0.02


Acquisition related costs


0.01


0.24


0.03


Fair value adjustments


-


-


0.02


Depreciation adjustments


-


-


(0.01)


Product transition fees


-


0.02


-


Disposal of business unit


-


0.03


-


Income tax effect of non-GAAP adjustments


(0.04)


(0.06)


(0.03)


Income tax effect of valuation allowance


0.07


0.12


0.06


Non-GAAP net income


$              0.21


$              0.30


$      0.21


Weighted average number of diluted shares (thousands) on a non-GAAP basis

40,025


38,930


39,734










 

ULTRA CLEAN HOLDINGS, INC.

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



Three Months Ended




September 27,


September 28,


June 28,




2019


2018


2019


(in thousands, except percentages)








Provision for income taxes on a GAAP basis


$            3,878


$            4,596


$   2,835


Income tax effect of non-GAAP adjustments (1)


1,567


2,220


1,407


Income tax effect of valuation allowance (2)


(2,781)


(4,865)


(2,344)


Non-GAAP provision for income taxes


$            2,664


$            1,951


$   1,898










Income (loss) before income taxes on a GAAP basis


$            4,766


$          (1,844)


$   2,581


Amortization of intangible assets


5,093


2,411


5,053


Restructuring charges


1,393


1,565


774


Acquisition related costs


200


9,490


1,211


Fair value adjustments


129


-


766


Depreciation adjustments


-


-


(360)


Product transition fees


-


657


-


Disposal of business unit


-


1,082


-


Non-GAAP income before income taxes


$          11,581


$          13,361


$ 10,025


Effective income tax rate on a GAAP basis


81.4%


-249.2%


109.8%


Non-GAAP effective income tax rate


23.0%


14.6%


18.9%




1    Tax effect of items (1) through (7) 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. 


 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/ultra-clean-reports-third-quarter-2019-financial-results-300948482.html

SOURCE Ultra Clean Holdings, Inc.

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