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02/19/2020

Ultra Clean Reports Fourth Quarter and Full Year 2019 Financial Results

HAYWARD, Calif., Feb. 19, 2020 /PRNewswire/ -- Ultra Clean Holdings, Inc. (Nasdaq: UCTT), today reported its financial results for the fourth quarter and full year ended December 27, 2019.

(PRNewsfoto/Ultra Clean Holdings, Inc.)

"UCT's solid performance resulted in a very strong fourth quarter with revenue growing more than 12 percent and earnings per share increasing more than 57 percent sequentially on increased demand," said Jim Scholhamer, CEO. "We are excited about the opportunities that lie ahead as the industry ramps to keep pace with technology transitions, and will continue to manage our business with a focus on sustainable and profitable growth."

"UCT generated $32.0 million of cash from operations in the quarter, bringing the total for the year to a record $121.0 million," added Sheri Savage, CFO. "We paid down our long-term debt by $50.0 million during the year, significantly reducing our leverage, and ended the quarter with a cash balance of $162.5 million."

Fourth Quarter 2019 GAAP Financial Results

Total revenue was $286.4 million. SPS contributed $230.2 million and SSB added $56.2 million. Total gross margin was 19.7%, operating margin was 1.6%, and net loss was $10.3 million or $(0.26) per basic share. This compares to total revenue of $254.3 million, gross margin of 18.7%, operating margin of 3.2%, and net income of $0.5 million or $0.01 per basic and diluted share last quarter.  

Fourth Quarter 2019 Non-GAAP Financial Results

On a non-GAAP basis, gross margin was 20.1%, operating margin was 8.1%, and net income was $13.2 million or $0.33 per diluted share and $0.40 per diluted share excluding stock-based compensation. This compares to gross margin of 19.2%, operating margin of 5.8%, and net income of $8.5 million or $0.21 per diluted share and $0.28 per diluted share excluding stock-based compensation last quarter.

Full Year 2019 GAAP Financial Results

Total revenue was $1,066.2 million. SPS contributed $840.9 million and SSB added $225.3 million. Total gross margin was 18.5%, operating margin was 2.8%, and net loss was $9.4 million or $(0.24) per basic share. This compares to total revenue of $1,096.5 million, gross margin of 16.0%, operating margin of 5.5%, and net income of $36.6 million or $0.94 per diluted share in the prior year. 

Full Year 2019 Non-GAAP Financial Results

On a non-GAAP basis, gross margin was 19.0%, operating margin was 6.6%, and net income was $36.6 million or $0.91 per diluted share and $1.16 per diluted share excluding stock-based compensation. This compares to gross margin of 16.5%, operating margin of 7.8% and net income of $64.7 million or $1.66 per diluted share and $1.89 per diluted share excluding stock-based compensation in the prior year.

First Quarter 2020 Outlook

Due to limited visibility surrounding the coronavirus situation, the Company has widened its guidance ranges to reflect the heightened uncertainty in the marketplace. The Company expects revenue in the range of $290.0 million to $320.0 million and GAAP diluted net income per share to be between $0.24 and $0.36. The Company expects non-GAAP diluted net income per share to be between $0.40 and $0.52 excluding stock-based compensation.

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 10138300. 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 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


Twelve months ended


December 27, 


December 28, 


December 27, 


December 28, 

2019


2018

2019


2018













Revenues

$

286,413


$

257,389


$

1,066,244


$

1,096,523

Cost of goods sold


230,017



211,412



869,378



920,682

Gross profit


56,396



45,977



196,866



175,841













Operating expenses:












  Research and development


3,632



4,059



14,618



13,287

  Sales and marketing


5,755



5,032



22,393



16,306

  General and administrative


42,505



26,676



129,942



85,544

    Total operating expenses


51,892



35,767



166,953



115,137

Income from operations


4,504



10,210



29,913



60,704

  Interest and other income (expense), net


(12,300)



(5,187)



(27,501)



(8,436)

Income (loss) before provision for income taxes


(7,796)



5,023



2,412



52,268

  Income tax provision


1,811



5,335



10,031



15,319

Net income (loss)


(9,607)



(312)



(7,619)



36,949

Net income (loss) attributable to non-controlling interest


660



796



1,732



353

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

$

(10,267)


$

(1,108)


$

(9,351)


$

36,596













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












  Basic

$

(0.26)


$

(0.03)


$

(0.24)


$

0.95

  Diluted

$

(0.26)


$

(0.03)


$

(0.24)


$

0.94

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












  Basic


39,778



39,009



39,467



38,366

  Diluted


39,778



39,009



39,467



38,919

 

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands)








December 27,


December 28,

2019

2018

ASSETS






Current assets:






  Cash and cash equivalents

$

162,531


$

144,145

  Accounts receivable, net of allowance


112,694



106,956

  Inventories


172,420



186,116

  Prepaid expenses and other


19,400



25,708

    Total current assets


467,045



462,925







Property, plant and equipment, net


145,272



143,459

Goodwill


171,087



150,226

Purchased intangibles, net


180,318



193,507

Deferred tax assets, net


15,498



10,167

Operating lease right-of-use assets


34,877



Other non-current assets


5,209



5,193

Total assets

$

1,019,306


$

965,477







LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities:






  Bank borrowings

$

8,842


$

9,671

  Accounts payable


133,058



99,011

  Operating lease liabilities


13,179



  Other current liabilities


55,519



30,616

    Total current liabilities


210,598



139,298







Bank borrowings, net of current portion


283,390



331,549

Deferred tax liability


25,183



15,834

Operating lease liabilities


28,828



Other long-term liabilities


18,800



27,808

    Total liabilities


566,799



514,489







Stockholders' equity:






  Common stock


297,693



287,127

  Retained earnings


140,367



149,718

  Accumulated other comprehensive loss


(1,334)



(547)

  Ultra Clean Holdings, Inc. stockholders' equity


436,726



436,298

  Noncontrolling interest


15,781



14,690

    Total stockholders' equity


452,507



450,988

Total liabilities and stockholders' equity

$

1,019,306


$

965,477

 

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in thousands)






Fiscal Year Ended


December 27,


December 28,


2019


2018

Cash flows from operating activities:




Net income (loss) including noncontrolling interests

$          (7,619)


$          36,949

Adjustments to reconcile net income (loss) to net cash provided by operating activities (excluding assets acquired and liabilities assumed and noncontrolling interests at acquisition):




   Depreciation and amortization

43,360


21,907

Stock-based compensation

12,065


10,272

Others

4,763


692

Changes in assets and liabilities:




Accounts receivable

(4,488)


7,237

Inventories

22,292


50,151

Prepaid expenses and other

3,747


2,614

Deferred income taxes

(3,563)


(82)

Other non-current assets

12


(353)

Accounts payable

31,017


(83,195)

Accrued compensation and related benefits

9,006


(2,795)

Change in operating leases

7,130


Income taxes payable

(2,906)


798

Other liabilities

6,153


(2,486)

Net cash provided by operating activities

120,969


41,709

Cash flows from investing activities:




Purchases of property, plant and equipment

(26,312)


(26,152)

Acquisition of businesses, net of cash acquired

(29,873)


(319,781)

Proceeds from sale of equipment, including insurance proceeds

7,002


Net cash used for investing activities

(49,183)


(345,933)

Cash flows from financing activities:




Proceeds from bank borrowings

41,847


387,054

Proceeds from issuance of common stock

342


94,614

Payments on bank borrowings and finance leases

(93,065)


(86,354)

Debt issuance costs paid


(12,144)

Employees' taxes paid upon vesting of restricted stock units

(1,841)


(3,095)

Others

(641)


Net cash provided by (used for) financing activities

(53,358)


380,075

Effect of exchange rate changes on cash and cash equivalents

(42)


(12)

Net increase in cash and cash equivalents

$          18,386


$          75,839

Cash and cash equivalents at beginning of period

144,145


68,306

Cash and cash equivalents at end of period

$       162,531


$       144,145

 

ULTRA CLEAN HOLDINGS, INC.

REPORTABLE SEGMENTS

GAAP TO NON-GAAP RECONCILIATION 

(Unaudited; Dollars in thousands)
















GAAP


Non-GAAP



Three months ended


Three months ended



December 27, 2019


December 27, 2019



SPS


SSB


Consolidated


SPS


SSB


Consolidated

Revenues


$        230,206


$          56,207


$        286,413


$ 230,206


$ 56,207


$      286,413

Gross profit


$          36,885


$          19,511


$          56,396


$   36,906


$ 20,534


$        57,440

Gross margin


16.0%


34.7%


19.7%


16.0%


36.5%


20.1%

Operating profit


$               272


$            4,232


$            4,504


$   15,150


$   8,056


$        23,206

Operating margin


0.1%


7.5%


1.6%


6.6%


14.3%


8.1%






















Three months ended









December 27, 2019









SPS


SSB


Consolidated

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

Reported gross profit on a GAAP basis







$   36,885


$ 19,511


$        56,396

Amortization of intangible assets (1)







-


1,023


1,023

Restructuring charges (2)








21


-


21

Non-GAAP gross profit








$   36,906


$ 20,534

#

$        57,440














Reconciliation of GAAP Gross margin to Non-GAAP Gross margin

Reported gross margin on a GAAP basis







16.0%


34.7%


19.7%

Amortization of intangible assets (1)







0.0%


1.8%


0.4%

Restructuring charges (2)








0.0%


-


0.0%

Non-GAAP gross margin








16.0%


36.5%


20.1%














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





Reported income from operations on a GAAP basis






$        272


$   4,232


$          4,504

Amortization of intangible assets (1)







1,267


3,824


5,091

Restructuring charges (2)








13,500


-


13,500

Acquisition related costs (3)








111


-


111

Non-GAAP income from operations







$   15,150


$   8,056


$        23,206














Reconciliation of GAAP Operating margin to Non-GAAP Operating margin

Reported operating margin on a GAAP basis






0.1%


7.5%


1.6%

Amortization of intangible assets (1)







0.6%


6.8%


1.8%

Restructuring charges (2)








5.9%


0.0%


4.7%

Acquisition related costs (3)








0.0%


0.0%


0.0%

Non-GAAP operating margin








6.6%


14.3%


8.1%














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

 

ULTRA CLEAN HOLDINGS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS














Three Months Ended


Twelve Months Ended



December 27,


December 28,


September 27,


December 27,


December 28,



2019


2018


2019


2019


2018

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


$ (10,267)


$          (1,108)


$         513


$    (9,351)


$   36,596

Amortization of intangible assets (1)


5,091


4,973


5,093


20,090


9,580

Restructuring charges (2)


13,500


832


1,393


16,615


4,821

Acquisition related costs (3)


111


613


200


3,861


10,102

Fair value adjustments (4)


6,562


-


129


7,457


-

Depreciation adjustments (5)


-


-


-


(360)


-

Product transition fees (6)


-


-


-


-


657

Disposal of business unit (7)


52


-


-


52


1,082

Income tax effect of non-GAAP adjustments (8)


(5,266)


(1,101)


(1,567)


(11,261)


(4,501)

Income tax effect of valuation allowance (9)


3,440


4,474


2,781


9,461


6,355

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


$   13,223


$            8,683


$      8,542


$   36,564


$   64,692












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

Reported income from operations on a GAAP basis


$     4,504


$         10,210


$      8,258


$   29,913


$   60,704

Amortization of intangible assets (1)


5,091


4,973


5,093


20,090


9,580

Restructuring charges (2)


13,500


832


954


15,821


4,821

Acquisition related costs (3)


111


613


200


3,863


10,003

Fair value adjustments (4)


-


-


129


895


-

Depreciation adjustments (5)


-


-


-


(360)


-

Product transition fees (6)


-


-


-


-


657

Non-GAAP income from operations


$   23,206


$         16,628


$    14,634


$   70,222


$   85,765












Reconciliation of GAAP Operating margin to Non-GAAP Operating margin

Reported operating margin on a GAAP basis


1.6%


4.0%


3.2%


2.8%


5.5%

Amortization of intangible assets (1)


1.8%


1.9%


2.0%


1.8%


0.9%

Restructuring charges (2)


4.7%


0.3%


0.4%


1.5%


0.4%

Acquisition related costs (3)


0.0%


0.3%


0.1%


0.4%


0.9%

Fair value adjustments (4)


0.0%


0.0%


0.1%


0.1%


0.0%

Depreciation adjustments (5)


0.0%


0.0%


0.0%


0.0%


0.0%

Product transition fees (6)


0.0%


0.0%


0.0%


0.0%


0.1%

Non-GAAP operating margin


8.1%


6.5%


5.8%


6.6%


7.8%












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

Reported gross profit on a GAAP basis


$   56,396


$         45,977


$    47,504


$ 196,866


$ 175,841

Amortization of intangible assets (1)


1,023


1,363


1,023


4,090


1,363

Restructuring charges (2)


21


715


154


1,041


2,849

Fair value adjustments (4)


-


-


129


895


-

Depreciation adjustments (5)


-


-


-


(316)



Product transition fees (6)


-


-


-


-


657

Non-GAAP gross profit


$   57,440


$         48,055


$    48,810


$ 202,576


$ 180,710












Reconciliation of GAAP Gross margin to Non-GAAP Gross margin

Reported gross margin on a GAAP basis


19.7%


17.9%


18.7%


18.5%


16.0%

Amortization of intangible assets (1)


0.4%


0.5%


0.4%


0.4%


0.1%

Restructuring charges (2)


0.0%


0.3%


0.1%


0.1%


0.3%

Fair value adjustments (4)


0.0%


0.0%


0.0%


0.0%


0.0%

Depreciation adjustments (5)


0.0%


0.0%


0.0%


0.0%


0.0%

Product transition fees (6)


0.0%


0.0%


0.0%


0.0%


0.1%

Non-GAAP gross margin


20.1%


18.7%


19.2%


19.0%


16.5%












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


$ (12,300)


$          (5,187)


$    (3,492)


$  (27,501)


$    (8,436)

Restructuring charges (2)


-


-


439


795


1,082

Acquisition related costs (3)


-


-


-


-


99

Fair value adjustments (4)


6,562


-


-


6,562


-

Disposal of business unit (7)


52


-


-


52


-

Non-GAAP interest and other income (expense)


$   (5,686)


$          (5,187)


$    (3,053)


$  (20,092)


$    (7,255)












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 adjustments related to DMS inventory, contingent consideration and purchase obligation

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


Twelve Months Ended



December 27,


December 28,


September 27,


December 27,


December 28,



2019


2018


2019


2019


2018

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











Reported net income (loss) on a GAAP basis


$      (0.26)


$            (0.03)


$        0.01


$      (0.24)


$        0.94

Amortization of intangible assets


0.13


0.13


0.13


0.50


0.25

Restructuring charges


0.33


0.02


0.03


0.42

-

0.12

Acquisition related costs


0.01


0.02


0.01


0.10


0.26

Fair value adjustments


0.16


-


-


0.19


-

Depreciation adjustments


-


-


-


(0.01)


-

Product transition fees


-


-


-


-


0.02

Disposal of business unit


0.01


-


-


-


0.03

Income tax effect of non-GAAP adjustments


(0.13)


(0.03)


(0.04)


(0.28)


(0.12)

Income tax effect of valuation allowance


0.08


0.12


0.07


0.23


0.16

Non-GAAP net income


$       0.33


$              0.23


$        0.21


$        0.91


$        1.66

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

40,523


39,009


39,734


40,027


38,919












ULTRA CLEAN HOLDINGS, INC.

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



Three Months Ended


Twelve Months Ended



December 27,


December 28,


September 27,


December 27,


December 28,



2019


2018


2019


2019


2018

(in thousands, except percentages)











Provision for income taxes on a GAAP basis


$     1,811


$            5,335


$      3,878


$   10,031


$   15,319

Income tax effect of non-GAAP adjustments (1)


5,266


1,101


1,567


11,261


4,501

Income tax effect of valuation allowance (2)


(3,440)


(4,474)


(2,781)


(9,461)


(6,355)

Non-GAAP provision for income taxes


$     3,637


$            1,962


$      2,664


$   11,831


$   13,465












Income (loss) before income taxes on a GAAP basis


$   (7,796)


$            5,023


$      4,766


$      2,412


$   52,268

Amortization of intangible assets


5,091


4,973


5,093


20,090


9,580

Restructuring charges


13,500


832


1,393


16,615


4,821

Acquisition related costs


111


613


200


3,861


10,102

Fair value adjustments


6,562


-


129


7,457


-

Depreciation adjustments


-


-


-


(360)


-

Product transition fees


-


-


-


-


657

Disposal of business unit


52


-


-


52


1,082

Non-GAAP income before income taxes


$   17,520


$         11,441


$    11,581


$   50,127


$   78,510

Effective income tax rate on a GAAP basis


-23.2%


106.2%


81.4%


415.9%


29.3%

Non-GAAP effective income tax rate


20.8%


17.2%


23.0%


23.6%


17.2%


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-fourth-quarter-and-full-year-2019-financial-results-301007844.html

SOURCE Ultra Clean Holdings, Inc.

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