Market Overview

BE Semiconductor Industries N.V. Announces Q2-18 and H1-18 Results

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Q2-18 Revenue and Net Income Increase by 4.0% and 27.2%, Respectively, vs. Q1-18
Strong H1-18 with Revenue and Net Income Up 12.8% and 9.9%, Respectively
New € 75 Million Share Repurchase Program Initiated

DUIVEN, the Netherlands, July 26, 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 second quarter and first half year ended June 30, 2018.

Key Highlights Q2-18

  • Revenue of € 161.1 million up 4.0% vs. Q1-18 and in line with revised guidance due to higher shipments for mobile and automotive applications. Down 5.2% vs. Q2-17 due to lower die bonding shipments for high end mobile applications partially offset by growth in Besi's automotive and computing end user markets
  • Orders of € 86.3 million, down 58.1% vs. Q1-18 and 33.7% vs. Q2-17 due primarily to reduced demand by customer supply chains for high end smart phone applications after the significant 2017 and Q1-18 capacity build
  • Gross margin of 56.5% equal to Q1-18 and down 0.8 points vs. Q2-17 due primarily to adverse forex influences. At high end of prior guidance
  • Operating expenses down 18.7% vs. Q1-18 due primarily to lower share based compensation and warranty expense. Down 6.7% vs. Q2-17. Better than prior guidance
  • Net income of € 47.2 million, up € 10.1 million vs. Q1-18 as strategic execution continues to generate high levels of profitability. Down € 5.2 million (-9.9%) vs. Q2-17
  • Similarly, net margin rose to 29.3% vs. 23.9% in Q1-18. Down by 1.5% vs. Q2-17 (30.8%)

Key Highlights H1-18

  • Revenue of € 316.0 million, up 12.8% vs. H1-17 reflecting broad based growth across all product groups and end user application markets
  • Orders decreased by 21.0% due primarily to lower die bonding bookings for high end smart phone and, to a lesser extent, high end server applications
  • Gross margin decreased slightly to 56.5% vs. 56.7% despite adverse forex influences from decline of USD vs. euro
  • Net income of € 84.3 million grew € 7.6 million vs. H1-17 (+9.9%). Net margin of 26.7% vs. 27.4% in H1-17

Outlook  

  • Q3-18 revenue estimated to decrease 25-30% vs. Q2-18 due primarily to lower die bonding revenue for mobile applications and typical H2 seasonal patterns
  • New € 75 million share repurchase program initiated through October 2019
(€ millions, except EPS) Q2-
2018
Q1-
2018
Δ   Q2-
2017
 

Δ
  H1-
2018
H1-
2017
 

Δ
 
Revenue 161.1 154.9 +4.0%   170.0 -5.2%   316.0 280.2 +12.8%  
Orders 86.3 205.8 -58.1%   130.1 -33.7%   292.1 369.9 -21.0%  
Operating Income 59.3 48.6 +22.0%   63.3 -6.3%   107.8 94.1 +14.6%  
EBITDA 62.8 52.0 +20.8%   66.6 -5.7%   114.8 100.8 +13.9%  
Net Income 47.2 37.1 +27.2%   52.4 -9.9%   84.3 76.7 +9.9%  
EPS (basic) 0.63 0.50 +26.0%   0.70 -10.0%   1.13 1.03 +9.7%  
EPS (diluted) 0.58 0.46 +26.1%   0.65 -10.8%   1.03 0.94 +9.6%  
Net Cash & Deposits 110.2* 290.1 -62.0%   131.5* -16.2%   110.2* 131.5* -16.2%  

*Reflects cash dividend payments of € 174.0 million and € 65.3 million in Q2-18 and Q2-17, respectively.

Richard W. Blickman, President and Chief Executive Officer of Besi, commented:
"Besi's first half 2018 results showed continued year over year improvement in revenue and net income of 12.8% and 9.9%, respectively. The solid results reflected the extension of favorable industry trends from 2017, additions to advanced packaging capacity by customers and Besi's ongoing execution of strategic initiatives. Revenue growth in H1-18 was broad based with contributions from each of our principal end user markets. First half net income of € 84.3 million combined with peer leading gross and net margins of 56.5% and 26.7% highlight the success of Besi's products in the market place and the efficiency of our business model. Q2-18 financial metrics were also favorable with sequential revenue up 4.0% vs. Q1-18, gross margin at the high end of guidance, net income growing sequentially by 27.2% and a net margin of 29.3%.

During Q2-18, we experienced a sharp decline in orders for high end smart phone applications including a € 28 million order cancellation at quarter end from a single customer via its Asian subcontractors. This decline reflected both a digestion by customers of the substantial capacity added last year and in Q1-18 as well as a delay in the roll out of certain high end mobile features. Customer order patterns for assembly equipment can adjust quickly depending on economic conditions, capacity utilization rates and the timing and success of new product introductions, particularly for mobile applications.

Fluctuations in high-end smart phone orders overshadowed positive trends in H1-18 in some of Besi's other end user applications such as automotive, computing and spares/service. They also overshadowed notable orders from Chinese subcontractors for mainstream electronics applications during Q2-18. Further, they obscured the significant opportunities ahead to leverage Besi's technology for the demands of the new digital society such as AI, 5G connectivity, expanded data, computing and memory needs, block chain software deployment, increased automotive electronic content and the Internet of Things. As these needs are realized, the assembly equipment market will become an ever more critical step in the semiconductor value chain for which we believe Besi has the premier advanced packaging portfolio and market position.

Looking to Q3-18, we estimate that revenue will decline by 25-30% sequentially due to unfavorable conditions in the high end mobile market, typical second half seasonal patterns and weakness in the high performance computing area from Chinese and Taiwanese subcontractors. As a result, we started adjusting temporary production levels in Q2-18. In parallel, strategic plan execution continues apace to further reduce European personnel and other structural costs and enhance future profitability. 

We are initiating a new € 75 million share repurchase program through October 26, 2019. The new program will replace our current 2.0 million share program, under which approximately 1.5 million shares have been repurchased to date. It is intended for capital reduction purposes and to help offset dilution related to our Convertible Notes and share issuance under employee stock plans."   

Second Quarter Results of Operations

  Q2-2018 Q1-2018 Δ   Q2-2017 Δ  
Revenue 161.1 154.9 +4.0%   170.0 -5.2%  
Orders 86.3 205.8 -58.1%   130.1 -33.7%  
Backlog 140.4 215.2 -34.8%   166.0 -15.4%  
Book to Bill Ratio 0.5x 1.3x -0.8   0.8x -0.3  

Besi's Q2-18 revenue increased by 4.0% vs. Q1-18 primarily due to higher system shipments for mobile and automotive applications. Revenue decreased by 5.2% on a year over year basis reflecting lower die bonding shipments to Asian subcontractors for mobile applications partially offset by increased shipments for automotive and computing markets.   

Orders of € 86.3 million were down 58.1% vs. Q1-18 primarily due to reduced demand by Asian subcontractors for high end smart phone applications after the significant Q1-18 capacity build. In addition, the decrease included the cancellation by a single customer via its Asian subcontractors of € 28 million in orders at the end of Q2-18. Similarly, orders decreased by 33.7% as compared to Q2-17. Per customer type, IDM orders decreased sequentially by € 40.3 million, or 36.3%, while subcontractor orders decreased by € 79.2 million, or 83.6%. IDM and subcontractor orders represented 82% and 18%, respectively, of total Q2-18 bookings.

  Q2-2018   Q1-2018   Δ   Q2-2017   Δ  
Gross Margin 56.5%   56.5%   -   57.3%   -0.8  
Operating Expenses 31.8   39.1   -18.7%   34.1   -6.7%  
Financial Expense/(Income), net 5.1   4.3   +18.6%   2.6   +96.2%  
EBITDA 62.8   52.0   +20.8%   66.6   -5.7%  

Besi's gross margin of 56.5% in Q2-18 was equal to Q1-18 and at the high end of prior guidance (55-57%) despite adverse forex influences from the increase in the Malaysian ringgit vs. the euro. Gross margin decreased by 0.8 points vs. Q2-17 principally due to the significant decrease of the USD vs. the euro and, to a lesser extent, higher severance charges.

Q2-18 operating expenses decreased by € 7.3 million, or 18.7%, vs. Q1-18 and were better than prior guidance (-5-10%). The sequential decline was due to a € 5.9 million reduction in share based compensation expense and € 1.7 million of lower warranty costs. Operating expenses decreased by € 2.3 million, or 6.7%, vs. Q2-17 due primarily to lower warranty costs and higher R&D capitalization on new product development partially offset by higher Asian personnel costs from increased headcount levels in that region. Total headcount at June 30, 2018 decreased by 1.9% vs. March 31, 2018 due to a reduction in temporary production personnel.

Financial expense, net increased by € 0.8 million vs. Q1-18 due primarily to higher forex hedging costs related to higher revenue levels. As compared to Q2-17, such expenses increased by € 2.5 million inclusive of higher interest expense associated with Besi's issuance of € 175 million of Convertible Notes in December 2017 as well as higher hedging costs.


 
Q2-2018 Q1-2018 Δ   Q2-2017   Δ  
             
Net Income
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