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Kulicke & Soffa Finalizes Third Quarter 2018 Results

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Delivers Strong Results

Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) ("Kulicke & Soffa",
"K&S" or the "Company"), today announced financial results of its third
fiscal quarter ended June 30, 2018. The Company reported third quarter
net revenue of $268.8 million, and reported diluted EPS of $0.86 and a
non-GAAP diluted EPS of $0.89.

During its third fiscal quarter, K&S repurchased $42.6 million of common
stock in open market transactions at an average price of $23.75 per
share. The Company also recorded a quarterly dividend equivalent to
$0.12 per share during its third fiscal quarter.

 
Quarterly Results - U.S. GAAP
         

Fiscal Q3 2018
       

Change vs.
Fiscal Q3 2017
(As Restated)

       

Change vs.
Fiscal Q2 2018

Net Revenue         $268.8 million         up 10.2%         up 21.2%
Gross Profit         $127.0 million         up 11.4%         up 27.8%
Gross Margin         47.2%         up 50 bps         up 240 bps
Income from Operations $64.5 million up 310.8% up 68.0%
Operating Margin         24.0%         up 1760 bps         up 670 bps
Net Income $60.3 million up 73.3% up 66.1%
Net Margin         22.4%         up 810 bps         up 600 bps
EPS – Diluted         $0.86         up 79.2%         up 68.6%
 
                       

Quarterly Results - Non-GAAP

         

Fiscal Q3 2018
       

Change vs.
Fiscal Q3 2017
(As Restated)

       

Change vs.
Fiscal Q2 2018

Income from Operations $66.4 million up 21.6% up 64.0%
Operating Margin         24.7%         up 230 bps         up 650 bps
Net Income $62.3 million down 15.2% up 63.1%
Net Margin         23.2%         down 690 bps         up 600 bps
EPS - Diluted         $0.89         down 11.9%         up 64.8%
 

* A reconciliation of the GAAP and non-GAAP adjusted results is
provided in the financial tables included in this release. See also "Use
of Non-GAAP Financial Results" section.

Dr. Fusen Chen, Kulicke & Soffa's President and Chief Executive Officer,
stated, "Strong June quarter results were due to a sequential increase
in sales of high-volume Ball and Wedge bonding tools. Improved margins
were due to a relative increase in demand from high-performance
Automotive and Semiconductor markets."

Third Quarter Fiscal 2018 Financial Highlights

  • Net revenue of $268.8 million.
  • Gross margin of 47.2%.
  • Net income of $60.3 million or $0.86 per share; Non-GAAP net income of
    $62.3 million or $0.89 per share.
  • Cash, cash equivalents, and short-term investments were $620.7 million
    as of June 30, 2018.

Fourth Quarter Fiscal 2018 Outlook

The Company currently expects net revenue in the fourth fiscal quarter
of 2018 ending September 29, 2018 to be approximately $180 million to
$190 million. The midpoint of this guidance would represent an increase
of approximately 10% over fiscal year 2017.

Looking forward, Dr. Fusen Chen commented, "We continue to execute
towards further increasing market opportunities, enhancing revenue and
delivering profitability. Ongoing progress, evident in recent results,
supports our long-term targets. Market relevance of our product
portfolio combined with wide range of growing opportunities further
increases our long-term confidence."

Use of Non-GAAP Financial Results

In addition to U.S. GAAP results, this press release also contains
non-GAAP financial results. The Company's non-GAAP results exclude
amortization related to intangible assets acquired through business
combinations, goodwill impairment, costs associated with restructuring,
income tax expense related to the Tax Cuts and Jobs Act of 2017 as well
as tax benefits or expense associated with the foregoing non-GAAP items.
These non-GAAP measures are consistent with the way management analyzes
and assesses the Company's operating results. The Company believes these
non-GAAP measures enhance investors' understanding of the Company's
underlying operational performance, as well as their ability to compare
the Company's period-to-period financial results and the Company's
overall performance to that of its competitors.

Management uses both U.S. GAAP metrics as well as non-GAAP operating
income, operating margin, net income, net margin and net income per
diluted share to evaluate the Company's operating and financial results.
Non-GAAP financial measures may not provide information that is directly
comparable to that provided by other companies in the Company's
industry, as other companies in the industry may calculate non-GAAP
financial results differently. In addition, there are limitations in
using non-GAAP financial measures because the non-GAAP financial
measures are not prepared in accordance with GAAP, may be different from
non-GAAP financial measures used by other companies and exclude expenses
that may have a material impact on the Company's reported financial
results. The presentation of non-GAAP items is meant to supplement, but
not substitute for, GAAP financial measures or information. The Company
believes the presentation of non-GAAP results in combination with GAAP
results provides better transparency to the investment community when
analyzing business trends, providing meaningful comparisons with prior
period performance and enhancing investors' ability to view the
Company's results from management's perspective. A reconciliation of
each available GAAP to non-GAAP financial measure discussed in this
press release is contained in the attached exhibit.

About Kulicke & Soffa

Kulicke & Soffa (NASDAQ:KLIC) is a leading provider of semiconductor
packaging and electronic assembly solutions supporting the global
automotive, consumer, communications, computing and industrial segments.
As a pioneer in the semiconductor space, K&S has provided customers with
market leading packaging solutions for decades. In recent years, K&S has
expanded its product offerings through strategic acquisitions and
organic development, adding advanced packaging, electronics assembly,
wedge bonding and a broader range of tools to its core offerings.
Combined with its extensive expertise in process technology and focus on
development, K&S is well positioned to help customers meet the
challenges of packaging and assembling the next-generation of electronic
devices (www.kns.com).

Caution Concerning Results and Forward Looking Statements

In addition to historical statements, this press release contains
statements relating to future events and our future results. These
statements are "forward-looking" statements within the meaning of the
Private Securities Litigation Reform Act of 1995, and include, but are
not limited to, statements that relate to our future expected dividend
payouts and growth opportunities. While these forward-looking statements
represent our judgments and future expectations concerning our business,
a number of risks, uncertainties and other important factors could cause
actual developments and results to differ materially from our
expectations. These factors include, but are not limited to: the risk
that the Company fails to meet its operational and financial targets in
order to adhere to its dividend policy; the risk that customer orders
already received may be postponed or canceled, generally without
charges; the risk that anticipated customer orders may not materialize;
the risk that our suppliers may not be able to meet our demands on a
timely basis; the volatility in the demand for semiconductors and our
products and services; the risk that identified market opportunities may
not grow or developed as we anticipated; volatile global economic
conditions, which could result in, among other things, sharply lower
demand for products containing semiconductors and for the Company's
products, and disruption of capital and credit markets; the risk of
failure to successfully manage our operations; the possibility that we
may need to impair the carrying value of goodwill and/or intangibles
established in connection with one or more of our prior acquisitions;
acts of terrorism and violence; risks, such as changes in trade
regulations, currency fluctuations, political instability and war, which
may be associated with a substantial non-U.S. customer and supplier base
and substantial non-U.S. manufacturing operations; the impact of changes
in tax law; the risk that the Company will not identify suitable
acquisition opportunities or that any acquisitions will not be
successful; the risk that the Company fails to timely remediate the
material weaknesses identified in the Company's internal controls over
financial reporting or that new material weaknesses or significant
deficiencies emerge; and the factors listed or discussed in Kulicke and
Soffa Industries, Inc. 2017 Annual Report on Form 10-K and our other
filings with the Securities and Exchange Commission. Kulicke and Soffa
Industries, Inc. is under no obligation to (and expressly disclaims any
obligation to) update or alter its forward-looking statements whether as
a result of new information, future events or otherwise.

 

KULICKE & SOFFA INDUSTRIES, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(In thousands, except per share and employee data)

(Unaudited)

 
    Three months ended     Nine months ended
June 30, 2018    

July 1, 2017
As Restated

June 30, 2018    

July 1, 2017
As Restated

Net revenue $ 268,834 $ 243,897 $ 704,297 $ 593,149
Cost of sales 141,865   129,894   380,679   318,456  
Gross profit 126,969   114,003   323,618   274,693  
 
Operating expenses:
Selling, general and administrative 30,609 33,453 85,484 88,900
Research and development 29,974 25,980 88,881 72,505
Impairment charges 35,207 35,207
Amortization of intangible assets 1,962 1,521 5,927 4,565
Restructuring (39 ) 2,170   1,268   2,282  
Total operating expenses 62,506   98,331   181,560   203,459  
Income from operations 64,463 15,672 142,058 71,234
Other income (expense):
Interest income 3,459 1,751 8,420 4,502
Interest expense (263 ) (264 ) (799 ) (787 )
Income before income taxes 67,659 17,159 149,679 74,949
Income tax expense/(benefit) 7,282 (17,657 ) 122,494 (9,933 )
Share of results of equity-method investee, net of tax 121   7   144   7  
Net income $ 60,256   $ 34,809   $ 27,041   $ 84,875  
 
Net income per share:
Basic $ 0.87   $ 0.49   $ 0.39   $ 1.20  
Diluted $ 0.86   $ 0.48   $ 0.38   $ 1.18  
 
Cash dividends declared per share $ 0.12   $   $ 0.12   $  
 
Weighted average shares outstanding:
Basic 69,125 71,063 70,019 70,960
Diluted 70,302 72,483 71,113 72,169
 
            Three months ended       Nine months ended
Supplemental financial data: June 30, 2018     July 1, 2017 June 30, 2018     July 1, 2017
Depreciation and amortization $ 4,951 $ 3,963 $ 14,163 $ 11,739
Capital expenditures 4,071 3,803 16,481 21,909
Equity-based compensation expense:
Cost of sales 126 97 384 344
Selling, general and administrative 2,111 2,179 5,877 7,363
Research and development 656   514   1,963   1,763
Total equity-based compensation expense $ 2,893   $ 2,790   $   8,224   $   9,470
 

As of

June 30, 2018

July 1, 2017

Backlog of orders 1

$

146,578

$

198,592

Number of employees

3,109

3,299

 
1.     Represents customer purchase commitments. While the Company believes
these orders are firm, they are generally cancellable by customers
without penalty.
 
 

KULICKE & SOFFA INDUSTRIES, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands)

(Unaudited)

 
      As of
June 30, 2018     September 30, 2017
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 362,686 $ 392,410
Restricted cash 514 530
Short-term investments 258,000 216,000
Accounts and other receivable, net of allowance for doubtful
accounts of $675 and $79 respectively
256,694 198,480
Inventories, net 123,293 122,023
Prepaid expenses and other current assets 21,255   23,939  
TOTAL CURRENT ASSETS 1,022,442 953,382
 
Property, plant and equipment, net 76,064 67,762
Goodwill 56,649 56,318
Intangible assets, net 55,131 62,316
Deferred income taxes 11,781 27,771
Equity investments 1,358 1,502
Other assets 2,500   2,056  
TOTAL ASSETS $ 1,225,925   $ 1,171,107  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 78,777 $ 51,354
Accrued expenses and other current liabilities 106,193 124,847
Income taxes payable 18,608   16,780  
TOTAL CURRENT LIABILITIES 203,578 192,981
 
Financing obligation 15,437 16,074
Deferred income taxes 27,316 27,152
Income taxes payable 88,571 6,438
Other liabilities 8,941   8,432  
TOTAL LIABILITIES 343,843   251,077  
 
SHAREHOLDERS' EQUITY
Common stock, no par value 516,208 506,515
Treasury stock, at cost (224,938 ) (157,604 )
Retained earnings 591,951 569,080
Accumulated other comprehensive (loss) / income (1,139 ) 2,039  
TOTAL SHAREHOLDERS' EQUITY $ 882,082   $ 920,030  
   
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,225,925   $ 1,171,107  
 
 

KULICKE & SOFFA INDUSTRIES, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 
      Three months ended   Nine months ended
June 30, 2018   July 1, 2017 June 30, 2018   July 1, 2017
Net cash provided by operating activities $ 36,770 $ 25,188 $ 93,843 $ 68,166
Net cash provided by / (used in) investing activities, continuing
operations
25,929 24,387 (57,527 ) (8,012 )
Net cash used in financing activities, continuing operations (41,564 ) (162 ) (65,805 ) (805 )
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
1,379   (687 ) (251 ) 673  
Changes in cash, cash equivalents and restricted cash 22,514 48,726 (29,740 ) 60,022
Cash, cash equivalents and restricted cash, beginning of period* 340,686   435,203   392,940   423,907  
Cash, cash equivalents and restricted cash, end of period $ 363,200   $ 483,929   $ 363,200   $ 483,929  
 
Short-term investments 258,000   110,000   258,000   110,000  
Total cash, cash equivalents, restricted cash and short-term
investments
$ 621,200   $ 593,929   $ 621,200   $ 593,929  
*Certain time deposits as at October 1, 2016 have been corrected
from cash equivalents to short-term investments for comparative
purposes.
 
 

Reconciliation of U.S. GAAP Income from Operating

to Non-GAAP Income from Operation and Operating Margin

(in thousands, except percentages)

(unaudited)

 
      Three months ended
June 30, 2018    

July 1, 2017
As Restated

    March 31, 2018
Net revenue $ 268,834 $ 243,897 $ 221,772
U.S. GAAP Income from operations 64,463 15,672 38,436
U.S. GAAP operating margin 24.0 % 6.4 % 17.3 %
 
Pre-tax non-GAAP items:
Amortization related to intangible assets acquired through business
combination- selling, general and administrative
1,962 1,521 2,022
Restructuring (39 ) 2,170 (7 )
Impairment charges   35,207    
Non-GAAP Income from operations $ 66,386   $ 54,570   $ 40,451  
Non-GAAP operating margin 24.7 % 22.4 % 18.2 %
 
 

Reconciliation of U.S. GAAP Net Income to Non-GAAP Net Income
and

U.S. GAAP net income per share to Non-GAAP net income per share

(in thousands, except per share data)

(unaudited)

 
      Three months ended
June 30, 2018    

July 1, 2017
As Restated

    March 31, 2018
Net revenue $ 268,834 $ 243,897 $ 221,772
U.S. GAAP net income 60,256 34,809 36,313
U.S. GAAP net margin 22.4 % 14.3 % 16.4 %
 
Pre-tax non-GAAP adjustments:
Amortization related to intangible assets acquired through business
combination- selling, general and administrative
1,962 1,521 2,022
Restructuring (39 ) 2,170 (7 )
Impairment charges 35,207
Net income tax expense/(benefit) on non-GAAP items 78   (241 ) (111 )
Total non-GAAP adjustments 2,001   38,657   1,904  
Non-GAAP net income 62,257   73,466   38,217  
Non-GAAP net margin 23.2 % 30.1 % 17.2 %
 
U.S. GAAP net income per share:
Basic 0.87 0.49 0.52
Diluted 0.86 0.48 0.51
 
Non-GAAP adjustments per share:
Basic 0.03 0.54 0.03
Diluted 0.03 0.53 0.03
 
Non-GAAP net income per share:
Basic $ 0.90   $ 1.03   $ 0.54  
Diluted $ 0.89   $ 1.01   $ 0.54  
 

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