BE Semiconductor Industries N.V. Reports Strong Q3-16 Results

OREANDA-NEWS. BE Semiconductor Industries N.V. (the “Company" or "Besi") (Euronext Amsterdam:BESI) (OTC:BESIY), (Nasdaq International Designation), a leading manufacturer of assembly equipment for the semiconductor industry, today announced its results for the third quarter and nine months ended September 30, 2016.

Key Highlights Q3-16

• Revenue of € 94.3 million, down 13.5% vs. Q2-16 but above guidance. Decrease primarily due to lower demand by Asian subcontractors after first half capacity build. Up 30.7% vs. Q3-15 primarily due to higher die attach demand for mobile applications
• Orders of € 78.1 million, down 22.3% vs. Q2-16 due to lower demand for mobile, automotive and high end server applications and typical seasonal factors but up 4.2% vs. Q3-15
• Gross margin of 50.5% vs. 50.9% in Q2-16 at upper end of guidance. Up 1.8% vs Q3-15 (48.7%)
• Net income of € 16.6 million down € 7.4 million vs. Q2-16 but up € 10.3 million vs. Q3-15. Net margin of 17.6% vs. 8.7% in Q3-15 due to revenue growth and increased efficiency of business model
• Net cash increased by € 22.9 million (+21.0%) vs. Q3-15
• September 2015 buyback program completed. New 1.0 million share buy-back program initiated

Key Highlights YTD-16

• Revenue of € 282.3 million, up 4.0% vs. YTD-15 primarily as a result of higher die attach system demand by Asian customers for new advanced packaging capacity
• Orders up 4.2% primarily due to increased demand by Chinese and Taiwanese subcontractors and more favourable industry conditions
• Gross margin rose to 50.3% vs. 48.5% principally as a result of market position and increased material and labor cost efficiencies
• Net income of € 48.6 million up € 9.3 million vs. YTD-15. Net margins increased to 17.2% vs. 14.5% YTD-15. Adjusted net income up € 12.5 million vs. YTD-15  

Outlook  

• Q4-16 revenue expected to decrease 10-15% vs. Q3-16 reflecting typical seasonal patterns

*  Adjusted net income excludes € 1.0 million upward revaluation of tax loss carry forwards in Q2-16, € 0.1 million, € 0.1 million and € 0.7 million of restructuring charges in Q3-16, Q2-16 and Q1-16, respectively and € 0.2 million and € 3.3 million of net restructuring benefits in Q2-15 and Q1-15, respectively.

Richard W. Blickman, President and Chief Executive Officer of Besi, commented:

“Besi reported another solid quarter with Q3-16 revenue and profit exceeding expectations and strong cash flow generation. Revenue increased by 30.7% vs. Q3-15 primarily due to increased investment by customers in mobile and automotive advanced packaging capacity in a market environment more favorable than a year ago. Similarly, Besi’s seasonal 13.5% quarterly revenue decrease vs. Q2-16 improved significantly from last year’s 30.9% sequential quarterly revenue decrease. Net income of € 16.6 million increased by 163.5% vs. Q3-15 as revenue expanded and we realized increased efficiencies from our business model due to our strong market position and ongoing strategic initiatives. In addition, net margins more than doubled to reach 17.6% vs. Q3-15. Further, net cash grew to € 131.9 million in Q3-16 due to strong profit generation and enhanced working capital management efforts particularly in the areas of supply chain management and inventory control.

Besi’s solid profit and cash flow generation have enabled us to significantly enhance shareholder value in recent years. In October 2016, we completed a 1.0 million share buyback aggregating € 22.5 million. Since 2012, Besi has spent a total of € 157 million on dividends and share repurchases using excess cash resources. Given our outlook and prospects, we have initiated a new share buyback program up to a maximum of 1.0 million shares (2.7% of shares outstanding) through October 2017.

Besi’s nine month 2016 results also demonstrate solid financial and strategic progress and the operating leverage in our business model. While revenue grew by 4.0% vs. the 2015 period, net income of € 48.6 million grew by 23.7% vs. YTD-15 and was roughly equal to our net income for all of 2015. Revenue growth this year has benefited from increased investment by Chinese and Taiwanese subcontractors to expand advanced packaging capacity, the favourable influence of a new technology cycle to further shrink device geometries and the expansion of Besi’s market position in the major supply chains. Net income development has benefited from top line growth, higher gross margins from increased labor and material cost efficiencies and the execution of strategic initiatives to control operating expenses. 

The industry outlook for the second half and full year 2016 has improved significantly versus initial estimates for the year. Leading industry analysts estimate that the current upturn will continue into 2017 assuming stable global macro-economic conditions and further capacity upgrades by leading IDMs and Asian subcontractors.  Based on current backlog levels, Q4-16 revenue is anticipated to decline by 10-15% vs. Q3-16 which is in line with Besi’s sequential patterns in recent years.”

Third Quarter Results of Operations

Besi’s 13.5% sequential revenue decrease was primarily due to lower die attach demand by Asian subcontractors for mobile applications after a large first half capacity build and typical seasonal factors partially offset by strength in automotive applications. Q3-16 revenue was above prior guidance (-15-20% vs. Q2-16) and increased by 30.7% vs. Q3-15. Growth vs. Q3-15 was primarily due to significantly higher demand for die attach systems by Taiwanese and Chinese subcontractors for mobile applications, with particular strength in sales of epoxy die bonding systems for fingerprint sensor applications.

Orders decreased by 22.3% vs. Q2-16 primarily as a result of lower customer demand for mobile, automotive and high end server applications and typical seasonal influences. Per customer type, subcontractor orders decreased sequentially in Q3-16 by € 15.5 million, or 31.1%, while IDM orders decreased by € 6.9 million, or 13.6%. However, orders increased by 4.2% vs. Q3-15 reflecting general strength in both die attach and packaging systems although order growth varied per individual product.

Besi’s gross margin in Q3-16 decreased sequentially by 0.4% primarily as a result of higher labor and freight costs partially offset by increased material cost efficiencies. As compared to Q3-15, the 1.8% gross margin increase was primarily due to labor and material cost efficiencies as well as foreign exchange benefits from the decrease of the MYR vs. the euro.   

Besi’s Q3-16 operating expenses decreased by € 0.9 million vs. Q2-16 and were within prior guidance (0 to -5%) primarily as a result of € 2.1 million lower personnel related expenses partially offset by higher advisory and consulting costs. Operating expenses decreased by € 0.5 million vs. Q3-15 due primarily to lower temporary personnel and R&D costs partially offset by higher advisory and consulting costs. Total headcount at September 30, 2016 decreased by 0.5% vs. September 30, 2015 as higher Asian fixed and temporary production and administrative personnel were more than offset by continued decreases in European headcount.

* Adjusted net income excludes € 1.0 million upward revaluation of tax loss carry forwards in Q2-16 and € 0.1 million of restructuring charges in each of Q2-16 and Q3-16.

Besi’s Q3-16 net income decreased by € 7.4 million sequentially due primarily to (i) a 13.5% revenue decrease, (ii) slightly lower gross margins and (iii) an increased effective tax rate partially offset by lower operating expenses. As compared to Q3-15, net income increased by € 10.3 million primarily as a result of a 30.7% revenue increase, improved gross margins, reduced operating expenses and a lower effective tax rate. Besi’s effective tax rate was 11.1%, 6.9% (10.8% as adjusted) and 13.3% in Q3-16, Q2-16 and Q3-15, respectively. In Q2-16, the effective tax rate was favorably influenced by a € 1.0 million upward revaluation of net operating loss carry forwards at Besi Switzerland.

Nine Month Results of Operations

 

*Adjusted net income excludes € 1.0 million upward revaluation of tax loss carry forwards and € 0.9 million of restructuring charges in YTD-16 and € 3.3 million of net restructuring benefits in YTD-15.