Ultra Clean Reports Fourth Quarter and Full Year 2018 Financial Results

20 March 2019

HAYWARD, Calif., Feb. 21, 2019 /PRNewswire/ -- Ultra Clean Holdings, Inc. (Nasdaq: UCTT), today reported its financial results for the fourth quarter and full year ended December 28, 2018.

(PRNewsfoto/Ultra Clean Holdings, Inc.)

"A full quarter of revenue from our new services business, driven by our acquisition of Quantum, contributed to top line growth for the fourth quarter and delivered greater than 18 percent revenue growth for the year," said Jim Scholhamer, CEO. "We expect the overall semiconductor industry to remain challenged for the near-term so we are implementing a series of rigorous cost structure improvements. These initiatives will improve profitability without compromising our ability to react quickly by seizing opportunities with IDM's and OEM's when industry growth resumes."

Fourth Quarter 2018 GAAP Financial Results

Total revenue was $257.4 million, an increase of 10.0% compared to the third quarter and an increase of 3.4% compared to the same period a year ago.

Gross margin was 17.9% compared to 15.0% last quarter and 17.7% a year ago. Operating margin was 4.0% compared to 0.4% last quarter and 8.8% for the same period last year.

Net loss was $1.1 million or $0.03 per basic and diluted share. This compares to net loss of $6.0 million or $0.15 per basic and diluted share in the previous quarter, and net income of $20.8 million or $0.62 and $0.60 per basic and diluted share last year.

Cash and cash equivalents were $144.1 million, a decrease of $16.2 million compared to the end of the third quarter.  

Fourth Quarter Non-GAAP Financial Results

Non-GAAP net income was $8.7 million, or $0.23 per diluted share. This compares to non-GAAP net income of $11.9 million or $0.30 per diluted share in the previous quarter and non-GAAP net income of $20.3 million or $0.59 for the prior year. 

Non-GAAP operating margin was 6.5% compared to 6.4% in the previous quarter and 9.5% in the same period a year ago.

The Company has provided a reconciliation of GAAP to non-GAAP financial measures in the financial statement tables included in this press release.

Full Year 2018 GAAP Financial Results

Total revenue was $1,096.5 million, an increase of 18.6% from fiscal year 2017. Gross margin was 16.0% compared to 18.1% a year ago. Operating margin was 5.5% compared to 9.7% in fiscal year 2017. Net income was $36.6 million or $0.95 and $0.94 per basic and diluted share. This compares to net income of $75.1 million or $2.25 and $2.19 per basic and diluted share last year.

Full Year 2018 Non-GAAP Financial Results

Non-GAAP net income was $64.7 million, or $1.66 per diluted share. This compares to non-GAAP net income of $80.3 million or $2.34 per diluted share in the previous fiscal year. Non-GAAP operating margin was 7.8% compared to 10.3% a year ago.

First Quarter 2019 Outlook

The Company expects revenue to be between $230.0 million to $250.0 million and GAAP diluted net (loss) income per share to be in the range of ($0.03) to $0.07. The Company expects non-GAAP net income per diluted share to be in the range of $0.09 to $0.19.

Conference Call

The call will take place at 1:45 p.m. PT and can be accessed by dialing 1-844-826-3034 or 1-412-317-5179 (international). No passcode is required. A replay of the call will be available by dialing 1-877-344-7529 or 1-412-317-0088 (international) and entering the confirmation code 10128320. 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 microcontamination analytical services. Ultra Clean is headquartered in Hayward, California. Additional information is available at www.uct.com.

Use of Non-GAAP Measures

Management uses non-GAAP net income and net income per diluted share 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 of non-GAAP results to U.S. GAAP results are included at the end of this press release. A reconciliation of our guidance for non-GAAP net income per diluted share for the first quarter of 2019 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 our first quarter 2019 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 29, 2017 as filed with the Securities and Exchange Commission and subsequently filed quarterly reports on Form 10-Q. Additional information will also be set forth in our annual report on Form 10-K for the year ended December 28, 2018. 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 28, 



December 29, 



December 28, 



December 29, 

2018



2017

2018



2017

























Sales

$

257,389



$

248,886



$

1,096,523



$

924,351

Cost of goods sold



211,412





204,819





920,682





756,722

Gross profit



45,977





44,067





175,841





167,629

























Operating expenses:























  Research and development



4,059





3,264





13,287





11,666

  Sales and marketing



5,032





3,684





16,306





13,748

  General and administrative



26,676





15,162





85,544





52,818

    Total operating expenses



35,767





22,110





115,137





78,232

Income from operations



10,210





21,957





60,704





89,397

  Interest and other income (expense), net



(5,187)





(378)





(8,436)





(2,455)

Income before provision for income taxes



5,023





21,579





52,268





86,942

  Income tax provision



5,335





730





15,319





11,857

Net income (loss)



(312)





20,849





36,949





75,085

  Net income (loss) attributable to non-controlling interest



796





-





353





-

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

$

(1,108)



$

20,849



$

36,596



$

75,085

























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























  Basic

$

(0.03)



$

0.62



$

0.95



$

2.25

  Diluted

$

(0.03)



$

0.60



$

0.94



$

2.19

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























  Basic



39,009





33,602





38,366





33,409

  Diluted



39,009





34,500





38,919





34,303

 

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands)



















December 28,



December 29,

2018

2017

ASSETS













Current assets:













  Cash and cash equivalents



$

144,145



$

68,306

  Accounts receivable, net of allowance





108,024





90,213

  Inventory





186,116





236,840

  Other current assets





21,088





12,089

    Total current assets





459,373





407,448















Equipment and leasehold improvements, net





142,922





32,246

Goodwill





155,472





85,248

Purchased intangibles, net





193,707





31,587

Deferred tax assets, net





2,323





4,951

Other non-current assets





8,110





1,932

Total assets



$

961,907



$

563,412















LIABILITIES AND STOCKHOLDERS' EQUITY













Current liabilities:













  Bank borrowings



$

9,671



$

12,381

  Accounts payable





99,011





173,521

  Other current liabilities





33,542





21,445

    Total current liabilities





142,224





207,347















Bank borrowings, net of current portion





331,549





39,893

Deferred tax liability





7,990





9,981

Other long-term liabilities





28,497





5,886

    Total liabilities





510,260





263,107















Stockholders' equity:













  Common stock





287,127





185,336

  Retained earnings





149,718





113,122

  Accumulated other comprehensive income (loss)





(886)





1,847

  Ultra Clean Holdings, Inc. stockholders' equity





435,959





300,305

  Noncontrolling interest





15,688





-

    Total stockholders' equity





451,647





300,305

Total liabilities and stockholders' equity



$

961,907



$

563,412

 

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in thousands)











Twelve Months Ended



December 28,



December 29,



2018



2017

Cash flows from operating activities:







Net income including noncontrolling interests

$        36,949



$        75,085

Adjustments to reconcile net income to net cash provided by operating activities (excluding assets acquired and liabilities assumed):







Depreciation and amortization

21,907



10,865

Stock-based compensation

10,272



7,757

Others

(308)



(206)

Changes in assets and liabilities:







Accounts receivable

7,694



(14,930)

Inventories

50,151



(131,874)

Prepaid expenses and other

(2,407)



(4,911)

Deferred income taxes

(82)



(3,755)

Other non-current assets

(162)



(582)

Accounts payable

(82,951)



99,569

Accrued compensation and related benefits

2,048



2,777

Income taxes payable

798



8,177

Other liabilities

1,474



933

Net cash provided by operating activities

45,383



48,905

Cash flows from investing activities:







Purchases of equipment and leasehold improvements

(29,487)



(16,149)

Acquisition of Quantum, net of cash acquired

(319,781)



Net cash used for investing activities

(349,268)



(16,149)

Cash flows from financing activities:







Proceeds from bank borrowings

387,054



15,076

Proceeds from issuance of common stock

94,611



1,816

Principal payments on bank borrowings

(86,354)



(31,248)

Debt issuance costs paid

(12,144)



Employees' taxes paid upon vesting of restricted stock units

(3,092)



(2,714)

Net cash provided by (used for) financing activities

380,075



(17,070)

Effect of exchange rate changes on cash and cash equivalents

(351)



155

Net increase in cash and cash equivalents

$        75,839



$        15,841

Cash and cash equivalents at beginning of period

68,306



52,465

Cash and cash equivalents at end of period

$      144,145



$        68,306

 

ULTRA CLEAN HOLDINGS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS



























Three Months Ended



Twelve Months Ended





December 28,



December 29,



September 28,



December 28,



December 29,





2018



2017



2018



2018



2017

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

$               (1,108)



$              20,849



$               (5,997)



$              36,596



$              75,085

Amortization of intangible assets (1)



4,973



1,745



2,411



9,580



5,438

Reduction in force (2)



297



-



1,319



2,640



-

Product transition fees (3)



-



-



657



657



-

Executive transition costs (4)



418



-



246



2,064



-

Disposal of business unit (5)



-



-



1,082



1,082



-

Bank transaction costs (6)



-



-



99



99



-

Acquisition costs (7)



613



-



9,391



10,003



-

Facility lease early exit costs (8)



117



-



-



117



-

Income tax effect of non-GAAP adjustments (9)



(1,101)



(229)



(2,220)



(4,501)



(714)

Income tax effect of valuation allowance (10)



4,474



(2,096)



4,865



6,355



469

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



$                8,683



$              20,269



$              11,853



$              64,692



$              80,278























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





















Reported income from operations on a GAAP basis



$              10,210



$              21,957



$                   922



$              60,704



$              89,397

Amortization of intangible assets (1)



4,973



1,745



2,411



9,580



5,438

Reduction in force (2)



297



-



1,319



2,640



-

Product transition fees (3)



-



-



657



657



-

Executive transition costs (4)



418



-



246



2,064



-

Acquisition costs (7)



613



-



9,391



10,003



-

Facility lease early exit costs (8)



117



-



-



117



-

Non-GAAP income from operations



$              16,628



$              23,702



$              14,946



$              85,765



$              94,835























Reconciliation of GAAP Operating margin to Non-GAAP Operating margin





















Reported operating margin on a GAAP basis



4.0%



8.8%



0.4%



5.5%



9.7%

Amortization of intangible assets (1)



1.9%



0.7%



1.0%



0.9%



0.6%

Reduction in force (2)



0.1%



0.0%



0.6%



0.2%



0.0%

Product transition fees (3)



0.0%



0.0%



0.3%



0.1%



0.0%

Executive transition costs (4)



0.2%



0.0%



0.1%



0.2%



0.0%

Acquisition costs (7)



0.3%



0.0%



4.0%



0.9%



0.0%

Facility lease early exit costs (8)



0.0%



0.0%



0.0%



0.0%



0.0%

Non-GAAP operating margin



6.5%



9.5%



6.4%



7.8%



10.3%























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





















Reported gross profit on a GAAP basis



$              45,977



$              44,067



$              34,995



$            175,841



$            167,629

Amortization of intangible assets (1)



1,363



-



-



1,363



-

Reduction in force (2)



297



-



1,197



2,431



-

Product transition fees (3)



-



-



657



657



-

Executive transition costs (4)



418



-



-



418



-

Non-GAAP gross profit



$              48,055



$              44,067



$              36,849



$            180,710



$            167,629























Reconciliation of GAAP Gross margin to Non-GAAP Gross margin





















Reported gross margin on a GAAP basis



17.9%



17.7%



15.0%



16.0%



18.1%

Amortization of intangible assets (1)



0.5%



0.0%



0.0%



0.1%



0.0%

Reduction in force (2)



0.0%



0.0%



0.4%



0.2%



0.0%

Product transition fees (3)



0.1%



0.0%



0.3%



0.1%



0.0%

Executive transition costs (4)



0.2%



0.0%



0.0%



0.1%



0.0%

Non-GAAP gross margin



18.7%



17.7%



15.7%



16.5%



18.1%























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



$               (5,187)



$                  (378)



$               (2,766)



$              (8,436)



$              (2,455)

Disposal of business unit (5)



-



-



1,082



1,082



-

Bank transaction costs (6)



-



-



99



99



-

Non-GAAP interest and other income (expense)



$               (5,187)



$                  (378)



$               (1,585)



$              (7,255)



$              (2,455)



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

2    Represents severance costs related to the company's reduction in force during the quarter

3    One-time product transition payment  

4    Represents termination benefits paid to a former executive of the Company

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

6    Represents the writeoff of debt issuance costs, bank fees related to the payoff of remaining debt with East West Bank.

7    Represents costs related to the acquisition of QGT

8    Represents lease related costs due to the early exit of a facility

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

10    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. 

 

ULTRA CLEAN HOLDINGS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS







Three Months Ended



Twelve Months Ended





December 28,



December 29,



September 28,



December 28,



December 29,





2018



2017



2018



2018



2017

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





















Reported net income (loss) on a GAAP basis



(0.03)



$                  0.60



$                 (0.15)



$                  0.94



$                  2.19

Amortization of intangible assets



0.13



0.05



0.06



0.25



0.16

Reduction in force



0.01



-



0.03



0.07



-

Product transition fees



-



-



0.02



0.02



-

Executive transition costs



0.01



-



0.01



0.05



-

Disposal of business unit 



-



-



0.03



0.03



-

Bank transaction costs



-



-



-



0.00



-

Acquisition costs



0.02



-



0.24



0.26



-

Facility lease early exit costs



0.00



-



-



0.00



-

Income tax effect of non-GAAP adjustments



(0.03)



(0.01)



(0.06)



(0.12)



(0.02)

Income tax effect of valuation allowance



0.12



(0.05)



0.12



0.16



0.01

Non-GAAP net income



$                  0.23



$                  0.59



$                  0.30



$                  1.66



$                  2.34

Weighted average number of diluted shares (thousands)



39,009



34,500



38,930



38,919



34,303

 

ULTRA CLEAN HOLDINGS, INC.

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







Three Months Ended



Twelve Months Ended





December 28,



December 29,



September 28,



December 28,



December 29,





2018



2017



2018



2018



2017

(in thousands, except percentages)





















Provision for income taxes on a GAAP basis



$                5,335



$                   730



$                4,596



$              15,319



$              11,857

Income tax effect of non-GAAP adjustments (1)



1,101



229



2,220



4,501



714

Income tax effect of valuation allowance (2)



(4,474)



2,096



(4,865)



(6,355)



(469)

Non-GAAP provision for income taxes



$                1,962



$                3,055



$                1,951



$              13,465



$              12,102























Income (loss) before income taxes on a GAAP basis



$                5,023



$              21,579



$               (1,844)



$              52,268



$              86,942

Amortization of intangible assets



4,973



1,745



2,411



9,580



5,438

Reduction in force



297



-



1,319



2,640



-

Product transition fees



-



-



657



657



-

Executive transition costs



418



-



246



2,064



-

Disposal of business unit



-



-



1,082



1,082



-

Bank transaction costs



-



-



99



99



-

Acquisition costs



613



-



9,391



10,003



-

Facility lease early exit costs



117



-



-



117



-

Non-GAAP income before income taxes



$              11,441



$              23,324



$              13,361



$              78,510



$              92,380

Effective income tax rate on a GAAP basis



106.2%



3.4%



-249.2%



29.3%



13.6%

Non-GAAP effective income tax rate



17.2%



13.1%



14.6%



17.2%



13.1%



1    Tax effect of items (1) through (8) 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-2018-financial-results-300799970.html

SOURCE Ultra Clean Holdings, Inc.