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angle-left 07/23/2018 - ams financial results Q2 2018

ams reports second quarter revenues and profitability above previous guidance; anticipated major ramps in consumer optical sensing underway; ...

2018/07/23

Key financial data for second quarter and first half 2018

German version

(PR title cont'd) ... expecting steep third quarter growth with revenues of USD 450-490 million, up 46-59% year-on-year, and adjusted EBIT margin in the low teens driving record expected second half revenues


Premstaetten, Austria (23 July 2018) -- ams AG (SIX: AMS), a leading worldwide supplier of high performance sensor solutions, reports second quarter results with revenues and operating profitability above the guidance range. The anticipated significant customer volume impact in ams’ consumer business in the second quarter resulted in a lower-than-expected effect on revenues and profitability supporting an overall solid performance. For the third quarter, ams sees strong sequential revenue and profitability growth driven by high volume ramp-ups in consumer optical sensing with expected revenues of USD 450-490 million, up 46-59% year-on-year.

Second quarter group revenues were USD 252.8 million, down 42% sequentially compared to the first quarter and up 18% from USD 213.3 million in the same quarter 2017. Group revenues for the first half of 2018 were USD 685.5 million, up 76% compared to USD 388.7 million recorded in the first half of 2017. Adjusted gross margin for the second quarter was 15% (excluding acquisition-related and share-based compensation costs) with IFRS reported gross margin at 9% (including acquisition-related and share-based compensation costs), compared to 41% and 35% respectively in the same quarter 2017. For the first half of 2018, adjusted gross margin stood at 28% (excluding acquisition-related and share-based compensation costs) and IFRS reported gross margin at 24% (including acquisition-related and share-based compensation costs), compared to 44% and 37% respectively in the first half of 2017.

The adjusted result from operations (EBIT) for the second quarter was a loss of USD 48.6 million or -19% of revenues (excluding acquisition-related and share-based compensation costs), above previous expectations while decreasing from USD 1.6 million in the same period 2017 (a loss of USD 76.1 million or -30% of revenues including acquisition-related and share-based compensation costs, up from a loss of USD 25.3 million in the same period 2017). This expected result reflects the underutilization of our manufacturing capacity in Singapore, driven by previously anticipated significantly lower customer volumes in our consumer business in the second quarter. For the first half of 2018, the adjusted EBIT was USD 25.3 million (excluding acquisition-related and share-based compensation costs), up from USD 6.4 million in the same period 2017 (a loss of USD 31.7 million including acquisition-related and share-based compensation costs, down from a loss of USD 41.5 million in the first half year 2017).

Adjusted net income for the second quarter was a loss of USD 103.5 million (excluding valuation effect of option element of foreign currency convertible bond), compared to a loss of USD 20.9 million for the same period 2017 (second quarter 2018: USD -34.6 million including valuation effect). Adjusted basic/diluted earnings per share for the second quarter were CHF -1.24/-1.19 or USD -1.24/-1.20 based on 83,377,425/86,388,635 shares (weighted average; second quarter 2018: CHF -0.41/-0.40 or USD -0.41/-0.40 including valuation effect; second quarter 2017: CHF -0.23/-0.22 or USD -0.25/-0.25 based on 83,327,015/86,462,424 shares, weighted average). Adjusted net income for the first half year 2018 was a loss of USD 8.0 million (excluding valuation effect of option element of foreign currency convertible bond), compared to a loss of USD 40.0 million for the same period 2017 (first half 2018: USD 39.1 million including valuation effect). Adjusted basic/diluted earnings per share for the first half were CHF -0.10/-0.10 or USD -0.10/-0.10 per share based on 77,344,938/80,159,144 shares (weighted average; first half 2018: CHF 0.50/0.45 or USD 0.51/0.45 including valuation effect; first half 2017: CHF -0.47/-0.45 or USD -0.51/-0.49 based on 78,870,841/81,254,354 shares, weighted average).

Operating cash flow for the second quarter was USD -72.3 million compared to USD -38.9 million in the same quarter last year, while operating cash flow for the first half was USD -18.4 million compared to USD -8.2 million in the first half year 2017. Total backlog on 30 June 2018 (excluding consignment stock agreements) was USD 549.9 million compared to USD 330.7 million at the end of the first quarter and USD 247.9 million on 30 June 2017.

ams’ business achieved an overall solid performance in the second quarter and first half of 2018 while ams recorded the previously anticipated significantly lower customer volumes in its consumer business in the second quarter. The resulting impact on group revenues and profitability remained lower than expected allowing ams to report second quarter results above previous guidance.

ams’ consumer and communications business was strongly impacted in the second quarter by the above mentioned substantial reduction in customer volumes for certain optical solutions. At the same time, volume shipments of other consumer products continued for a broad range of customers. Leading in optical sensing, ams provides a wide array of high performance solutions for 3D sensing including VCSEL (Vertical Cavity Surface-Emitting Laser)-based illumination, advanced spectral sensing, TrueColor and color display management, smallest scale advanced proximity sensing, and other optical applications.

ams drives innovation in optical technologies and leverages a broad and expanding portfolio of hardware and software for fast growing applications in optical sensing. In the emerging growth market for 3D sensing ams strengthened its position as a leading provider of consumer 3D sensing technologies. ams recently announced a further design-win in Android 3D sensing at Xiaomi, the fast-growing Chinese smartphone vendor. ams powers the first face recognition solution in an Android smartphone via a VCSEL array for structured light illumination and a further VCSEL array for IR flood illumination. The design-win underscores the strong competitive advantages of ams’ VCSEL technology in 3D sensing applications. This success adds to a previously announced large program win for an Asian smartphone OEM which will also include ams VCSEL technology for illumination. ams currently expects that program to start ramping before the end of 2018.

The consumer 3D sensing market remains in a formation phase as OEMs and other participants continue to identify valid technical approaches for different market, application and performance needs. ams also notes an emerging trend where large Android ecosystem players want to support robust reference designs to enable 3D sensing adoption across applications and market segments. As a result, besides OEMs ams now sees major ecosystem players starting to engage with the company to define and create consumer 3D sensing solutions in different technologies. Through its industry-leading portfolio of 3D technologies, expertise and IP ams is strongly positioned for these efforts and able to support relevant systems for all 3D sensing approaches – structured light, ToF and stereo vision.

To accelerate time-to-market for structured light solutions that address diversified market needs, ams has started a cooperation with OmniVision Technologies to define and develop tightly aligned structured light systems based on both partners’ technology portfolios. ams has also expanded its 3D system design and software capabilities through the acquisition of Germany-based ixellence in the quarter, which is an expert in customized DOE dot pattern design and 3D system solution architecting. Further expanding ams’ 3D sensing capabilities and leveraging its existing know-how and IP in stereo vision, ams recently concluded an equity investment into US-based 3D software specialist Bellus3D. Bellus3D develops active stereo vision reference solutions for front-facing smartphone 3D sensing which will include ams’ proprietary pattern projector. Promoting these reference solutions to Chinese smartphone OEMs through Face++, Bellus3D enables cost-efficient implementations for face authentication and other innovative face-related applications.

In the context of ams’ collaboration with Bellus3D, a worldwide leader in semiconductor and software solutions for consumer devices is engaging with ams to explore new reference solutions for stereo vision 3D systems. These will target cost-efficient 3D sensing for a wider range of consumer devices and smartphones. At the same time, ams is in discussions with a leading software provider for smartphone platforms to cooperate on new reference solutions enabling faster time-to-market and easier adoption of stereo vision 3D sensing in Android smartphones.

As market interest keeps increasing ams also pursues major developments for other optical sensing, spectral sensing, and multi-sensor solutions for consumer applications which include audio. ams’ audio sensing business continued to expand through the first half of 2018 while ams’ other consumer product lines saw further attractive volumes at a wide range of device vendors. In consumer spectral sensing, ams expects volume shipments for the first smartphone implementation of a spectral sensing application to start within the next six months.

ams’ industrial, medical and automotive businesses performed well and in line with expectations in the second quarter and first half. ams sees a continuing positive demand environment in its non-consumer end markets as ams enters the second half of the year. ams’ industrial business recorded attractive results in the second quarter as automation, HABA, industrial sensing, and industrial imaging all contributed to the performance. Showcasing ams’ leadership in global shutter technology for demanding applications, ams’ latest generation award-winning industrial imaging solution entered volume production in the quarter. A key supplier to OEMs worldwide, ams enables new sensing functions and high quality data acquisition in manufacturing, HABA, industrial IoT and other industrial areas. ams’ medical business continued to be successful in the second quarter and first half with good volumes in digital imaging for computed tomography (CT), digital X-ray, mammography, and miniature camera applications. ams’ market position in Asia is expanding while ams’ unmatched biosensing capabilities including high quality blood pressure monitoring create OEM interest in multiple end markets.

ams’ automotive business recorded another positive quarter as attractive demand for its automotive solutions continues across product lines. ams focuses on applications in safety, driver assistance, position sensing, and chassis control where market interest remains high on a global basis. Besides the reported major program win for VCSEL illumination in solid-state LIDAR, ams sees increased interest in its autonomous driving portfolio as industry leaders recognize ams’ outstanding expertise in laser systems and LIDAR. A global pioneer in autonomous driving platforms is engaging with ams to explore innovative technical solutions for solid-state LIDAR, based on ams’ leadership in optical technologies. In addition, OEM interest in other automotive 3D sensing such as in-cabin monitoring continues to solidify.

In manufacturing operations, ams has expanded its Singapore facilities to support capacity requirements for the current production ramps in consumer optical sensing and expects further investments into our production infrastructure in the second half of 2018. The investments into ams’ internal VCSEL production line in Singapore continue to plan with volume production scheduled for next year. In addition, ams concluded an agreement with Taiwan-based VCSEL vendor HLJ Technology in order to strengthen and expand its external VCSEL supply chain. Supporting this relationship ams also retains a meaningful shareholding in HLJ Technology.

Moreover, ams recently announced that the Supervisory Board has extended the Management Board contract of CEO Alexander Everke until 2021 which enables ams to continue on its strategic path towards the global leadership position in sensor solutions.

For the third quarter 2018, ams sees steep sequential growth as ams is ramping very high volume smartphone sensing solutions and its other end markets continue their positive contribution. Based on available information, ams expects third quarter revenues to grow strongly to USD 450-490 million, up 78-94% sequentially and 46-59% year-on-year. This expected development reflects the ramp-up nature of the third quarter as production and shipment volumes in ams’ consumer business continue to expand. Driven by these large scale consumer ramps, ams currently expects a record level of revenues for the second half of 2018. The adjusted operating margin for the third quarter (excluding acquisition-based and share-based compensation costs) is expected to show a significant sequential increase to a low teens percentage, predominantly resulting from the ongoing improvement in capacity utilization.

ams has recently initiated a strategic review of specific business areas taking an active approach to align its business portfolio for long-term attractive growth, profitability and end market diversification. Simultaneously, ams is actively evaluating strategic expansion opportunities in line with its strategy to build the global leader in sensor solutions based on its focus areas optical, imaging, environmental, and audio sensing. Focused on enhancing ams’ long-term positioning, ams currently expects to provide an update on both developments in the fourth quarter 2018. While taking into account potential effects from possible future changes to its business portfolio, ams endorses its growth target for ams revenues of 60% CAGR for the 2016-2019 period. At the same time, ams is convinced of the long-term strength of its business model and committed to driving balanced profitable growth. ams therefore also endorses reaching the target of 30% adjusted EBIT margin for ams in 2020, prudently taking into consideration potential financial effects that could result from possible future changes to its business portfolio.

The half year report 2018 including additional financial information is available on the company website at https://ams.com/financial-reports.