PR Newswire | Oct 28, 2020 04:06PM EDT

10/28 15:05 CDT

Ultra Clean Reports Third Quarter 2020 Financial Results HAYWARD, Calif., Oct. 28, 2020

HAYWARD, Calif., Oct. 28, 2020 /PRNewswire/ -- Ultra Clean Holdings, Inc. (Nasdaq: UCTT), today reported its financial results for the third quarter ended September 25, 2020.

"Delivering another quarter of solid revenue and earnings is strong evidence of UCTT's execution capabilities as we drive towards our longer-term strategic and financial goals," said Jim Scholhamer, CEO. "Our diversified suite of quality products and services is capturing additional business from existing customers and gaining traction with new customers. Industry momentum remains steady as our end markets expand to power a new generation of semiconductor devices, giving us confidence in our ability to sustainably outperform over the long-term."

Third Quarter 2020 GAAP Financial Results

Total revenue was $363.3 million. SPS contributed $294.4 million and SSB added $68.9 million. Total gross margin was 20.5%, operating margin was 9.6%, and net income was $24.4 million or $0.60 and $0.59 per basic and diluted share. This compares to total revenue of $344.8 million, gross margin of 21.4%, operating margin of 8.9%, and net income of $21.3 million or $0.53 and $0.52 per basic and diluted share in the prior quarter.

Third Quarter 2020 Non-GAAP Financial Results

On a non-GAAP basis, gross margin was 21.0%, operating margin was 11.6%, and net income was $29.9 million or $0.73 per diluted share. This compares to gross margin of 22.0%, operating margin of 11.7%, and net income of $30.5 million or $0.75 per diluted share in the prior quarter.

Fourth Quarter 2020 Outlook

Due to limited visibility resulting from the pandemic, the Company has widened its guidance ranges to reflect the heightened uncertainty in the marketplace. The Company expects revenue in the range of $345.0 million to $375.0 million and GAAP diluted net income per share to be between $0.44 and $0.58. The Company expects non-GAAP diluted net income per share to be between $0.63 and $0.77.

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. No passcode is required. A replay of the call will be available by dialing 1-877-344-7529 or 1-412-317-0088 and entering the confirmation code 10148588. 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 micro-contamination analytical services. Ultra Clean is headquartered in Hayward, California. Additional information is available at www.uct.com.

Use of Non-GAAP Measures

In addition to providing results that are determined in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP), management uses non-GAAP gross margin, non-GAAP operating margin and non-GAAP net income 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 from GAAP results to non-GAAP results are included at the end of this press release.

The Company currently defines non-GAAP net income as net income (loss) before amortization of intangible assets, restructuring charges, executive transition costs, acquisition costs, fair value adjustments, depreciation adjustments, stock-based compensation, and the tax effects of the foregoing adjustments.

A reconciliation of our guidance for non-GAAP net income per diluted share for the following quarter 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," "should" 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 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 27, 2019 as filed with the Securities and Exchange Commission. 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 Relationsrbennetto@uct.com

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in thousands, except per share data)

Three Months Ended Nine Months Ended

September 25, September 27, September 25, September 27,

2020 2019 2020 2019

Revenues:

Product $ 294,381 $ 200,024 $ 831,656 $ 610,660

Services 68,895 54,299 197,298 169,171

Total revenues 363,276 254,323 1,028,954 779,831

Cost of revenues:

Product 243,582 170,144 687,613 525,782

Services 45,118 36,675 127,225 113,579

Total cost of revenues 288,700 206,819 814,838 639,361

Gross profit 74,576 47,504 214,116 140,470

Operating expenses:

Research and development 3,514 3,634 10,765 10,986

Sales and marketing 5,989 5,877 17,657 16,638

General and administrative 30,251 29,735 97,498 87,437

Total operating expenses 39,754 39,246 125,920 115,061

Income from operations 34,822 8,258 88,196 25,409

Interest income 226 74 696 416

Interest expense (4,133) (6,636) (13,094) (19,899)

Other income (expense), net (1,079) 3,070 (3,210) 4,282

Income before provision for income taxes 29,836 4,766 72,588 10,208

Provision for income taxes 4,776 3,878 14,932 8,220

Net income 25,060 888 57,656 1,988

Less: Net income attributable to noncontrolling 695 375 2,605 1,072interests

Net income attributable to UCT $ 24,365 $ 513 $ 55,051 $ 916

Net income per share attributable to UCT commonstockholders:

Basic $ 0.60 $ 0.01 $ 1.37 $ 0.02

Diluted $ 0.59 $ 0.01 $ 1.35 $ 0.02

Shares used in computing net income per share:

Basic 40,367 39,557 40,091 39,363

Diluted 41,149 40,025 40,929 39,746

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands)

September 25, December 27,

2020 2019

ASSETS

Current assets:

Cash and cash equivalents $ 176,131 $ 162,531

Accounts receivable, net of allowance 145,523 112,694

Inventories 175,332 172,420

Prepaid expenses and other current assets 17,150 19,400

Total current assets 514,136 467,045

Property, plant and equipment, net 150,487 145,272

Goodwill 171,132 171,087

Intangibles assets, net 165,469 180,318

Deferred tax assets, net 15,773 15,498

Operating lease right-of-use assets 38,062 34,877

Other non-current assets 5,192 5,209

Total assets $ 1,060,251 $ 1,019,306

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Bank borrowings $ 7,515 $ 8,842

Accounts payable 111,398 133,058

Accrued compensation and related benefits 30,752 24,825

Operating lease liabilities 12,090 13,179

Other current liabilities 33,543 30,694

Total current liabilities 195,298 210,598

Bank borrowings, net of current portion 272,605 283,390

Deferred tax liabilities 25,183 25,183

Operating lease liabilities 31,242 28,828

Other liabilities 17,468 18,800

Total liabilities 541,796 566,799

Equity:

UCT stockholders' equity:

Common stock 305,994 297,693

Retained earnings 195,418 140,367

Accumulated other comprehensive loss (1,343) (1,334)

Total UCT stockholders' equity 500,069 436,726

Noncontrolling interest 18,386 15,781

Total equity 518,455 452,507

Total liabilities and equity $ 1,060,251 $ 1,019,306

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in thousands)

Nine Months Ended

September 25, September 27,

2020 2019

Cash flows from operating activities:

Net income $ 57,656 $ 1,988

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

Depreciation and amortization 35,064 32,152

Stock-based compensation 9,463 9,078

Deferred income taxes (273) (2,115)

Change in the fair value of financial instruments and earn-out liability 4,376 (3,720)

Others (1,939) 25

Changes in assets and liabilities:

Accounts receivable (32,677) (2,376)

Inventories (2,964) 42,489

Prepaid expenses and other current assets 325 1,994

Other non-current assets 17 (776)

Accounts payable (21,919) (282)

Accrued compensation and related benefits 5,916 8,757

Operating lease assets and liabilities (791) 2,332

Income taxes payable 3,169 (1,473)

Other liabilities (2,538) 1,000

Net cash provided by operating activities 52,885 89,073

Cash flows from investing activities:

Purchases of property, plant and equipment (26,535) (12,665)

Proceeds from sale of property and equipment, including insurance proceeds 6,614 2,698

Acquisition of Dynamic Manufacturing Solutions, LLC - (29,873)

Net cash used in investing activities (19,921) (39,840)

Cash flows from financing activities:

Proceeds from bank borrowings 69,670 34,805

Proceeds from issuance of common stock 260 126

Payments on bank borrowings and finance leases (85,688) (64,534)

Payment of contingent earn-out (1,428) -

Withholding tax on employee equity compensation (1,422) (1,652)

Net cash used in financing activities (18,608) (31,255)

Effect of exchange rate changes on cash and cash equivalents (756) (3,433)

Net increase in cash and cash equivalents 13,600 14,545

Cash and cash equivalents at beginning of period 162,531 144,145

Cash and cash equivalents at end of period $ 176,131 $ 158,690

ULTRA CLEAN HOLDINGS, INC.

REPORTABLE SEGMENTS

GAAP TO NON-GAAP RECONCILIATION

(Unaudited; dollars in thousands)

GAAP Non-GAAP

Three Months Ended Three Months Ended

September 25, 2020 September 25, 2020

SPS SSB Consolidated SPS SSB Consolidated

Revenues $ 294,381 $ 68,895 $ 363,276 $ 294,381 $ 68,895 $ 363,276

Gross profit $ 50,799 $ 23,777 $ 74,576 $ 51,442 $ 24,799 $ 76,241

Gross margin 17.3% 34.5% 20.5% 17.5% 36.0% 21.0%

Income from operations $ 27,404 $ 7,418 $ 34,822 $ 31,716 $ 10,247 $ 41,963

Operating margin 9.3% 10.8% 9.6% 10.8% 14.9% 11.6%

Three Months Ended

September 25, 2020

SPS SSB Consolidated

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

Reported gross profit on a GAAP basis $ 50,799 $ 23,777 $ 74,576

Amortization of intangible assets (1) - 1,022 1,022

Restructuring charges (2) 260 - 260

Stock-based compensation expense (3) 383 - 383

Non-GAAP gross profit $ 51,442 $ 24,799 $ 76,241

Reconciliation of GAAP Gross margin to Non-GAAP Gross margin

Reported gross margin on a GAAP basis 17.3% 34.5% 20.5%

Amortization of intangible assets (1) 0.0% 1.5% 0.3%

Restructuring charges (2) 0.1% - 0.1%

Stock-based compensation expense (3) 0.1% - 0.1%

Non-GAAP gross margin 17.5% 36.0% 21.0%

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

Reported income from operations on a GAAP basis $ 27,404 $ 7,418 $ 34,822

Amortization of intangible assets (1) 1,173 3,776 4,949

Restructuring charges (2) 260 - 260

Stock-based compensation expense (3) 2,879 405 3,284

Gain on the sale of property (4) - (1,352) (1,352)

Non-GAAP income from operations $ 31,716 $ 10,247 $ 41,963

Reconciliation of GAAP Operating margin to Non-GAAP Operating margin

Reported operating margin on a GAAP basis 9.3% 10.8% 9.6%

Amortization of intangible assets (1) 0.4% 5.5% 1.4%

Restructuring charges (2) 0.1% 0.0% 0.1%

Stock-based compensation expense (3) 1.0% 0.6% 0.9%

Gain on the sale of property (4) 0.0% -2.0% -0.4%

Non-GAAP operating margin 10.8% 14.9% 11.6%

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

2 Represents severance, retention and costs related to facility closures

3 Represents compensation expense for stock granted to employees anddirectors

4 Represents gain realized on the sale of land in South Korea

ULTRA CLEAN HOLDINGS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS

Three Months Ended

September 25, September 27, June 26,

2020 2019 2020

Reconciliation of GAAP Net Income to Non-GAAP Net Income (in thousands)

Reported net income attributable to UCT on a GAAP basis $ 24,365 $ 513 $ 21,264

Amortization of intangible assets (1) 4,949 5,093 4,949

Restructuring charges (2) 400 1,393 1,572

Stock-based compensation expense (3) 3,284 3,408 3,104

Fair value adjustments (4) 200 129 1,209

Acquisition related costs (5) - 200 -

Gain on the sale of property (6) (1,352) - -

Income tax effect of non-GAAP adjustments (7) (1,352) (2,351) (2,037)

Income tax effect of valuation allowance (8) (616) 2,781 470

Non-GAAP net income attributable to UCT $ 29,878 $ 11,166 $ 30,531

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

Reported income from operations on a GAAP basis $ 34,822 $ 8,258 $ 30,825

Amortization of intangible assets (1) 4,949 5,093 4,949

Restructuring charges (2) 260 954 1,572

Stock-based compensation expense (3) 3,284 3,408 3,104

Fair value adjustments (4) - 129 -

Acquisition related costs (5) - 200 -

Gain on the sale of property (6) (1,352) - -

Non-GAAP income from operations $ 41,963 $ 18,042 $ 40,450

Reconciliation of GAAP Operating margin to Non-GAAP Operating margin

Reported operating margin on a GAAP basis 9.6% 3.2% 8.9%

Amortization of intangible assets (1) 1.4% 2.0% 1.4%

Restructuring charges (2) 0.1% 0.4% 0.5%

Stock-based compensation expense (3) 0.9% 1.3% 0.9%

Fair value adjustments (4) 0.0% 0.1% 0.0%

Acquisition related costs (5) 0.0% 0.1% 0.0%

Gain on the sale of property (6) -0.4% 0.0% 0.0%

Non-GAAP operating margin 11.6% 7.1% 11.7%

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

Reported gross profit on a GAAP basis $ 74,576 $ 47,504 $ 73,878

Amortization of intangible assets (1) 1,022 1,023 1,022

Restructuring charges (2) 260 154 253

Stock-based compensation expense (3) 383 514 726

Fair value adjustments (4) - 129 -

Non-GAAP gross profit $ 76,241 $ 49,324 $ 75,879

Reconciliation of GAAP Gross margin to Non-GAAP Gross margin

Reported gross margin on a GAAP basis 20.5% 18.7% 21.4%

Amortization of intangible assets (1) 0.3% 0.4% 0.3%

Restructuring charges (2) 0.1% 0.1% 0.1%

Stock-based compensation expense (3) 0.1% 0.2% 0.2%

Fair value adjustments (4) 0.0% 0.0% 0.0%

Non-GAAP gross margin 21.0% 19.4% 22.0%

Reconciliation of GAAP Interest and other income (expense) to Non-GAAP Interestand other income (expense) (inthousands)

Reported interest and other income (expense) on a GAAP basis $ (4,986) $ (3,492) $ (3,055)

Restructuring charges (2) 140 439 -

Fair value adjustments (4) 200 - 1,209

Non-GAAP interest and other income (expense) $ (4,646) $ (3,053) $ (1,846)

Three Months Ended

September 25, September 27, June 26,

2020 2019 2020

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

Reported net income on a GAAP basis $ 0.59 $ 0.01 $ 0.52

Amortization of intangible assets (1) 0.12 0.13 0.12

Restructuring charges (2) 0.01 0.03 0.04

Stock-based compensation expense (3) 0.08 0.09 0.08

Fair value adjustments (4) 0.00 0.00 0.03

Gain on the sale of property (6) (0.03) - -

Income tax effect of non-GAAP adjustments (7) (0.03) (0.06) (0.05)

Income tax effect of valuation allowance (8) (0.01) 0.07 0.01

Non-GAAP net income $ 0.73 $ 0.27 $ 0.75

Weighted average number of diluted shares (thousands) on a non-GAAP basis 41,149 40,025 40,834

ULTRA CLEAN HOLDINGS, INC.

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

Three Months Ended

September 25, September 27, June 26,

2020 2019 2020

(in thousands, except percentages)

Provision for income taxes on a GAAP basis $ 4,776 $ 3,878 $ 5,691

Income tax effect of non-GAAP adjustments (7) 1,352 2,351 2,037

Income tax effect of valuation allowance (8) 616 (2,781) (470)

Non-GAAP provision for income taxes $ 6,744 $ 3,448 $ 7,258

Income before income taxes on a GAAP basis $ 29,836 $ 4,766 $ 27,770

Amortization of intangible assets (1) 4,949 5,093 4,949

Restructuring charges (2) 400 1,393 1,572

Stock-based compensation expense (3) 3,284 3,408 3,104

Fair value adjustments (4) 200 129 1,209

Acquisition related costs (5) - 200 -

Gain on the sale of property (6) (1,352) - -

Non-GAAP income before income taxes $ 37,317 $ 14,989 $ 38,604

Effective income tax rate on a GAAP basis 16.0% 81.4% 20.5%

Non-GAAP effective income tax rate 18.1% 23.0% 18.8%

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

2 Represents severance, retention and costs related to facility closures

3 Represents compensation expense for stock granted to employees anddirectors

4 Fair value adjustments related to contingent consideration, purchaseobligation, DMS' sold inventories

5 Represents costs related to the acquisition of DMS

6 Represents gain realized on the sale of land in South Korea

7 Tax effect of items (1) through (6) above based on the non-GAAP tax rateshown below

8 The Company's GAAP tax expense is generally higher than the Company'snon-GAAP tax expense, primarily dueto losses in the U.S. with full federal and state valuation allowances. TheCompany's non-GAAP tax rate and resultingnon-GAAP tax expense considers the tax implications as if there was no federalor state valuation allowance position in effect.

View original content to download multimedia: http://www.prnewswire.com/news-releases/ultra-clean-reports-third-quarter-2020-financial-results-301162138.html

SOURCE Ultra Clean Holdings, Inc.