PR Newswire | Jul 29, 2020 04:06PM EDT

07/29 15:05 CDT

Ultra Clean Reports Second Quarter 2020 Financial Results HAYWARD, Calif., July 29, 2020

HAYWARD, Calif., July 29, 2020 /PRNewswire/ -- Ultra Clean Holdings, Inc. (Nasdaq: UCTT), today reported its financial results for the second quarter ended June 26, 2020.

"UCT delivered record revenue and profitability in the second quarter on increased demand across all areas of our business," said Jim Scholhamer, CEO. "A recovery in wafer starts drove our Services business upwards, and ongoing momentum in the equipment market led to an increase in our Products business. I want to thank our dedicated employees worldwide for their commitment to quality and solid execution in a challenging environment. UCT's results are a powerful testament to the engagement and loyalty of our customers, demonstrating growth across the board."

Second Quarter 2020 GAAP Financial Results

Total revenue was $344.8 million. SPS contributed $277.9 million and SSB added $66.9 million. Total gross margin was 21.4%, operating margin was 8.9%, and net income was $21.3 million or $0.53 and $0.52 per basic and diluted share. This compares to total revenue of $320.9 million, gross margin of 20.5%, operating margin of 7.0%, and net income of $9.4 million or $0.24 and $0.23 per basic and diluted share in the prior quarter.

Second Quarter 2020 Non-GAAP Financial Results

On a non-GAAP basis, gross margin was 22.0%, operating margin was 11.7%, and net income was $30.5 million or $0.75 per diluted share. This compares to gross margin of 20.9%, operating margin of 9.9%, and net income of $21.0 million or $0.52 per diluted share in the prior quarter.

Third 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 $320.0 million to $360.0 million and GAAP diluted net income per share to be between $0.40 and $0.56. The Company expects non-GAAP diluted net income per share to be between $0.56 and $0.72.

Conference Call

The call will take place at 3:30 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 10145593. 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 Six Months Ended

June 26, June 28, June 26, June 28,

2020 2019 2020 2019

Revenues:

Product $ 277,892 $ 210,390 $ 537,275 $ 410,635

Services 66,890 54,977 128,403 114,873

Total revenues 344,782 265,367 665,678 525,508

Cost of revenues:

Product 229,276 181,073 444,031 355,637

Services 41,628 36,125 82,107 76,905

Total cost of revenues 270,904 217,198 526,138 432,542

Gross profit 73,878 48,169 139,540 92,966

Operating expenses:

Research and development 3,827 3,921 7,251 7,352

Sales and marketing 5,876 5,366 11,668 10,761

General and administrative 33,350 29,911 67,247 57,702

Total operating expenses 43,053 39,198 86,166 75,815

Income from operations 30,825 8,971 53,374 17,151

Interest income 158 151 470 342

Interest expense (3,773) (6,674) (8,961) (13,263)

Other income (expense), net 560 133 (2,131) 1,212

Income before provision for income 27,770 2,581 42,752 5,442taxes

Provision for income taxes 5,691 2,835 10,156 4,342

Net income (loss) 22,079 (254) 32,596 1,100

Less: Net income (loss)attributable to noncontrolling 815 (52) 1,910 697interests

Net income (loss) attributable to $ 21,264 $ (202) $ 30,686 $ 403UCT

Net income (loss) per share attributable to UCT common stockholders:

Basic $ 0.53 $ (0.01) $ 0.77 $ 0.01

Diluted $ 0.52 $ (0.01) $ 0.75 $ 0.01

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

Basic 40,087 39,399 39,952 39,261

Diluted 40,834 39,399 40,774 39,556

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands)

June 26, December 27,

2020 2019

ASSETS

Current assets:

Cash and cash equivalents $ 214,364 $ 162,531

Accounts receivable, net of allowance 138,886 112,694

Inventories 193,827 172,420

Prepaid expenses and other current assets 18,660 19,400

Total current assets 565,737 467,045

Property, plant and equipment, net 148,143 145,272

Goodwill 171,132 171,087

Intangibles assets, net 170,419 180,318

Deferred tax assets, net 15,517 15,498

Operating lease right-of-use assets 38,895 34,877

Other non-current assets 4,919 5,209

Total assets $ 1,114,762 $ 1,019,306

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Bank borrowings $ 7,735 $ 8,842

Accounts payable 140,082 133,058

Accrued compensation and related benefits 27,668 24,825

Operating lease liabilities 12,069 13,179

Other current liabilities 39,337 30,694

Total current liabilities 226,891 210,598

Bank borrowings, net of current portion 322,132 283,390

Deferred tax liabilities 25,183 25,183

Operating lease liabilities 33,455 28,828

Other liabilities 18,979 18,800

Total liabilities 626,640 566,799

Equity:

UCT stockholders' equity:

Common stock 302,721 297,693

Retained earnings 171,053 140,367

Accumulated other comprehensive loss (3,343) (1,334)

Total UCT stockholders' equity 470,431 436,726

Noncontrolling interest 17,691 15,781

Total equity 488,122 452,507

Total liabilities and equity $ 1,114,762 $ 1,019,306

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in thousands)

Six Months Ended

June 26, June 28,

2020 2019

Cash flows from operating activities:

Net income $ 32,596 $ 1,100

Adjustments to reconcile net income to net cash providedby operating activities (excluding assets acquired andliabilities assumed):

Depreciation and amortization 23,403 21,225

Stock-based compensation 6,150 5,777

Deferred income taxes (17) (2,077)

Change in the fair value of financial instruments and 4,186 52earn-out liability

Others (239) (274)

Changes in assets and liabilities:

Accounts receivable (26,040) 10,001

Inventories (21,459) 32,362

Prepaid expenses and other current assets (1,567) 3,705

Other non-current assets 290 (566)

Accounts payable 6,520 (4,704)

Accrued compensation and related benefits 2,832 3,358

Operating lease assets and liabilities (510) 467

Income taxes payable 4,887 (2,206)

Other liabilities 2,153 (203)

Net cash provided by operating activities 33,185 68,017

Cash flows from investing activities:

Purchases of property, plant and equipment (17,049) (6,750)

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

Proceeds from sale of equipment, including insurance 2,922 458proceeds

Net cash used in investing activities (14,127) (36,165)

Cash flows from financing activities:

Proceeds from bank borrowings 60,478 28,112

Proceeds from issuance of common stock 260 125

Payments on bank borrowings and finance leases (26,261) (32,389)

Withholding tax on employee equity compensation (1,382) (1,394)

Net cash provided by (used in) financing activities 33,095 (5,546)

Effect of exchange rate changes on cash and cash (320) (2,323)equivalents

Net increase in cash and cash equivalents 51,833 23,983

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

Cash and cash equivalents at end of period $ 214,364 $ 168,128

ULTRA CLEAN HOLDINGS, INC.

REPORTABLE SEGMENTS

GAAP TO NON-GAAP RECONCILIATION

(Unaudited; dollars in thousands)

GAAP Non-GAAP

Three Months Ended Three Months Ended

June 26, 2020 June 26, 2020

SPS SSB Consolidated SPS SSB Consolidated

Revenues $ 277,892 $ 66,890 $ 344,782 $ 277,892 $ 66,890 $ 344,782

Gross profit $ 48,616 $ 25,262 $ 73,878 $ 49,595 $ 26,284 $ 75,879

Gross margin 17.5% 37.8% 21.4% 17.8% 39.3% 22.0%

Income from operations $ 24,269 $ 6,556 $ 30,825 $ 29,042 $ 11,408 $ 40,450

Operating margin 8.7% 9.8% 8.9% 10.5% 17.1% 11.7%

Three Months Ended

June 26, 2020

SPS SSB Consolidated

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

Reported gross profit on a GAAP basis $ 48,616 $ 25,262 $ 73,878

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

Restructuring charges (2) 253 - 253

Stock-based compensation expense (3) 726 - 726

Non-GAAP gross profit $ 49,595 $ 26,284 $ 75,879

Reconciliation of GAAP Gross margin to Non-GAAP Gross margin

Reported gross margin on a GAAP basis 17.5% 37.8% 21.4%

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

Restructuring charges (2) 0.1% - 0.1%

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

Non-GAAP gross margin 17.8% 39.3% 22.0%

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

Reported income from operations on a GAAP basis $ 24,269 $ 6,556 $ 30,825

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

Restructuring charges (2) 654 918 1,572

Stock-based compensation expense (3) 2,946 158 3,104

Non-GAAP income from operations $ 29,042 $ 11,408 $ 40,450

Reconciliation of GAAP Operating margin to Non-GAAP Operating margin

Reported operating margin on a GAAP basis 8.7% 9.8% 8.9%

Amortization of intangible assets (1) 0.4% 5.6% 1.4%

Restructuring charges (2) 0.3% 1.4% 0.5%

Stock-based compensation expense (3) 1.1% 0.3% 0.9%

Non-GAAP operating margin 10.5% 17.1% 11.7%

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

ULTRA CLEAN HOLDINGS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS

Three Months Ended

June 26, June 28, March 27,

2020 2019 2020

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

Reported net income (loss) attributable to $ 21,264 $ (202) $ 9,423UCT on a GAAP basis

Amortization of intangible assets (1) 4,949 5,053 4,951

Restructuring charges (2) 1,572 774 1,600

Stock-based compensation expense (3) 3,104 3,091 2,752

Fair value adjustments (4) 1,209 766 2,948

Acquisition related costs (5) - 1,211 -

Depreciation adjustments (6) - (360) -

Income tax effect of non-GAAP adjustments (2,037) (1,991) (2,291)(7)

Income tax effect of valuation allowance 470 2,344 1,663(8)

Non-GAAP net income attributable to UCT $ 30,531 $ 10,686 $ 21,046

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

Reported income from operations on a GAAP $ 30,825 $ 8,971 $ 22,550basis

Amortization of intangible assets (1) 4,949 5,053 4,951

Restructuring charges (2) 1,572 749 1,600

Stock-based compensation expense (3) 3,104 3,091 2,752

Fair value adjustments (4) - 766 -

Acquisition related costs (5) - 1,211 -

Depreciation adjustments (6) - (360) -

Non-GAAP income from operations $ 40,450 $ 19,481 $ 31,853

Reconciliation of GAAP Operating margin to Non-GAAP Operating margin

Reported operating margin on a GAAP basis 8.9% 3.4% 7.0%

Amortization of intangible assets (1) 1.4% 1.9% 1.5%

Restructuring charges (2) 0.5% 0.2% 0.5%

Stock-based compensation expense (3) 0.9% 1.2% 0.9%

Fair value adjustments (4) 0.0% 0.3% 0.0%

Acquisition related costs (5) 0.0% 0.5% 0.0%

Depreciation adjustments (6) 0.0% -0.1% 0.0%

Non-GAAP operating margin 11.7% 7.4% 9.9%

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

Reported gross profit on a GAAP basis $ 73,878 $ 48,169 $ 65,662

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

Restructuring charges (2) 253 350 233

Stock-based compensation expense (3) 726 509 307

Fair value adjustments (4) - 766 -

Depreciation adjustments (6) - (316) -

Non-GAAP gross profit $ 75,879 $ 50,501 $ 67,225

Reconciliation of GAAP Gross margin to Non-GAAP Gross margin

Reported gross margin on a GAAP basis 21.4% 18.2% 20.5%

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

Restructuring charges (2) 0.1% 0.1% 0.0%

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

Fair value adjustments (4) 0.0% 0.2% 0.0%

Depreciation adjustments (6) 0.0% -0.1% 0.0%

Non-GAAP gross margin 22.0% 19.0% 20.9%

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

Reported interest and other income $ (3,055) $ (6,390) $ (7,567)(expense) on a GAAP basis

Restructuring charges (2) - (25) -

Fair value adjustments (4) 1,209 - 2,948

Non-GAAP interest and other income $ (1,846) $ (6,415) $ (4,619)(expense)

ULTRA CLEAN HOLDINGS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS

Three Months Ended

June 26, June 28, March 27,

2020 2019 2020

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

Reported net income (loss) on a GAAP basis $ 0.52 $ (0.01) $ 0.23

Amortization of intangible assets (1) 0.12 0.13 0.12

Restructuring charges (2) 0.04 0.02 0.04

Stock-based compensation expense (3) 0.08 0.08 0.07

Fair value adjustments (4) 0.03 0.02 0.08

Acquisition related costs (5) - 0.03 -

Depreciation adjustments (6) - (0.01) -

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

Income tax effect of valuation allowance 0.01 0.06 0.04(8)

Non-GAAP net income $ 0.75 $ 0.27 $ 0.52

Weighted average number of diluted shares 40,834 39,734 40,704(thousands) on a non-GAAP basis

ULTRA CLEAN HOLDINGS, INC.

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

Three Months Ended

June 26, June 28, March 27,

2020 2019 2020

(in thousands, except percentages)

Provision for income taxes on a GAAP basis $ 5,691 $ 2,835 $ 4,465

Income tax effect of non-GAAP adjustments 2,037 1,991 2,291(7)

Income tax effect of valuation allowance (470) (2,344) (1,663)(8)

Non-GAAP provision for income taxes $ 7,258 $ 2,482 $ 5,093

Income before income taxes on a GAAP basis $ 27,770 $ 2,581 $ 14,983

Amortization of intangible assets (1) 4,949 5,053 4,951

Restructuring charges (2) 1,572 774 1,600

Stock-based compensation expense (3) 3,104 3,091 2,752

Fair value adjustments (4) 1,209 766 2,948

Acquisition related costs (5) - 1,211 -

Depreciation adjustments (6) - (360) -

Non-GAAP income before income taxes $ 38,604 $ 13,116 $ 27,234

Effective income tax rate on a GAAP basis 20.5% 109.8% 29.8%

Non-GAAP effective income tax rate 18.8% 18.9% 18.7%

1 Amortization of intangible assets related to the Company's acquisitionsof AIT, 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 Depreciation adjustments related to QGT's fixed assets

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

8 The Company's GAAP tax expense is generally higher than the Company'snon-GAAP tax expense, primarily due to losses in the U.S. with full federaland state valuation allowances. The Company's non-GAAP tax rate andresulting non-GAAP tax expense considers the tax implications as if therewas no federal or state valuation allowance position in effect.

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SOURCE Ultra Clean Holdings, Inc.