ams reports third quarter revenues in upper third of guidance range and operating profitability in line with guidance; ongoing high volume ramps ...
(PR title cont'd) ... in smartphone optical/3D sensing; further sequential and year-on-year growth expected in fourth quarter with revenues of USD 570-610 million and sequentially higher adjusted operating margin; more focused growth strategy around optical, image and audio sensing to drive optical growth opportunities
Premstaetten, Austria (22 October 2018) -- ams (SIX: AMS), a leading worldwide supplier of high performance sensor solutions, reports third quarter results with revenues in the upper third of the guidance range and operating profitability in line with guidance. ams is successfully implementing the expected production ramps in consumer optical sensing while its other businesses continued to develop positively in line with expectations. Ongoing high volume ramps in ams’ consumer business drive further expected sequential and year-on-year growth in the fourth quarter with expected revenues of USD 570-610 million and sequentially higher adjusted operating margin.
Third quarter group revenues were USD 479.6 million, up 92% sequentially compared to the second quarter and up 57% from USD 305.5 million in the same quarter 2017. Adjusted gross margin for the third quarter was 33% (excluding acquisition-related and share-based compensation costs) with IFRS reported gross margin at 31% (including acquisition-related and share-based compensation costs), compared to 41% and 37% respectively in the same quarter 2017.
The adjusted result from operations (EBIT) for the third quarter was USD 60.2 million or 13% of revenues (excluding acquisition-related and share-based compensation costs), in line with previous guidance, while increasing strongly from USD 40.5 million in the same period 2017 (USD 37.3 million or 8% of revenues including acquisition-related and share-based compensation costs, up from USD 12.3 million in the same period 2017). This expected positive result reflects the ramp-up nature of the quarter given increasing production volumes for a recently launched global smartphone platform.
Adjusted net income for the third quarter was USD 18.6 million (excluding valuation effect of option element of foreign currency convertible bond), compared to USD 23.5 million for the same period 2017 (third quarter 2018: USD 68.8 million including valuation effect). Adjusted basic/diluted earnings per share for the third quarter were CHF 0.22/0.21 or USD 0.23/0.22 based on 82,518,624/84,893,054 shares (weighted average; third quarter 2018: CHF 0.82/0.79 or USD 0.83/0.81 including valuation effect; third quarter 2017: CHF 0.28/0.27 or USD 0.28/0.27 based on 83,390,747/86,716,951 shares, weighted average).
Operating cash flow for the third quarter was USD 85.9 million compared to USD -37.6 million in the same quarter last year. Total backlog on 30 September 2018 (excluding consignment stock agreements) was USD 601.7 million compared to USD 544.4 million at the end of the second quarter and USD 512.3 million on 30 September 2017.
ams’ business showed a strong performance in the third quarter of 2018 which was driven by the previously expected significant product ramps in its consumer business. Supported by the anticipated positive demand across end markets, ams recorded third quarter results well in line with previous expectations.
ams’ consumer and communications business was again the biggest contributor to its overall results. As the leader in optical sensing ams offers an unmatched portfolio covering high performance solutions for 3D sensing including VCSEL (Vertical Cavity Surface-Emitting Laser)-based illumination, TrueColor and other high quality display management, spectral sensing, advanced proximity sensing and other optical applications. Leveraging its extensive technology base, ams is a key innovator in optical technologies and continues to advance high performance optical sensing. ams is a leading provider of 3D sensing technology as shown by the large scale 3D sensing ramp ams is realizing this second half for a major global smartphone platform. For this program, ams is ramping very high volumes of differentiated optical systems encompassing complex optical manufacturing and high performance wafer level optics.
ams is strongly positioned to support current and upcoming 3D sensing implementations across different technologies in 2018, 2019 and beyond as 3D sensing momentum continues to increase. As expected, the smartphone market is experiencing multi-year development and implementation cycles for 3D sensing which are due to the complexity of the technology. This has, however, not impacted the clear 3D sensing focus ams observes at smartphone OEMs and ecosystem players targeting broad usage of the technology through the coming years.
ams sees ongoing coexistence of the 3D sensing approaches structured light, ToF (time-of-flight) and active stereo vision and is successful in all three areas. Based on its leading portfolio of 3D sensing technologies, solutions and system know-how, ams addresses face-related and world-facing applications and is engaged in numerous OEM projects and discussions at various stages. This includes current design activities for a world-facing 3D sensing application for a major smartphone OEM.
The announced 3D sensing design-wins for Chinese smartphone vendor Xiaomi and a further major Android smartphone OEM have both moved to production. ams has also won two designs in Android ToF (time-of-flight) 3D systems for two Asian smartphone OEMs leveraging its illumination and VCSEL expertise. ams’ active stereo vision 3D developments with major Android ecosystem players for reference solutions are progressing rapidly at a high level of partner engagement. ams enables a high quality implementation bringing 3D sensing to a wider range of Android devices and expects to provide further details before year end. Based on advanced OEM discussions, ams expects active stereo vision 3D sensing built around ams technology in first smartphones next year.
ams’ differentiated high power VCSEL portfolio is showing significant design momentum in different 3D systems based on the competitive advantages of its VCSEL technology and its 3D system expertise. ams therefore expects to build a strong market position in high performance VCSELs for consumer 3D sensing. ams confirms broad market traction with multiple 3D programs won or in advanced discussion which underlines the strength of its 3D illumination portfolio including dot projection, different types of flood illumination, proximity sensing, and pattern projection.
All in all, ams’ extensive OEM and ecosystem player engagements and design activities across 3D technologies underscore the ongoing momentum in consumer 3D sensing adoption despite the emergence of different timelines in this market.
ams is also ramping TrueColor optical sensing solutions for display management in very high volume through the second half of this year. ams has likewise secured first design wins for advanced behind-OLED-display proximity and light sensing at a major Asian smartphone OEM which enables bezel-less phone designs. ams continues focused development efforts for new optical sensing applications while first spectral sensing shipments are expected to start as previously indicated with attractive expected revenues in 2019. ams’ audio sensing business continued to show a robust performance in the third quarter while its other consumer product lines provided attractive contributions from high shipment rates.
ams’ industrial, medical and automotive businesses contributed positively to its overall business development. ams’ industrial business showed a good performance in the third quarter based on ongoing solid demand in automation, HABA, industrial sensing, and industrial imaging. As a key provider of industrial sensing solutions to leading OEMs ams benefits from increasing sensor deployment in manufacturing, HABA, industrial IoT and other markets. In industrial imaging, ams’ industry-leading global shutter portfolio is gaining further high value wins and offers attractive growth perspectives for the coming years. ams also won an industrial VCSEL design with an online shopping leader for warehousing and distribution robotics. ams’ medical business recorded another attractive quarter with good volumes for computed tomography (CT), digital X-ray, mammography, and miniature camera endoscopy where ams sees very good market traction. Leveraging imaging and optical technologies ams enables high quality diagnostics and innovation in existing and emerging medical and personal health applications.
ams’ automotive business continues to perform well and recorded healthy results in the third quarter. Focusing on safety, driver assistance, position sensing, and chassis control ams sees ongoing attractive demand for its automotive solutions. While ams pursues significant development efforts for the reported major program win in VCSEL illumination for solid-state LIDAR, industry interest in its automotive sensing technologies continues to broaden particularly in Asia and Japan. This is driven by ams’ differentiated portfolio and strong know-how in new and upcoming applications such as 3D sensing and LIDAR. ams is receiving very positive feedback from the LIDAR space on its VCSEL/driver IC solutions and optical path capabilities and can offer outstanding optical performance in different LIDAR implementations. ams sees additional industry players starting to engage with them in LIDAR and 3D sensing while design activities for a first in-cabin 3D sensing project are progressing for a leading OEM.
To support its range of production needs ams implemented additional manufacturing investments into its Singapore facilities in the quarter which included equipment for the internal VCSEL production line. The construction of its internal high power VCSEL capacity for consumer applications is progressing to plan with production ramp scheduled to start around the middle of next year.
In operations, ams is successfully realizing the current high volume production ramps in 3D, optical and other sensing as shown by the strong revenue growth in the quarter. Production yields for certain consumer products are ahead of expectations due to stronger efficiency improvements while significant advances in the filter deposition process for optical sensing products have substantially reduced process times, which is driving a lower utilization of ams’ expanded optical manufacturing and filter deposition capacity despite the ongoing ramp activities. Following further analysis ams has decided to retain these existing production capacities to support its future growth plans.
Updating on its strategic assessment, ams has on the one hand evaluated a meaningful acquisition opportunity over the last months but has decided not to pursue this opportunity. On the other hand and looking further ahead, ams sees optical sensing technologies supporting an even broader spectrum of applications with significant growth potential for ams, including areas such as audio sensing. At the same time, ams recognizes that upcoming optical sensing opportunities offer a larger size revenue opportunity and higher growth prospects when compared to certain envisaged environmental sensing applications.
ams has therefore decided to de-emphasize current efforts in environmental sensing and focus strongly on very attractive mid- and long-term growth opportunities in optical technologies. This includes new areas of innovation such as photonic elements and photoacoustic structures. ams is preparing steps to implement this change and expect further details to be available with the next quarterly results.
As a result of these decisions, ams is even more focused in its strategic approach as it pursues its growth strategy around the three pillars optical, image and audio sensing.
ams is also in early preparation stages for the planned secondary listing on the Hong Kong Stock Exchange, which is currently anticipated for the second quarter 2019. Besides enabling full access to a broad regional investor base the envisaged listing also underscores the growing relevance of the Asia Pacific region for its business. To enhance the benefits of the transaction ams currently anticipates a share placement of up to 10% of outstanding shares in connection with the listing transaction, subject to required approvals.
For the fourth quarter 2018, ams sees further sequential growth as it continues to ramp very high volume smartphone sensing products while its other end markets continue their positive contribution. Based on available information, ams expects fourth quarter revenues of USD
570-610 million, growing around 19-27% sequentially. Consequently, ams expects 2018 to be another year of strong growth and record revenues for ams. The adjusted operating margin for the fourth quarter (excluding acquisition-based and share-based compensation costs) is expected to increase further sequentially to 16-20%, taking into account product mix effects as overall demand is skewed to a mix including certain higher maturity products. At the same time, ams expects total capital expenditures for 2018 of around USD 500 million. ams anticipates strong cash generation in the fourth quarter and expects a meaningful positive free cash flow (FCF) result for the second half of 2018.
ams reiterates its revenue growth target of 60% CAGR for the 2016-2019 period based on its business outlook and pipeline for the coming year which translates into further substantial expected growth for 2019. ams remains committed to driving profitable growth and endorses its target of 30% adjusted EBIT margin in 2020 as ams is convinced of the long-term strength of its business and its strategic positioning in multiple growth markets. Following extensive investments in 2017 and 2018 and supporting its cash flow profile, ams currently expects capital expenditures for 2019 to decrease significantly from this year’s level and reach its longer-term target range of 10-15% of revenues.
The quarterly report for the third quarter 2018 including additional financial information is available on the company website at https://ams.com/financial-reports.