ams reports second quarter revenues above guidance range despite negative EUR/USD trend; revised expected revenue growth CAGR 2016-2019 of more than 40%, EBIT margin target confirmed; strong expected quarter-on-quarter growth with third quarter revenues of EUR 260-290 million at adjusted EBIT margin above 10%; ongoing optical solutions ramp drives expectation of record second half and substantial sequential revenue growth in fourth quarter; VCSEL manufacturing investment pulled forward given significant business opportunities
Key financial data for second quarter and first half 2017
Premstaetten, Austria (24 July 2017) - ams (SIX: AMS), a leading worldwide supplier of high-performance performance sensor solutions, reports second quarter and first half 2017 results with revenues above the previous guidance range despite a negative EUR/USD trend. ams increases its revenue growth target for 2016-2019 to more than 40% compound annual growth rate (CAGR) and confirms its adjusted EBIT margin target of 30% from 2019 onwards. ams expects strong quarter-on-quarter growth with third quarter revenues of EUR 260-290 million reflecting the ramp-up nature of the quarter in ams’ consumer business and currency headwinds, together with an adjusted EBIT margin of above 10%. Driven by ongoing optical solutions ramps, ams expects a record second half 2017 including substantial sequential revenue growth for the fourth quarter at an expected growth rate comparable to the expected growth rate from second quarter to third quarter, based on currently available information. ams has also decided to pull forward an investment into Vertical Cavity Surface-Emitting Laser (VCSEL) manufacturing capacity in order to pursue significant business opportunities.
Second quarter group revenues were EUR 181.5 million, up 22% sequentially compared to the first quarter and up 37% from EUR 132.4 million in the same quarter 2016 (EUR 184.1 million based on the guidance EUR/USD exchange rate of 1.08). Group revenues for the first half of 2017 were EUR 330.8 million, up 23% compared to EUR 269.6 million recorded in the first half of 2016. On a constant currency basis, second quarter revenues were 35% higher compared to the second quarter last year with first half revenues 21% higher compared to the first half of 2016.
In the second quarter, adjusted gross margin (excluding acquisition-related and share-based compensation costs) was 41% with IFRS reported gross margin (including acquisition-related and share-based compensation costs) at 35%, compared to 56% and 53% respectively in the same quarter 2016. In the first half of 2017, adjusted gross margin (excluding acquisition-related and share-based compensation costs) stood at 44% and IFRS reported gross margin (including acquisition-related and share-based compensation costs) at 37%, compared to 57% and 54% respectively in the first half of 2016.
The adjusted result from operations (EBIT) (excluding acquisition-related and share-based compensation costs) for the second quarter was EUR 1.3 million or 1% of revenues in line with previous expectations, decreasing from EUR 24.4 million in the same period 2016. The IFRS reported result from operations (EBIT) (including acquisition-related and share-based compensation costs) for the second quarter was a loss of EUR 21.5 million or -12% of revenues, down from a profit of EUR 16.7 million in the same period 2016. This expected result reflects the underutilization of expanded capacity in ams’ Heptagon business in the second quarter. For the first half of 2017, the adjusted EBIT (excluding acquisition-related and share-based compensation costs) was EUR 5.4 million, down from EUR 52.6 million in the same period 2016, and the IFRS reported EBIT (including acquisition-related and share-based compensation costs) was a loss of EUR 35.3 million, down from a profit of EUR 36.4 million in the first half year 2016.
The net result for the second quarter was a loss of EUR 17.8 million compared to a profit of EUR 19.6 million in the same period last year. Basic and diluted earnings per share were CHF -0.23/-0.22 or EUR -0.21/-0.21 based on 83,327,015/86,462,424 shares (basic/diluted; weighted average) compared to CHF 0.32/0.31 or EUR 0.29/0.28 for the second quarter 2016 based on 68,085,043/70,016,054 shares (basic/diluted; weighted average). The net profit for the first half year 2017 was a loss of EUR 34.0 million, equivalent to CHF -0.47/-0.45 or EUR -0.43/-0.42 per share (basic/diluted) based on 78,870,841/81,254,354 shares (basic/diluted; weighted average), compared to a profit of EUR 33.2 million, i.e. CHF 0.53/0.52 or EUR 0.49/0.47 per share (basic/diluted) based on 68,321,871/70,388,158 shares (basic/diluted; weighted average), for the same period last year.
Operating cash flow for the second quarter was EUR -33.1 million compared to EUR 7.3 million in the second quarter last year, while operating cash flow for the first half was EUR -7.0 million compared to EUR 14.8 million in the first half year 2016. Total backlog on June 30, 2017 (excluding consignment stock agreements) was EUR 211.0 million compared to EUR 195.6 million at the end of the first quarter and EUR 146.6 million on June 30, 2016, today’s total backlog exceeds EUR 275 million.
ams’ business showed a strong performance in the second quarter and first half of 2017 as all end markets contributed meaningfully to ams’ second quarter results. Despite the negative EUR/USD exchange rate trend in the second half of the quarter the company’s second quarter results demonstrate the attractive demand environment for ams’ sensor solutions resulting in group revenues above the top end of the company’s guidance range.
ams’ consumer and communications business performed well in the second quarter driven by high run rates for existing products, a new platform launch by a major smartphone OEM and positive effects from a display management ramp for another Asian smartphone OEM. Light sensor solutions were again the most important product segment in ams’ consumer business in the second quarter. ams’ latest display management products are gaining importance in its optical sensing portfolio which is expanding from color/RGB ambient light sensing, proximity sensing and multi-function modules into 3D sensing and advanced spectral sensing. These cutting-edge technologies are seeing increasing market interest as OEMs explore new sensing possibilities for future devices. ams’ multi-year product and development pipeline which also covers audio and environmental sensing mirrors these trends. ams’ Heptagon business recorded the expected flattish revenue development in the second quarter compared to the first quarter while ams’ audio business showed a good performance in the first half of the year. In the quarter, ams won a prestigious industry award for its innovative ACI interface allowing power and high speed data transmission over the microphone line in 3.5mm or USB-C audio designs.
ams’ industrial, medical, and automotive businesses recorded very attractive results in the second quarter and first half 2017. End-market demand in these non-consumer areas continues to be solid as ams enters the second half of the year. ams’ industrial business had a successful second quarter with ams’ industrial imaging and machine vision product lines showing noticeable strength. ams is a key supplier to industrial OEMs worldwide for an expanding range of industrial sensing solutions. The company’s low-power low-latency Simblee Bluetooth offering is seeing increasing customer interest for emerging Industrial IoT applications. Here ams can offer an integrated solution capability to create high performance connected sensing systems. In ams’ medical business, digital imaging sensor solutions for computed tomography (CT), digital X-ray, and mammography continued to show good volumes while ams ramps new business in Asia this year as the market and technology leader. ams’ automotive business recorded another positive quarter amid attractive demand across product lines which the company sees continuing. ams focuses on sensing applications for safety, driver assistance, position, and chassis control and sees strong market interest to explore next generation applications. ams’ specialty analog foundry business contributed attractively to the company’s results in the first half.
In manufacturing operations, ams has been expanding capacity in Singapore and Austria to support volume requirements for the recently initiated ramps of new consumer optical sensing solutions while ams continues to add capacity to support expected customer needs for 2018. This includes investments in optical back-end manufacturing and optical filter deposition equipment.
Faster than expected, ams completed the acquisition of Princeton Optronics, a leading provider of high power single and array Vertical Cavity Surface-Emitting Lasers (VCSELs) earlier this month. ams is now able to cover the complete value chain in optical sensing including VCSEL illumination and can aggressively pursue end-to-end solutions for new growth areas such as 3D sensing, the Human Machine Interface (HMI) or spectral sensing. This strategic approach offers strong potential to increase ams’ presence in innovative consumer applications as well as future automotive sensing systems. ams is already seeing substantial VCSEL business opportunities and has therefore decided to pull forward an investment into internal VCSEL manufacturing capacity to exploit differentiating technology and cost advantages. In order to prepare for expected volume opportunities from 2019 onwards ams plans to build a VCSEL manufacturing line in Singapore in two stages at a total expense of around EUR 100 million over a period of approximately 24 months.
For the third quarter 2017, ams sees significant upward momentum for the company as ams starts to ramp new optical solutions in its consumer business and its other end markets continue to contribute positively to ams’ overall growth. Based on available information and a current EUR/USD exchange rate of 1.16, ams expects third quarter revenues to show strong sequential growth to EUR 260-290 million which reflects the ramp-up nature of the quarter in ams’ consumer business and headwinds from a negative EUR/USD exchange rate trend.
Driven by these ongoing high value consumer ramps, ams expects a record second half year 2017. This includes substantial sequential revenue growth for the fourth quarter at an expected growth rate comparable to the expected growth rate from second quarter to third quarter, based on currently available information. These expectations confirm the excellent positioning of ams as a key provider of innovative high performance optical technologies including 3D sensing and advanced display management. The adjusted operating margin for the third quarter (excluding acquisition-based and share-based compensation costs) is expected to show a significant sequential improvement to more than 10%, predominantly resulting from increasing capacity utilization in ams’ Heptagon business.
Based on substantially increased customer forecasts and a higher revenue pipeline for this year and particularly 2018, ams increases its revenue growth target for the period 2016-2019 to more than 40% compound annual growth rate (CAGR). The continuing strong market traction ams sees for its innovative technologies adds to ams’ confidence in this new target. Despite this steep revenue growth and ongoing investments supporting this business expansion ams confirms its adjusted EBIT margin target of 30% from 2019 onwards.
ams’ half year report 2017 including additional financial information is available for download.