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02/05/2019 - Full year 2018 results

ams reports record revenues for full year 2018, up 34% year-on-year ...

2019/02/05

Selected financial information for full year and fourth quarter 2018

German version

Financial Information

FY 2018

(PR title cont'd) ... fourth quarter revenues of USD 491 million and operating margin in-line with updated expectations; more unfavorable end market environment, subdued smartphone demand and characteristic seasonality reflected in expected first quarter revenues of USD 350-390 million


Premstaetten, Austria (5 February 2019) -- ams (SIX: AMS), a leading worldwide supplier of high performance sensor solutions, reports record revenues for full year 2018, up 34% year-on-year, and fourth quarter revenues and operating margin in-line with updated expectations. Full year 2018 revenues grew strongly to USD 1,627.4 million while fourth quarter revenues reached USD 491.4 million. This growth was particularly driven by ams’ consumer business including 3D sensing and advanced light sensing in the second half of 2018. Reflecting a more unfavorable end market environment,subdued smartphone demand and characteristic first quarter consumer market seasonality, ams expects first quarter 2019 revenues of USD 350-390 million.

Group revenues for 2018 were USD 1,627.4 million, growing by 34% from USD 1,213.8 million in 2017. Group revenues for the fourth quarter 2018 were USD 491.4 million, up 4% sequentially from the third quarter and in-line with updated expectations.

Adjusted gross margin for 2018 was 32% while adjusted gross margin for the fourth quarter 2018 was 35%, compared to 43% and 44% respectively in 2017 (excluding acquisition-related, one-time restructuring and share-based compensation costs). IFRS reported gross margin for 2018 was 27% with IFRS reported gross margin for the fourth quarter 2018 at 28%, compared to 39% and 40% respectively in 2017 (including the abovementioned costs).

The adjusted result from operations (EBIT) for 2018 was USD 145.6 million or 9% of revenues and the adjusted result from operations (EBIT) for the fourth quarter 2018 was USD 61.9 million or 13% of revenues, compared to USD 192.5 million or 16% for 2017 and USD 146.6 million or 27% for the fourth quarter 2017 (excluding acquisition-related, one-time restructuring and share-based compen­sation costs) (including these costs USD 14.7 million or 1% of revenues for 2018 and USD 8.9 mil­lion or 2% of revenues for the fourth quarter 2018, compared to USD 86.6 million in 2017 and USD 114.9 million in the fourth quarter 2017). The adjusted gross margin and result from operations above reflect one-time restructuring costs in the fourth quarter 2018 totaling USD 29.6m regarding customer-related equipment and the reorganization of the environmental sensing business.

Adjusted net income for 2018 was USD 12.1 million while adjusted net income for the fourth quarter 2018 was USD 1.7 million, compared to USD 145.5 million for 2017 and USD 161.3 million for the fourth quarter 2017 (excluding valuation effect of option element of foreign currency convertible bond) (including valuation effect USD 106.6 million for 2018 and USD 1.1 million for fourth quarter 2018). Adjusted basic/diluted earnings per share for 2018 were CHF 0.15/0.14 or USD 0.15/0.13 based on 81,836,472/88,509,392 shares (weighted average; including valuation effect CHF 1.34/0.72 or USD 1.30/0.70; 2017: CHF 1.74/1.63 or USD 1.78/1.67 based on 81,898,559/84,574,429 shares, weighted average). Adjusted basic/diluted earnings per share for the fourth quarter were CHF 0.02/0.02 or USD 0.02/0.02 based on 81,944,770/83,985,704 shares (weighted average; including valuation effect CHF 0.01/0.01 or USD 0.01/0.01; 2017: CHF 2.00/1.87 or USD 1.96/1.83 based on 82,383,170/85,860,494 shares, weighted average).

Cash flow from operations for 2018 was USD 359.9 million, significantly up from USD -4.1 million for 2017, while fourth quarter 2018 cash flow from operations was USD 293.5 million. Cash and cash equivalents increased strongly to USD 713.3 million on 31 December 2018, compared to USD 329.0 million at year-end 2017, as net debt amounted to USD 1,362.2 million on 31 December 2018 (year-end 2017: USD 987.9 million). Capital expenditures for 2018 were USD 471.2 million compared to USD 663.9 million for 2017, particularly due to a substantial expansion of manufacturing capacity in Singapore. Total backlog on 31 December 2018, excluding consignment stock agreements, was USD 332.9 million (USD 590.2 million on 30 September 2018, USD 618.3 million at year-end 2017 (including certain forecasted commitments)).

Reflecting a more volatile end market and macro-economic environment, ams has decided to suspend its cash dividend policy for fiscal year 2018 to focus on strengthening its business position in 2019.

ams recorded substantial growth in 2018 despite increasing end market volatility towards the end of the year. ams successfully pursued its focused strategy for leadership in optical, imaging, and audio sensing which was the basis for last year’s growth across end markets. However, in the fourth quarter ams faced unexpected weakness in customer demand in its consumer business which resulted in an update to original expectations for the quarter.

ams’ consumer business was nevertheless the main growth driver for the company last year with optical sensing once more being the largest business area for ams. Optical sensing solutions in 3D sensing and advanced display management were important revenue streams again last year while business performance in the fourth quarter was lower than originally expected. As the leader in optical sensing, ams offers a broad portfolio of high performance solutions for 3D sensing including VCSEL-based illumination, TrueColor and other display management, advanced proximity sensing, spectral sensing, and other optical applications. ams continued to drive innovation in optical technologies last year bringing new products and solutions to the market.

ams is a leading provider of 3D sensing technology having ramped significant 3D sensing volumes for a major global smartphone platform in the second half of 2018. As 3D sensing adoption in mobile devices is broadening, ams sees ongoing coexistence of the 3D sensing approaches structured light (SL), time-of-flight (iToF), and active stereo vision (ASV). ams has been able to win designs in all three areas with more 3D sensing-enabled devices expected to be launched this year. ams does not see one dominant approach emerging, rather, technology choices will continue to be driven by application, performance, software, solution partner, size, and cost considerations. Currently focusing on 3D system illumination, ams is successful working alongside different image sensor vendors at multiple OEMs and does not see issues of overlap. This broad traction underlines the strength of ams’ illumination portfolio and ams’ leading system capabilities. Consequently, ams’ 3D portfolio spans dot projection, different types of flood illumination, ToF proximity sensing, and pattern projection for SL, iToF and ASV.

With design-wins in SL, iToF and ASV ams provides illumination solutions for a range of Android 3D devices which are either launched or expected to be launched this year. Leveraging its solution know-how, ams started shipping first VCSEL and 3D sensing products for Android SL 3D face recognition to two Asian smartphone OEMs last year. The mentioned Android iToF designs which ams has won for 3D programs at two Asian smartphone OEMs are also built around ams’ illumination expertise and are shipping or expected to start shipping in the first half of 2019.

At the recent CES trade show, ams presented a high quality ASV implementation for 3D face recognition in partnership with leading software provider Face++/Megvii, Qualcomm Technologies, Inc. and Bellus 3D. This solution shows the success of the companies’ combined development efforts which had started last summer. ams has separately won a first design in ASV illumination and expects first ASV 3D systems using ams technology in Android smartphones this year. ams believes that upcoming ASV reference designs will enable quicker and easier implementation of 3D sensing for Android OEMs driving adoption of ASV.

Based on its leading portfolio in 3D sensing, ams addresses front-facing face-related and world-facing applications. For world-facing 3D sensing, ams expects a multi-year timeline of adoption as applications and solutions continue to evolve. However, supporting early adoption ams recently finalized an illumination solution for a world-facing 3D sensing system at a major Android OEM and sees volume shipments starting in the current quarter. ams’ differentiated VCSEL technology offers competitive advantages for 3D sensing that are recognized in the marketplace. Together with ams’ 3D system know-how, these are driving strong market and design traction for ams’ VCSEL solutions in SL, iToF and ASV. ams therefore expects to establish a significant market position in high power VCSELs for 3D sensing over the next years. As shown by its extensive engagements with OEMs and ecosystem players, ams’ ongoing development efforts are driving the company’s leadership position in 3D sensing which is built on ams’ recognized solution capability and outstanding system expertise across all 3D technologies.

In other optical sensing, ams reinforced its market leader position in display management light sensors including TrueColor, ambient light and proximity sensing. ams shipped a wide range of display management solutions to a broad base of consumer OEMs last year. This included significant volumes of TrueColor solutions which ams ramped in the second half of 2018 and very small scale proximity sensing for audio accessories at a major OEM. At the recent CES trade show, ams introduced an innovative solution for behind-OLED-display light and proximity sensing which enables bezel-less phone designs. For the previously reported first design-wins in this technology ams has recently started volume shipments to a leading Asian smartphone OEM. As bezel elimination is a key theme in the smartphone market, ams is seeing additional OEM interest for the solution. Significant R&D activities for new and future optical sensing and VCSEL illumination technologies continued last year. ams is working to finalize a miniature consumer spectral sensing solution with a major consumer OEM and expects shipments to start in mid-2019 contributing to this year’s revenues. ams’ other consumer product lines offered attractive contributions last year shipping in high volume to multiple OEMs.

Audio sensing was another growth area for ams in 2018 showing continued good performance in the fourth quarter. MEMS microphone interfaces where ams is the market leader recorded solid volume growth again last year. The strong market success of home assistant devices with multiple microphone content was an important driver of this development. In the growing market for ear- and headphone active noise cancellation (ANC), ams holds a leadership position serving a broad range of accessory and device OEMs. ams recently introduced a highly miniaturized high performance ANC solution for wireless earbuds. Moreover, new technologies such as ams’ single cable power and data interface and hybrid ANC are seeing market traction and offer additional opportunities going forward. ams also sees potential for audio sensing to support future machine hearing applications in coming years. For the reported opportunistic power component win in a consumer charging application, ams expects mass production this year as planned.

In autumn 2018, ams decided to de-emphasize development efforts in environmental sensing and focus relevant resources on very attractive mid- and long-term growth opportunities in optical technologies. ams expects optical technologies including innovation areas such as photonic elements to support an even broader spectrum of applications in the future. Based on the decision, ams has already implemented steps to internally redeploy R&D resources to its optical sensing focus area. ams is also actively exploring strategic options for parts of its environmental sensing business.

As a result of these streamlining efforts, ams can pursue a more focused strategy around its three strategic pillars optical, image and audio sensing which are core drivers of differentiation for ams.

ams’ automotive, industrial, and medical businesses performed well in 2018. ams serves a diversified range of non-consumer end markets with a clear focus on advanced sensing applications for global OEMs. As a leading supplier of high value sensing solutions, ams continued to drive innovation and performance across non-consumer applications last year. ams’ automotive business showed attractive growth in 2018. Focused on applications for safety, driver assistance, autonomous driving, position, and chassis control, ams’ automotive portfolio is strongly positioned towards structural growth areas in automotive sensing. ams shipped a broad range of differentiated sensing products to leading automotive system suppliers last year and sees increasing customer interest in Asia including Japan. At the same time, ams expects a more muted development of automotive volume demand in the coming quarters reflecting the prevailing industry and macroeconomic environment.

In automotive LIDAR, development activities continue at a strong pace to support the large reported 3D LIDAR program for a VCSEL array/driver illumination system at a global automotive supplier. Moreover, the US-based automotive LIDAR start-up company working with ams presented their latest 3D LIDAR solution incorporating 128 VCSELs at the recent CES trade show. LIDAR and 3D technologies are gaining increasing OEM attention for automotive applications, here ams offers strong VCSEL and optical sensing expertise as well as system know-how which enables high performance optical implementations. Design activities for a first in-cabin 3D sensing project are progressing among strengthening OEM interest, in this area ams sees potential to leverage its system expertise in iToF and ASV.

ams’ industrial business recorded another successful year in 2018. ams is an important supplier to industrial OEMs worldwide serving the industrial automation, factory automation, HABA, and additional industrial markets. Expanding its broad portfolio of differentiated solutions, ams was able to strengthen its leading position in industrial sensing based on application know-how and solution expertise. The industrial markets for manufacturing, HABA, industrial IoT and other applications continue to see increasing demand for sensor-based data acquisition. As a consequence, ams expects new sensing applications and technologies including 3D sensing to create further growth opportunities for ams in the coming years. ams’ industrial imaging and machine vision business was particularly successful last year winning new designs in important markets. Leveraging its industry-leading global shutter technology, ams brought innovation to the market and remains at the forefront of growth applications in high performance image sensing.

ams’ medical business showed a good performance again last year. ams’ market leadership in Medical Imaging for computed tomography (CT) and digital X-ray remained the core driver of ams’ medical business in 2018. ams successfully ramped first solutions for another new Asian medical imaging OEM and sees continuing good market traction in Asia. ams also introduced the next generation of microcameras last year offering the world’s smallest camera systems for endoscopy. Based on this strong technology position, next generation medical endoscopy continues to be a growth area for ams.

In operations, ams completed a substantial expansion of manufacturing capacity in its Singapore locations last year to support customer plans. Capital expenditures totaled around USD 471 million for 2018 while showing an expected strong quarter-on-quarter decrease in the fourth quarter. Simultaneously, ams realized major efficiency improvements and reduced process times in several production areas last year which have resulted in a lower utilization of ams’ expanded optical manufacturing and filter deposition capacity. ams expects this situation to continue to create operational headwinds for the company this year. At the same time, these advances in manufacturing allow ams to expect very significantly lower capital expenditures for 2019 compared to 2018 which will support the financial strength of the company. ams’ in-house wafer manufacturing capacity in Austria was again fully utilized through 2018.

Construction of ams’ internal VCSEL production line continues with limited equipment investment remaining. ams sees further differentiation opportunities in both design and manufacturing of high power VCSELs for consumer and other applications which ams is keen to exploit through this manufacturing investment. To optimize operational and cost effects of the wafer manufacturing line as part of ams’ total VCSEL capacity, ams has adapted the front-end production ramp of the line to a planned start around the end of this year. In line with previous expectations, anticipated VCSEL volume needs for this year will be covered through ams’ established outsourced supply chain.

Given the current volatile capital market environment and as ams does not see additional capital needs at this time that would drive a share placement, ams has decided to postpone the planned secondary listing at the Hong Kong stock exchange (HKEx). The prerequisite jurisdiction admission process for Austria was successfully completed in December and ams expects to pursue the planned secondary listing at a later point in time.

For the first quarter 2019, ams expects revenues to reflect the current more unfavorable end market environment and subdued smartphone demand in addition to characteristic first quarter consumer market seasonality. As a result, ams expects first quarter revenues of USD 350-390 million based on available information. Driven by lower expected production volumes in ams’ consumer business in the first quarter, ams foresees a first quarter adjusted operating (EBIT) margin in the low single-digit percentage range.

ams is experiencing growing end market volatility, customer performance that is becoming more difficult to anticipate, and ongoing uncertainty regarding end market demand trends, industry development, and the macro-economic environment. ams has therefore decided to continue to provide detailed guidance for the relevant upcoming quarter going forward and discontinue other numerical guidance.

Additional selected financial information for full year 2018 and the fourth quarter 2018 is available on the company website at https://ams.com/financial-reports