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angle-left Q3 2019 results

ams reports third quarter revenues above top end of guidance range with strong operating profitability well above expectations; high volume ramps in consumer optical solutions ...

2019/10/22

Selected financial information for the third quarter 2019

German version

Third Quarter Report

Q3

(PR title cont'd) ... further strength expected in fourth quarter with revenues of USD 610-650 million, adjusted fourth quarter EBIT margin to reach at least level of third quarter; confident in success of recently announced takeover offer for OSRAM


Premstaetten, Austria (22 October 2019) -- ams (SIX: AMS), a leading worldwide supplier of high performance sensor solutions, reports third quarter results with revenues above the top end of the guidance range and strong operating profitability that was well above expectations. Driven by ams’ consumer solutions and positive trends in the smartphone market, the results demonstrate ams’ market position and robust operational performance. ams expects continued strength in the fourth quarter based on high volume programs in the consumer market with expected revenues of USD 610-650 million and the adjusted operating margin reaching at least the level of the third quarter.

Third quarter group revenues were USD 645.0 million, up 57% sequentially compared to the second quarter and up 41% from USD 458.7 million in the same quarter 2018. Adjusted gross margin for the third quarter was 44% (excluding acquisition-related and share-based compensation costs) with IFRS reported gross margin at 42% (including acquisition-related and share-based compensation costs), compared to 33% and 31% respectively in the same quarter 2018.

The adjusted result from operations (EBIT) for the third quarter was USD 177.9 million or 28% of revenues (excluding acquisition-related and share-based compensation costs), strongly increasing from USD 57.6 million in the same period 2018 (USD 146.5 million or 23% of revenues including acquisition-related and share-based compensation costs, up from USD 35.7 million in the same period 2018). This very positive development was particularly driven by ams’ consumer business.

Adjusted net income for the third quarter was USD 158.1 million (excluding valuation effect of option element of foreign currency convertible bond), compared to USD 17.8 million for the same period 2018 (third quarter 2019: USD 158.0 million including valuation effect). Adjusted basic/diluted earnings per share for the third quarter were CHF 1.92/1.87 or USD 1.95/1.91 based on 81,059,682/82,981,954 shares (weighted average; third quarter 2019: CHF 1.91/1.87 or USD 1.95/1.90 including valuation effect; third quarter 2018: CHF 0.22/0.21 or USD 0.22/0.21 based on 82,518,624/84,893,054 shares, weighted average).

Operating cash flow for the third quarter was USD 299.0 million compared to USD 82.2 million in the same quarter last year. Total backlog on 30 September 2019 (excluding consignment stock agreements) was USD 253.1 million compared to USD 301.4 million at the end of the second quarter and USD 575.5 million on 30 September 2018.

ams’ business showed a very strong performance in the third quarter of 2019 with results above or well above expectations. Given strong demand for consumer solutions ams achieved this positive development in light of a more subdued market situation in ams’ non-consumer end markets.

ams‘ consumer business again provided the largest contribution to its results in the third quarter. Leading in optical sensing, ams offers high performance solutions for 3D sensing including VCSEL (Vertical Cavity Surface-Emitting Laser)-based illumination, high quality display management including behind-OLED and TrueColor technologies, ultra compact proximity sensing, bio- and spectral sensing, and other optical applications. ams is a leading supplier of 3D sensing technology shipping significant volumes of consumer 3D sensing solutions. ams’ extensive 3D sensing portfolio and system know-how including 3D hard- and software serves all three approaches, structured light (SL), time-of-flight (ToF), and active stereo vision (ASV) with a main focus on 3D illumination for front-facing and world-facing applications.

ams’ advanced high power VCSEL portfolio and its optics capabilities are key factors in ams’ market success in 3D sensing. ams offers high quality 3D sensing illumination in all technologies SL, ToF and ASV and is able to serve different customer needs across these approaches. ams is shipping very substantial volumes of 3D sensing solutions to the leading smartphone OEMs globally as ams continues to expand its position in the Android market. This includes strongly increasing volumes of world-facing iToF 3D sensing illumination solutions as the camera enhancement features which these systems support are highly successful in the market. ams therefore expects customer adoption of these features to continue to broaden going forward.

A first smartphone implementation of ams’ small form factor ASV is coming to the market as expected while ams’ partnership with Qualcomm on ASV is progressing successfully. ams is receiving very positive market feedback for its combined solution with major OEM interest to introduce ASV in mobile computing. ams also sees increasing OEM interest to explore dToF technology for 3D sensing applications and has active product developments in this promising area. ams is able to offer 3D illumination solutions that build on its broad portfolio of VCSELs, drivers, optics, design, and manufacturing allowing ams to adapt to customer requirements and application needs. Given its extensive capabilities across SL, iToF, dToF and ASV ams continues to build its leading position in 3D sensing and illumination.

ams long-distance 1D ToF solution for accurate distance capture records further positive market feedback following a first design-win for smartphone laser detect autofocus (LDAF). The recently announced partnership with image sensor specialist SmartSens for high quantum efficiency NIR image sensing has good traction with progress for ams’ ASV reference design for consumer 3D applications. Validating industrial applications, ams continues its work with a global OEM for an ASV application in a household device while industrial OEM engagement continues to increase.

In display management, the market success of ams’ innovation for high performance behind-OLED (BOLED) proximity and light sensing is expanding at a quick pace. This unmatched technology allows OEMs to move light and proximity sensing invisibly behind the OLED display as they pursue maximized screen-to-body ratio and bezel-less phone designs. ams is supplying an increasing range of high volume Android smartphone and mobile device platforms including additional newly launched models. The ability to remove bezel-placed elements from the device front is driving continuing adoption across the full spectrum of leading Android OEMs. Overall, ams shipped significant volumes of its broad range of advanced display management solutions in the quarter. This also includes flicker detection sensing which improves picture quality by detecting artificial light flicker and is seeing increasing adoption at Android OEMs.

New optical sensing technologies and applications remain a focus of continued R&D investment. Building on ams’ excellent BOLED capabilities, development activities for behind-display 3D sensing technology have started. Fully aligned with the market trend to reduce visible components on the device front, ams expects this technology to create very attractive penetration opportunities in smartphones and mobile devices. While too early to provide a timeframe for commercial deployment ams expects to solve the related technical challenges within the next 18 months. OEM engagements for ams’ high quality measurement solution for blood pressure and additional health parameters, which provides extensive personal health data, are ongoing while ams continues to pursue medical grade certification for blood pressure measurement in the United States. In a different application area, ams sees potential for lower resolution spectral sensing in smartphones and mobile devices to enable high performance functions enhancing photo camera picture quality. ams’ audio sensing business recorded a positive quarter with other consumer product lines shipping in solid volumes. As a leader in noise cancellation, consumer OEM interest in ams’ innovative digital noise cancelling solution for loose-fitting wireless earbuds continues to be strong with several design activities underway.

ams’ automotive, industrial and medical businesses performed in line with expectations in the third quarter. ams’ automotive business is experiencing a more subdued market environment as demand trends have turned increasingly muted across world regions. With ams’ focus on safety, driver assistance/autonomous driving, position sensing, and chassis control ams offers a broad spectrum of sensing solutions for a range of Tier 1 suppliers, OEMs and market segments. ams’ continues strong R&D investments for advanced LIDAR architectures where its VCSEL illumination technology is seeing substantial interest from major automotive players. Besides the large true solid-state 3D LIDAR illumination program for ZF, the leading tier 1 system supplier, in conjunction with IBEO, ams is pursuing active LIDAR engagements in different geographies. ams’ capabilities in addressable high power VCSEL arrays offer significant system-level advantages for multiple scanning architectures and can be leveraged into future applications in different markets. In-cabin monitoring as another new automotive optical application offers attractive opportunities in the coming years as Tier 1 and OEM interest continues to increase. ams is seeing very good traction in this new market where ams pursues several development projects and have gained a design win for in-cabin 3D ToF illumination at a global tier 1 supplier. Positive momentum also continues in the sizeable emerging automotive projected lighting market. Based on advanced illumination and projector systems this technology enables new comfort and safety features as well as differentiated lighting applications such as light carpets.

ams’ industrial business showed a more muted performance in the third quarter, reflecting a challenging market and demand situation in industrial markets worldwide. Serving a wide range of applications in industrial and factory automation, HABA, other industrial sensing and industrial imaging as a leader in high performance solutions, ams is able to benefit from a broad portfolio and customer base in the current environment. Industrial imaging, where ams is leading in high performance global shutter technologies, developed in line with end market trends while contributing positively to its overall performance. ams’ medical business performed well in the third quarter benefiting from its leading market position in medical imaging for computed tomography (CT), digital X-ray, and mammography as well as miniature camera endoscopy. ams’ market penetration is strong across geographies with Asian markets providing ongoing opportunities for expansion. Supporting next generation medical endoscopy, ams supplies NanEye micro camera solutions to several customers in volume and note ongoing market traction for new micro camera applications.

In operations, ams is seeing very positive effects from the significant cost reductions and yield improvements in its Singapore manufacturing. These ongoing benefits which include lower staffing levels and materials usage enable ams’ strong profitability on the basis of robust capacity utilization at ams’ manufacturing sites. For VCSEL-based solutions, ams’ outsourced supply chain fully supports the attractive volumes ams is recording this year. At the same time, ams’ internal VCSEL line for differentiated designs is ready for the planned front-end ramp from around year-end. Combining scalable outsourced and internal VCSEL capacity creates a strong position to support expected future volume needs in this growth area. Capital expenditures are developing fully in line with expectations to realize the significantly lower capital expenditures ams expects for full year 2019 compared to 2018.

In the context of ams’ expired takeover offer for OSRAM, ams has become the largest shareholder of OSRAM with a shareholding of 19.99% and has confirmed that it would continue to pursue the full acquisition of OSRAM. ams feels confident about the new takeover offer for OSRAM its subsidiary ams Offer GmbH announced on 18 October 2019 with an offer price of EUR 41.00 as it is financially attractive, strategically compelling and the viable option for OSRAM shareholders. ams is offering a clear path forward for ams and OSRAM with the vision to create a global leader in sensor solutions and photonics. This includes commitments to OSRAM stakeholders, including holistic covenants aimed at safeguarding the employees and production facilities of OSRAM in Germany. Bringing together two technology leaders will allow the creation of a stronger combined company to benefit all stakeholders. Subject to BaFin approval, ams currently expects the offer period to commence by the end of October 2019.

For the fourth quarter 2019, ams expects its business to show a strong performance as large scale consumer programs continue to provide very attractive contributions based on positive smartphone volumes. In ams’ other end markets, however, business momentum is expected to reflect a more challenging macro-economic environment with higher levels of cautiousness.

On the basis of available information, ams expects fourth quarter revenues of USD 610-650 million showing continuing strength and a year-on-year increase of 28% at the midpoint. The adjusted operating (EBIT) margin for the fourth quarter is expected to reach at least the level of the third quarter reflecting operational performance benefits and sequential strength while more than doubling year-on-year. Based on this positive outlook, ams anticipates leverage in terms of net debt/EBITDA for ams on a stand-alone basis (excluding any effect from OSRAM share purchases) to decrease significantly to a level of 1.5 or lower at year-end 2019.

The third quarter report 2019 including additional financial information is available on the company website at https://ams.com/financial-reports.

 

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About ams

ams is a global leader in the design and manufacture of advanced sensor solutions. Our mission is to shape the world with sensor solutions by providing a seamless interface between humans and technology.

ams’ high-performance sensor solutions drive applications requiring small form factor, low power, highest sensitivity and multi-sensor integration. Products include sensor solutions, sensor ICs, interfaces and related software for consumer, communications, industrial, medical, and automotive markets.

With headquarters in Austria, ams employs about 9,000 people globally and serves more than 8,000 customers worldwide. ams is listed on the SIX Swiss stock exchange (ticker symbol: AMS). More information about ams can be found at https://ams.com

 

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Important notice:

This announcement is neither an offer to purchase nor a solicitation of an offer to sell shares in OSRAM (“OSRAM Shares”). The terms and further provisions regarding the Offer by ams Offer GmbH (currently still operating under Blitz F19-566 GmbH), a wholly-owned subsidiary of ams, to the shareholders of OSRAM will be set forth in the offer document which will be published following approval of its publication by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht). Holders of OSRAM Shares are strongly recommended to read the offer document and to seek independent advice, where appropriate, in relation to the matters therein. Moreover, this announcement is neither an offer to sell nor a solicitation of an offer to purchase shares in ams.

The release, publication or distribution of this announcement in certain jurisdictions other than the Federal Republic of Germany and Switzerland may be restricted by law. Persons who are resident in, or are subject to, other jurisdictions should inform themselves of, and observe, any applicable requirements.

The Offer will be made in the United States of America in reliance on, and compliance with, Section 14(e) of the US Securities Exchange Act of 1934 and Regulation 14E thereunder, as exempted thereunder by Rule 14d-1(d).

To the extent permissible under applicable law or regulation, and in accordance with German market practice, ams Offer GmbH (currently still operating under Blitz F19-566 GmbH), its affiliates and/or brokers acting on their behalf may, outside of the United States of America and in compliance with applicable law, from time to time make certain purchases of, or arrangements to purchase, directly or indirectly, OSRAM Shares or any securities that are immediately convertible into, exchangeable for, or exercisable for, OSRAM Shares, other than pursuant to the Offer, before, during or after the period in which the Offer will remain open for acceptance. These purchases may occur either in the open market at prevailing prices or in private transactions at negotiated prices. Any information about such purchases would be disclosed as required by law or regulation in Germany or other relevant jurisdictions.

The shares of ams have not been and will not be registered under the U.S. Securities Act of 1933 (the "Securities Act") and may not be offered or sold within the United States except pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. There will be no public offering of shares in the United States.

This announcement may contain statements about ams and/or its subsidiaries (together the “ams Group”) or OSRAM and/or its subsidiaries (together the “OSRAM Group”) that are or may be “forward-looking statements”. Forward-looking statements include, without limitation, statements that typically contain words such as “anticipate”, “target”, “expect”, “estimate”, “intend”, “plan”, “believe”, “hope”, “aims”, “continue”, “will”, “may”, “should”, “would”, “could”, or other words of similar meaning. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. ams cautions you that forward-looking statements are not guarantees of the occurrence of such future events or of future performance and that in particular the actual results of operations, financial condition and liquidity, the development of the industry in which ams Group and OSRAM Group operate and the outcome or impact of the acquisition and related matters on ams Group and/or OSRAM Group may differ materially from those made in or suggested by the forward-looking statements contained in this announcement. Any forward-looking statements speak only as at the date of this announcement. Except as required by applicable law, ams does not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.

ams is a registered trademark of ams AG. In addition many of our products and services are registered or filed trademarks of ams Group. All other company or product names mentioned herein may be trademarks or registered trademarks of their respective owners. Information provided in this press release is accurate at time of publication and is subject to change without advance notice.