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angle-left 02/06/2018 - ams reports record full year 2017 results

ams reports record full year 2017 results with fourth quarter revenues up 252% and operating result up 683% year-on-year for in-line profitability ...

2018/02/06

Selected financial information for fiscal year and fourth quarter 2017

German version

Financial Report Q4 2017

Q4 2017

(PR title cont'd) ... large 3D sensing design-win at major Asian smartphone OEM, high value automotive 3D LIDAR design-win, large power component design-win at major consumer OEM; acquisition of face recognition software leader KeyLemon for 3D sensing; expected revenue growth 2016-2019 at 60% CAGR, 2019 expected revenues above USD 2.7 billion; expected first quarter revenues of USD 440-490 million, up over 150% year-on-year; strong revenue growth expected in second half 2018; evaluating secondary listing in Hong Kong


Premstaetten, Austria (6 February 2018) -- ams (SIX: AMS), a leading worldwide supplier of high performance sensor solutions, reports record full year results for 2017 with fourth quarter revenues up 252% year-on-year, fourth quarter operating profitability well in-line with previous guidance and fourth quarter operating result up 683% year-on-year. 2017 full year revenues grew strongly to EUR 1,063.8 million (USD 1,221.3 million), up 93% from 2016, as fourth quarter revenues were EUR 470.3 million (USD 553.7 million), in the upper third of previous guidance of EUR 440‑480 million. This very substantial growth was particularly driven by new consumer business in 3D sensing and advanced light sensing in the second half of 2017. For the first quarter 2018, ams sees expected revenues of USD 440-490 million (current USD/EUR exchange rate of 1.24), given a customer volume impact and expected seasonality, up well over 150% year-on-year.

Full year 2017 adjusted gross margin was 43% and the full year adjusted operating (EBIT) margin was 16% (both excluding acquisition-related and share-based compensation costs). Fourth quarter 2017 adjusted gross margin was 44% while the adjusted operating (EBIT) margin reached 27%, fully in-line with previous guidance (both excluding acquisition-related and share-based compensation costs).

Financial overview

Group revenues for 2017 were EUR 1,063.8 million (USD 1,221.3 million), growing strongly by 93% from EUR 549.9 million (USD 608.7 million) for 2016. In constant currency, full year revenues exactly doubled from the year before. Revenues for the fourth quarter 2017 were EUR 470.3 million (USD 553.7 million), in the upper third of published guidance of EUR 440-480 million and 252% higher compared to EUR 133.6 million recorded a year ago (282% higher in constant currency).

Adjusted gross margin for full year 2017 was 43% (excluding acquisition-related and share-based compensation costs), compared to 55% in 2016 (39% including acquisition-related and share-based compensation costs, compared to 52% in 2016). Adjusted gross margin for the fourth quarter 2017 was 44% (excluding acquisition-related and share-based compensation costs), decreasing from 52% in the same period 2016 (40% including acquisition-related and share-based compensation costs, compared to 49% in the same period 2016).

The adjusted result from operations (EBIT) for 2017 was EUR 168.7 million or 16% of revenues (excluding acquisition-related and share-based compensation costs), compared to EUR 97.1 million or 18% in 2016 (EUR 75.9 million or 7% of revenues including acquisition-related and share-based compensation costs, compared to EUR 93.3 million or 17% of revenues in 2016). Research and development expenses amounted to EUR 214.0 million or 20% of revenues in 2017, driven by consolidation effects and additional development resources for pipeline projects. The adjusted result from operations (EBIT) for the fourth quarter 2017 was EUR 128.5 million or 27% of revenues (excluding acquisition-related and share-based compensation costs), growing strongly from EUR 16.4 million or 12% of revenues in the fourth quarter 2016 (EUR 100.6 million or 21% of revenues including acquisition-related and share-based compensation costs, compared to EUR 7.1 million or 5% of revenues in the fourth quarter 2016).

Adjusted net income for 2017 was EUR 127.5 million (excluding valuation effect of option element of foreign currency convertible bond), compared to EUR 102.9 million in 2016 (2017: EUR 88.7 million including valuation effect). Adjusted basic/diluted earnings per share for 2017 were CHF 1.74/1.63 or EUR 1.56/1.46 based on 81,898,559/84,574,429 shares (weighted average; CHF 1.21/1.12 or EUR 1.08/1.01 including valuation effect; 2016: CHF 1.67/1.62 or EUR 1.53/1.48 based on 67.241.926/69.373.197 shares, weighted average). Adjusted net income for the fourth quarter 2017 was EUR 141.4 million (excluding valuation effect of option element of foreign currency convertible bond), compared to EUR 13.7 million for the same period 2016 (2017: EUR 102.6 million including valuation effect). Adjusted basic/diluted earnings per share for the fourth quarter were CHF 2.00/1.87 or EUR 1.72/1.60 based on 82,383,170/85,860,494 shares (weighted average; CHF 1.45/1.34 or EUR 1.25/1.15 including valuation effect; 2016: CHF 0.22/0.22 or EUR 0.21/0.20 based on 66,245,957/67,812,290 shares, weighted average).

Cash flow from operations for 2017 was EUR -3.6 million compared to EUR 82.3 million in 2016. Cash and short term investments increased to EUR 392.4 million on 31 December 2017, compared to EUR 215.8 million at year-end 2016, while net debt was EUR 865.8 million on 31 December 2017 (year-end 2016: EUR 256.2 million). Capital expenditures for 2017 amounted to EUR 582.0 million compared to EUR 91.7 million for 2016, particularly driven by the major expansion of production capacity in Singapore. The total backlog on 31 December 2017, excluding consignment stock agreements and including certain forecasted commitments, was EUR 541.9 million (EUR 440.4 million on 30 September 2017 and EUR 136.1 million at year-end 2016).

Based on the company’s cash dividend policy stipulating an increase compared to the previous dividend in case of positive business development, ams will propose a dividend of EUR 0.33 per outstanding share for 2017.

Business

ams’ business showed record growth last year as ams virtually doubled revenues compared to the previous year. ams’ focused strategy for leadership in optical, imaging, environmental and audio sensing was the key driver of ams’ success and growth momentum in both consumer and non-consumer end markets.

Last year’s outstanding growth was predominantly driven by ams’ consumer and communications business and, more specifically, new optical sensing solutions in 3D sensing and advanced light sensing for display management. Both solutions started to ramp in very high volumes into a newly launched global smartphone platform in the second half of the year, continuing through the fourth quarter. To help enable innovative features for this platform ams successfully implemented a highly complex ramp-up involving mass production of multiple new optical sensing technologies.

ams is driving a leadership position in 3D sensing with its strongly differentiated optical technologies and extensive system know-how across different 3D technologies. Offering an aggressive multi-generation 3D sensing roadmap to OEMs, ams is able to create solutions including best-in-class VCSEL lasers, integrated optical systems built around wafer-level optics (WLO) and DOE optical elements as well as high performance optical sensors, tailored to customer needs. ams is successfully leveraging this industry-leading 3D portfolio and experiencing accelerating business momentum in 3D sensing.

Expanding its leading role in the consumer 3D sensing market, ams has gained a large 3D sensing design-win at a major Asian smartphone OEM and is working on several 3D sensing projects at Asian smartphone OEMs. ams sees a strongly increasing revenue pipeline for 3D sensing in smartphones and consumer devices from multiple OEMs. ams also gained a major 3D sensing design for an automotive application as detailed below.

To accelerate the adoption of 3D face recognition and help OEMs achieve a faster time-to-market, ams has agreed to acquire facial recognition software leader KeyLemon, based in Switzerland. The company is focused on developing biometric software and has built up extensive experience in facial recognition over many years. KeyLemon is well-known in the industry for its strong IP portfolio in 3D face recognition, based on which it has developed a robust, fully functional implementation of 3D face recognition for mobile phones that achieves high levels of performance and security. ams will leverage KeyLemon’s IP to develop 3D face recognition solutions for smartphones, consumer devices and additional future applications with first solutions to be introduced already in 2018.

By combining KeyLemon’s leading face recognition software IP with ams’ 3D technology and system expertise ams offers OEMs an accelerated path to high quality 3D face recognition in smartphones and other devices. The transaction is expected to close within 45 days and the parties to the transaction have agreed to keep the consideration confidential.

In other optical sensing, ams is seeing growing interest and implementing customer projects for its spectral sensing technologies enabling advanced consumer color matching, future food identification and new personal health applications. At the same time, ams strengthened its worldwide market leader position in light sensors supplying a broad range of smartphone and consumer OEMs with mobile device color, ambient light and proximity sensing.

In audio sensing, ams’ MEMS microphone interfaces recorded strong growth last year helped by the success of consumer devices such as home assistants, underscoring ams’ market leadership. ams is also leading in active noise cancellation (ANC) for the growing market of consumer device accessories. In addition to the recent Nuheara ANC wireless earphones, ams is supplying a world-leading Korean smartphone OEM with an ANC solution for new after-market earphones. Driving innovation, ams has started to combine microphone audio and environmental sensing such as pressure sensing into converged solutions for new small form factor consumer applications.

ams also gained a high volume multi-year design-win for a power component in a charging application at a world-leading smartphone OEM. This opportunistic design-win leveraged ams’ power competencies for a high life-time program value totaling several hundred million USD at relatively modest content per device. ams anticipates mass production to commence in 2019.

ams’ industrial, medical and automotive businesses showed very solid growth in 2017, fully reflecting previous expectations. ams’ solution focus and strong technology base is driving market success in ams’ diversified non-consumer end markets as ams helps realize new applications for an expanding customer base.

ams’ industrial business performed very well last year, providing a wide range of sensing solutions for industrial and factory automation, building control and other industrial sensing. In industrial imaging and machine vision, ams recorded good growth driven by continuing innovation for broader deployment of imaging technology, smaller form factors and higher optical performance. As a leading player in industrial end markets ams is growing its portfolio of differentiated sensing technologies and solutions which enable next generation systems at major OEMs.

ams’ medical business recorded another year of growth in 2017 based on the company’s market leadership in Medical Imaging for computed tomography (CT), digital X-ray, and mammography. ams ramped a new Asian OEM last year broadening its market reach in high resolution medical imaging and has recently gained a first design-win at another leading medical imaging OEM. Smallest scale endoscopy imaging systems are seeing good growth in new applications, leveraging ams’ image sensing innovation and optical manufacturing expertise.

Robust growth in ams’ automotive business continued last year given attractive demand for ams’ high performance sensing solutions. Focused on applications in safety, driver assistance, autonomous driving, position, and chassis control, ams’ portfolio is fully aligned with the accelerating structural growth of automotive sensing.

Demonstrating its innovation power, ams has gained a first significant 3D sensing design for an autonomous driving application at a global automotive system supplier. The very high value VCSEL solution for 3D LIDAR illumination leverages ams’ differentiated VCSEL technology and is expected to ramp from 2021 onwards. At a company record for projected life-time program value of more than USD 600m, this design-win illustrates ams’ 3D sensing expertise and outstanding VCSEL capabilities. In addition, ams has gained a further 3D sensing design-win for 3D LIDAR illumination at a US-based automotive LIDAR start-up company.

In operations, ams successfully completed an unprecedented expansion of manufacturing capacity in Singapore last year. Two new large-scale production locations for consumer optical sensing were commissioned, equipped, staffed and brought up to high volume production which including hiring around 8,000 employees in Singapore over the course of last year. In Austria, ams’ in-house front-end manufacturing capacity was again fully utilized throughout 2017. ams also decided to accelerate new internal production capacity for VCSEL laser products last year and is now implementing this capacity investment in Singapore with mass production planned in 2019. At the same time, ams expects to continue capacity investments for optical sensing in Singapore to prepare for additional expected volume needs in the second half 2018 and beyond.

Outlook

In order to better align ams’ financial information with the structure of its business ams is changing the presentation of its primary financial statements and related financial information to USD from this current quarter onwards (using currency conversion of the financial statement data).

Based on higher revenue pipeline visibility, ams has announced the increase of its revenue growth expectation for 2016-2019 to 60% compound annual growth rate (CAGR), combined with an adjusted EBIT margin target of 30% from 2019 onwards to drive EPS growth. This very substantial increase which translates into 2019 expected revenues of more than USD 2.7 billion (EUR 2.2 billion, current USD/EUR exchange rate of 1.24) is particularly driven by a range of revenue pipeline opportunities in smartphone/consumer applications that are clearly coming into view. Resulting from structural growth in sensing applications, this includes programs in 3D, optical, spectral and audio sensing, the mentioned power component design-win as well as attractive growth contributions from ams’ automotive, industrial and medical business.

For the first quarter 2018, ams expects revenues to reflect a customer volume impact in the consumer market and anticipated seasonality resulting in first quarter revenues of USD 440‑490 million (current USD/EUR exchange rate of 1.24), based on available information. ams’ first quarter revenue expectation still equates to outstanding year-on-year growth of well over 150% compared to the first quarter 2017. ams expects first quarter adjusted operating (EBIT) margin to reach 17-20% (excluding acquisition-related and share-based compensation costs), mostly due to revenue-related margin and operational leverage effects, which is a substantial year-on-year increase by 14-17 percentage points compared to the first quarter 2017.

At the same time, ams foresees a very strong second half 2018, based on currently available forecasts, with substantial sequential revenue growth rates in the second half year, similar to 2017. ams anticipates high volume ramps in its consumer business to drive this strong expected second half development.

To support its growth opportunities, ams anticipates total capital expenditures for 2018 of around USD 600 million, based on current information. In this context, ams expects to receive funding from a third party for around 25% of these planned investments.

Given ams’ increasing business presence and strong growth potential in the Asia/Pacific region and in order to better address an extensive additional investor base, ams is evaluating a potential secondary listing at the Hong Kong stock exchange (HKEx) within the coming 12 months.

Additional selected financial information for fiscal year 2017 and the fourth quarter 2017 is available on the company website at Financial Reports.