Guides fourth quarter revenues of ~$340 million, up 5% sequentially

MIGDAL HAEMEK, Israel, Oct. 29, 2018 (GLOBE NEWSWIRE) -- TowerJazz (NASDAQ: TSEM & TASE: TSEM) reported today its results for the third quarter ended September 30, 2018.

Highlights:

• Revenues of $323 million resulting in EBITDA of $89 million, and net profit of $34 million with $0.34 basic earnings per share;
• Cash from operations of $69 million with free cash flow of $29 million;
• Cash generation from operations year-to-date of $221 million, with $315 million net cash balance as of September 30, 2018;
• Further strengthened balance sheet:
  • $98 million reduction in debt, saving $7 million annual financing expenses:
    • Full conversion of the $58 million of Jazz notes, resulting in no remaining Jazz subsidiary debt;
    • Early repayment of $40 million San Antonio fab subsidiary loan; 
  • Increased shareholders’ equity reaching $1.15 billion as of September 30, 2018;

Business Outlook
Revenues for the fourth quarter of 2018 are expected to be approximately $340 million, with a range of ±5%, up 5% sequentially.

Mr. Russell Ellwanger, Chief Executive Officer of TowerJazz, commented, “We entered the year having decided to focus on profitability, rather than utilizing valuable capacity for lower margin businesses. This has had a greater than expected revenue impact in 2018 while building the higher value mix and with some high-end replacements not having met customer forecasts. The present overall market softness has had a recent notable impact across our business units, with a fourth quarter revenue roll-up lower than previous expectations. However, we expect to see fourth quarter margins increase as a result of this much richer products mix.” 

Ellwanger further added: “We are confident with our activities – advancing our technical roadmaps with associated strong customer traction. Having visited lead customer partners for each of our business groups over the past few months, we are convinced that our focus and engagements are industry leading. Having entered major new long-term contracts with undisputed tier-1 customers for our most advanced technologies namely 300mm RFSOI and power management, having been awarded breakthrough applications for image sensors, seamless continuation of customer engagements to our newest most advanced 300GHz SiGe platforms, and in the midst of several revolutionary seed technical developments for SiPho, new proprietary switch and display technologies, we have a base of technology and customer engagements that will provide engines for growth for the next several years.”

Third Quarter Results Summary
Revenues for the third quarter of 2018 were $323 million, compared to $335 million in the prior quarter and $355 million in the third quarter of 2017.

Gross and operating profits for the third quarter of 2018 were $73 million and $39 million, respectively, as compared to $79 million and $44 million, respectively, in the prior quarter, and as compared to $89 million and $55 million in the third quarter of 2017.

EBITDA for the third quarter of 2018 was $89 million, representing a 28% EBITDA margin.

Net profit for the third quarter of 2018 was $34 million, or $0.34 basic earnings per share and $0.33 diluted earnings per share, as compared to $38 million or $0.38 basic earnings per share and $0.37 diluted earnings per share in the prior quarter and as compared to $55 million or $0.56 basic earnings per share and $0.54 diluted earnings per share in the third quarter of 2017.

Jazz short term notes, originally due December 2018, in the amount of $58 million were fully converted to TSEM shares, resulting in zero outstanding principal and annual cash savings of $5 million. $19 million of the $58 million were converted during the third quarter of 2018 and $39 million during October 2018. Post conversion, the current outstanding share count is 105 million and fully diluted share count remains at 108 million, similar to previous quarters. 

Free cash flow for the quarter was $29 million, with $69 million cash flow generated from operations and $41 million invested in fixed assets, net. The other main cash activities during the third quarter of 2018 were $43 million of debt repaid, net of debt received, which included mainly the early repayment of the $40 million loan borrowed in 2016 from JA Mitsui in relation to the acquisition of the San Antonio fab from Maxim and its ramp.

Cash (including marketable securities), net of gross debt, as of September 30, 2018, totaled $315 million as compared to net cash of $226 million as of December 31, 2017.

Shareholders' equity as of September 30, 2018 totaled to $1.15 billion, as compared to $1.03 billion as of December 31, 2017.

Teleconference and Webcast

TowerJazz will host an investor conference call today, Monday, October 29, 2018, at 10:00 a.m. Eastern time (9:00 a.m. Central time, 8:00 a.m. Mountain time, 7:00 a.m. Pacific time and 4:00 p.m. Israel time) to discuss the Company’s financial results for the third quarter 2018 and its outlook.

This call will be webcast and can be accessed via TowerJazz’s website, or by calling 1-888-668-9141 (U.S. Toll-Free), 03-918-0609 (Israel), +972-3-918-0609 (International). For those who are not available to listen to the live broadcast, the call will be archived on TowerJazz’s website for 90 days.

The Company presents its financial statements in accordance with U.S. GAAP.  The financial information included in the tables below includes unaudited condensed financial data. Some of the financial information in this release, which we describe in this release as “adjusted” financial measures, is non-GAAP financial measures as defined in Regulation G and related reporting requirements promulgated by the Securities and Exchange Commission as they apply to our Company. These adjusted financial measures are calculated excluding one or more of the following: (1) amortization of acquired intangible assets and (2) compensation expenses in respect of equity grants to directors, officers and employees. These adjusted financial measures should be evaluated in conjunction with, and are not a substitute for, GAAP financial measures. The tables also present the GAAP financial measures, which are most comparable to the adjusted financial measures, as well as a reconciliation between the adjusted financial measures and the comparable GAAP financial measures. As used and/ or presented in this release, as well as calculated in the tables herein, the term Earnings Before Interest Tax Depreciation and Amortization (EBITDA) consists of net profit in accordance with GAAP, excluding financing expenses, net, other income (expense), net, taxes, non-controlling interest, depreciation and amortization expense and stock-based compensation expense. EBITDA is reconciled in the tables below from GAAP operating profit. EBITDA is not a required GAAP financial measure and may not be comparable to a similarly titled measure employed by other companies. EBITDA and the adjusted financial information presented herein should not be considered in isolation or as a substitute for operating profit, net profit, cash flows provided by operating, investing and financing activities, per share data or other profit or cash flow statement data prepared in accordance with GAAP. The term Net Cash, as used and/ or presented in this release, is comprised of cash, cash equivalents and marketable securities (in the amounts of $608 million and $560 million as of September 30, 2018 and December 31, 2017, respectively) less the outstanding principal amount of bank loans (in the amounts of $97 million and $138 million as of September 30, 2018 and December 31, 2017, respectively), the outstanding principal amount of capital leases (in the amounts of $35 million and $16 million as of September 30, 2018 and December 31, 2017, respectively) and the outstanding principal amount of debentures (in the amount of $161 million and $180 million as of September 30, 2018 and December 31, 2017, respectively). The term Net Cash is not a required GAAP financial measure, may not be comparable to a similarly titled measure employed by other companies and should not be considered in isolation or as a substitute for cash, debt, operating profit, net profit or loss, cash flows provided by operating, investing and financing activities, per share data or other profit or cash flow statement data prepared in accordance with GAAP. In addition, the term Free Cash Flow, as used and/ or presented in this release, is calculated to be cash from operating activities (in the amounts of $69 million, $77 million and $ 104 million for the three month periods ended September 30, 2018, June 30, 2018 and S eptember 30, 2017 , respectively) less cash for investments in property and equipment, net (in the amounts of $41 million, $40 million and $ 42 million for the three month periods ended September 30, 2018,  June 30, 2018 and S eptember 30, 2017 , respectively). The term Free Cash Flow is not a required GAAP financial measure, may not be comparable to a similarly titled measure employed by other companies and should not be considered in isolation or as a substitute for operating profit, net profit or loss, cash flows provided by operating, investing and financing activities, per share data or other profit or cash flow statement data prepared in accordance with GAAP.