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Tower Semiconductor Reports Third Quarter 2022 Record Revenue of $427 Million

MIGDAL HAEMEK, Israel, Nov. 14, 2022 (GLOBE NEWSWIRE) -- Tower Semiconductor (NASDAQ: TSEM & TASE: TSEM) reports today its results for the third quarter ended September 30, 2022.

Third Quarter of 2022 Results Overview

Revenue for the third quarter of 2022 was $427 million, as compared to $387 million in the third quarter of 2021, reflecting 10% revenue growth. Organic revenue grew by 22% year over year for the third quarter of 2022 (organic revenue defined as total revenue excluding revenues from (i) Nuvoton in the Japanese fabs and (ii) Maxim in the San Antonio fab). Revenue for the second quarter of 2022 was $426 million.

Gross profit for the third quarter of 2022 was $125 million, 46% higher than $85 million recorded in the third quarter of 2021. Gross profit in the second quarter of 2022 was $112 million.

Operating profit for the third quarter of 2022 was $79 million, 79% higher than $44 million recorded in the third quarter of 2021. Operating profit in the second quarter of 2022 was $71 million.

Net profit for the third quarter of 2022 was $69 million, reflecting 16.2% net margin, which exceeded the November 2021 publicly stated target of achieving 15% net margin in 2022, or $0.63 basic and $0.62 diluted earnings per share, 77% higher than $39 million recorded in the third quarter of 2021, which represented $0.36 basic and diluted earnings per share.

Net profit for the second quarter of 2022 was $58 million, representing $0.53 basic and diluted earnings per share.

Cash flow generated from operating activities in the third quarter of 2022 was $122 million and investment in fixed assets was $45 million, net. During the third quarter of 2022, the Company repaid $28 million of its debt.

Guidance and Conference Call

In light of the Company’s definitive agreement with Intel Corporation, as announced on February 15, 2022, the Company is not providing revenue guidance for the fourth quarter 2022 and will not host an earnings conference call.

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, which may be used and/ or presented in this release and/ or prior earnings related filings and/ or in related public disclosures or filings with respect to the financial statements and/ or results of the Company, which we describe as “adjusted” financial measures and/ or reconciled financial measures, are 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 the following: (1) amortization of acquired intangible assets, (2) compensation expenses in respect of equity grants to directors, officers, and employees and (3) restructuring costs, which include costs associated with the cessation of operations of the Arai manufacturing factory in Japan in 2022 in the amount of approximately $4 million recorded in the statements of operations for the three and nine months ended September 30, 2022. 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 and/ or prior earnings related filings and/ or in related public disclosures or filings with respect to the financial statements and/ or results of the Company, as well as calculated in the tables herein, the term Earnings Before Interest Tax Depreciation and Amortization which we define as EBITDA consists of operating profit in accordance with GAAP, excluding (i) depreciation expenses, which include depreciation recorded in cost of revenues and in operating cost and expenses lines (e.g, research and development related equipment and/ or fixed other assets depreciation), (ii) stock-based compensation expense, (iii) amortization of acquired intangible assets and (iv) restructuring costs in relation to the Arai manufacturing factory in Japan, as described in (3) above. 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 and/ or prior earnings related filings and/ or in related public disclosures or filings with respect to the financial statements and/ or results of the Company, 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. The term Net Cash, as may be used and/ or presented in this release and/ or prior earnings-related filings and/ or in related public disclosures or filings with respect to the financial statements and/ or results of the Company, is comprised of cash, cash equivalents, short-term deposits and marketable securities less debt amounts as presented in the balance sheets included herein. 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. The term Free Cash Flow, as used and/ or presented in this release and/ or prior earnings related filings and/ or in related public disclosures or filings with respect to the financial statements and/ or results of the Company, is calculated to be net cash provided by operating activities (in the amounts of $122 million, $138 million and $107 million for the three months periods ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively) less cash used for investments in property and equipment, net (in the amounts of $45 million, $49 million and $88 million for the three months periods ended September 30, 2022, June 30, 2022 and September 30, 2021, 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.

About Tower Semiconductor
Tower Semiconductor Ltd. (NASDAQ: TSEM, TASE: TSEM), the leading foundry of high value analog semiconductor solutions, provides technology and manufacturing platforms for integrated circuits (ICs) in growing markets such as consumer, industrial, automotive, mobile, infrastructure, medical and aerospace and defense. Tower Semiconductor focuses on creating positive and sustainable impact on the world through long term partnerships and its advanced and innovative analog technology offering, comprised of a broad range of customizable process platforms such as SiGe, BiCMOS, mixed-signal/CMOS, RF CMOS, CMOS image sensor, non-imaging sensors, integrated power management (BCD and 700V), and MEMS. Tower Semiconductor also provides world-class design enablement for a quick and accurate design cycle as well as process transfer services including development, transfer, and optimization, to IDMs and fabless companies. To provide multi-fab sourcing and extended capacity for its customers, Tower Semiconductor owns two manufacturing facilities in Israel (150mm and 200mm), two in the U.S. (200mm), two facilities in Japan (200mm and 300mm) which it owns through its 51% holdings in TPSCo and is sharing a 300mm manufacturing facility being established in Italy by STMicroelectronics. For more information, please visit:  www.towersemi.com

CONTACTS:
Noit Levy | Investor Relations | +972 74 737 7556 | noitle@towersemi.com

A more complete discussion of risks and uncertainties that may affect the accuracy of forward-looking statements included in this press release or which may otherwise affect our business is included under the heading "Risk Factors" in Tower’s most recent filings on Forms 20-F and 6-K, as were filed with the Securities and Exchange Commission (the “SEC”) and the Israel Securities Authority. Future results may differ materially from those previously reported. The Company does not intend to update, and expressly disclaims any obligation to update, the information contained in this release.


(Financial tables follow)


TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
 
 September 30, December 31,
 2022 2021
ASSETS   
CURRENT ASSETS   
Cash and cash equivalents$ 390,369 $ 210,930
Short-term deposits338,811 363,648
Marketable securities171,951 190,068
Trade accounts receivable165,086 142,228
Inventories269,405 234,512
Other current assets41,710 54,817
Total current assets1,377,332 1,196,203
PROPERTY AND EQUIPMENT, NET902,440 876,683
GOODWILL AND OTHER INTANGIBLE ASSETS, NET15,774 18,820
DEFERRED TAX AND OTHER LONG-TERM ASSETS, NET88,864 139,535
TOTAL ASSETS$ 2,384,410 $ 2,231,241
LIABILITIES AND SHAREHOLDERS' EQUITY   
CURRENT LIABILITIES   
Short-term debt$ 61,186 $ 83,868
Trade accounts payable143,992 78,712
Deferred revenue and customers' advances37,907 39,992
Other current liabilities121,487 73,756
Total current liabilities364,572 276,328
LONG-TERM DEBT202,142 230,972
LONG-TERM CUSTOMERS' ADVANCES44,414 69,968
DEFERRED TAX AND OTHER LONG-TERM LIABILITIES 20,356 38,584
TOTAL LIABILITIES631,484 615,852
TOTAL SHAREHOLDERS' EQUITY1,752,926 1,615,389
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$ 2,384,410 $ 2,231,241
    



TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(dollars and share count in thousands, except per share data)
 
 Three months ended
 September 30, June 30, September 30,
 2022 2022 2021
REVENUES$ 427,087 $ 426,168 $ 386,706
COST OF REVENUES302,576 313,728 301,330
GROSS PROFIT124,511 112,440 85,376
OPERATING COSTS AND EXPENSES:     
Research and development22,406 20,481 21,591
Marketing, general and administrative18,864 21,285 19,620
Restructuring costs4,033 -- --
 45,303 41,766 41,211
      
OPERATING PROFIT79,208 70,674 44,165
FINANCING AND OTHER EXPENSE, NET(9,351) (8,162) (2,714)
PROFIT BEFORE INCOME TAX69,857 62,512 41,451
INCOME TAX EXPENSE, NET(3,175) (4,339) (1,084)
NET PROFIT66,682 58,173 40,367
Net loss (income) attributable to non-controlling interest2,453 (96) (1,282)
NET PROFIT ATTRIBUTABLE TO THE COMPANY$ 69,135 $ 58,077 $ 39,085
BASIC EARNINGS PER SHARE$ 0.63 $ 0.53 $ 0.36
Weighted average number of shares109,416 109,138 108,354
DILUTED EARNINGS PER SHARE$ 0.62 $ 0.53 $ 0.36
Weighted average number of shares110,825 110,561 109,825
      



TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(dollars and share count in thousands, except per share data)
 
 Nine months ended
 September 30,
 2022
 2021
REVENUES$ 1,274,387  $ 1,096,058 
COST OF REVENUES932,805   867,113 
GROSS PROFIT341,582   228,945 
OPERATING COSTS AND EXPENSES:      
Research and development63,205   63,015 
Marketing, general and administrative61,402   55,282 
Restructuring costs4,033   -- 
       
 128,640   118,297 
       
OPERATING PROFIT212,942   110,648 
FINANCING AND OTHER EXPENSE, NET(19,646)  (11,040)
PROFIT BEFORE INCOME TAX193,296   99,608 
INCOME TAX BENEFIT (EXPENSE), NET(12,667)   2,590 
NET PROFIT180,629   102,198 
Net loss (income) attributable to non-controlling interest616   (3,925)
NET PROFIT ATTRIBUTABLE TO THE COMPANY$ 181,245  $ 98,273 
BASIC EARNINGS PER SHARE$ 1.66  $ 0.91 
Weighted average number of shares109,165   108,114 
DILUTED EARNINGS PER SHARE$ 1.64  $ 0.90 
Weighted average number of shares110,691   109,640 
       



TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
RECONCILIATION FROM GAAP OPERATING PROFIT TO EBITDA (UNAUDITED)
(dollars in thousands)
 
 Three months ended
 September 30, June 30, September 30,
 2022 2022 2021
GAAP OPERATING PROFIT $ 79,208 $ 70,674 $ 44,165
Depreciation67,343 60,886 63,021
Stock based compensation6,526 5,543 5,452
Amortization of acquired intangible assets509 508 504
Restructuring costs4,033 -- --
EBITDA$ 157,619 $ 137,611 $ 113,142
      



TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
CONSOLIDATED SOURCES AND USES REPORT (UNAUDITED)
(dollars in thousands)
 
 Three months ended
 September 30,
 June 30,
 September 30,
 2022
 2022
 2021
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD$ 211,177  $ 203,484  $ 215,755 
Net cash provided by operating activities122,402  138,097   106,974 
Investments in property and equipment, net(45,134) (49,377)  (87,714)
Exercise of options--  --   46 
Proceeds from an investment in a subsidiary5,469  --   -- 
Debt repaid, net(28,164) (8,211)  (29,211)
Effect of Japanese Yen exchange rate change over cash balance(4,638) (7,682)  (597)
Investments in short-term deposits, marketable securities and other assets, net129,257  (65,134)  6,250 
CASH AND CASH EQUIVALENTS - END OF PERIOD$ 390,369  $ 211,177  $ 211,503 
          



TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands)
 
 Three months ended
 September 30, June 30, September 30,
 2022 2022 2021
CASH FLOWS - OPERATING ACTIVITIES           
Net profit for the period$ 66,682  $ 58,173  $ 40,367 
Adjustments to reconcile net profit for the period           
to net cash provided by operating activities:           
Income and expense items not involving cash flows:           
Depreciation and amortization 74,958   67,007   69,482 
Effect of exchange rate differences 104   2,276   779 
Other expense, net 7,950   560   1,941 
Changes in assets and liabilities:           
Trade accounts receivable 3,991   3,578   (678)
Other assets 527   (3,355)  (4,186)
Inventories (25,510)  (10,630)  (12,553)
Trade accounts payable (15,951)  22,415   (2,100)
Deferred revenue and customers' advances  (16,906)  (14,031)  19,288 
Other current liabilities 20,725   10,974   (8,087)
Long-term employee related liabilities (220)  26   (43)
Deferred tax, net and other long-term liabilities 6,052   1,104   2,764 
   Net cash provided by operating activities 122,402   138,097   106,974 
CASH FLOWS - INVESTING ACTIVITIES           
Investments in property and equipment, net (45,134)  (49,377)  (87,714)
Investments in deposits, marketable securities and other assets, net 129,257   (65,134)  6,250 
   Net cash provided by (used in) investing activities 84,123   (114,511)  (81,464)
CASH FLOWS - FINANCING ACTIVITIES           
Debt repaid, net (28,164)  (8,211)  (29,211)
Proceeds from an investment in a subsidiary 5,469   --   -- 
Exercise of options --   --   46 
   Net cash used in financing activities (22,695)  (8,211)  (29,165)
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGE (4,638)  (7,682)  (597)
            
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 179,192   7,693   (4,252)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 211,177   203,484   215,755 
CASH AND CASH EQUIVALENTS - END OF PERIOD$ 390,369  $ 211,177  $ 211,503 
            

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