X-FAB Third Quarter 2019 Results

Intermediate declaration by the Board of Directors

TESSENDERLO, Belgium--()--Regulatory News:

(Paris:XFAB)

Highlights for Q3 2019:

- Revenue was USD 130.5 million, within the guidance of USD 128-135 million, down 14% year-on-year and 1% quarter-on-quarter

- Record quarterly revenues achieved in prototype manufacturing as well as in the medical market segment

- EBITDA was USD 12.7 million, down 57% year-on-year and up 8% quarter-on-quarter; EBITDA margin of 10%, on the upper end of 4-10% guidance

- EBIT was USD -6.1 million, down USD 20.5 million year-on-year and down USD 0.5 million quarter-on-quarter

- Net loss was USD 8.2 million, down USD 20.3 million year-on-year and down USD 0.1 million quarter-on-quarter

Outlook:

- Q4 2019 revenue is expected in the range of USD 111-118 million with an EBITDA margin in the range of 1-7%. Due to the continuing uncertainties in the market, visibility on the fourth quarter remains limited.

- Q4 2019 guidance is based on an average exchange rate of 1.12 USD/Euro.

Revenue breakdown per quarter:

in millions of USD

Q1 2018

Q2 2018

Q3 2018

Q4 2018

Q1 2019

Q2 2019

Q3 2019

Q3 y-o-y
growth

Automotive

68.5

79.3

76.6

59.7

64.1

62.5

60.5

-21%

Industrial

23.2

25.0

23.8

24.3

24.1

23.3

24.4

2%

Medical

4.8

5.6

6.3

7.3

6.8

6.3

8.8

38%

Subtotal core business

96.5

109.8

106.7

91.3

95.0

92.1

93.7

-12%

67.2%

70.6%

70.5%

66.4%

72.5%

70.0%

71.8%

 

CCC1

46.5

45.3

44.4

45.9

35.8

39.1

36.7

-17%

Others

0.5

0.3

0.3

0.3

0.2

0.3

0.0

n.m.

Total revenues

143.5

155.5

151.4

137.4

131.0

131.6

130.5

-14%

1 Consumer, Communications & Computer

Business development
X-FAB’s third quarter revenues came in at USD 130.5 million, within the guidance range of USD 128-135 million. Compared to the same quarter last year, revenues declined 14%, quarter-on-quarter they went down slightly by 1%.

Revenues in X-FAB’s core business, namely automotive, industrial and medical, came in at USD 93.7 million, a decline of 12% year-on-year, entirely driven by the continuously weak production revenue in automotive. Compared to the previous quarter, core business went up by 2%.

In the third quarter, automotive revenues decreased 21% year-on-year reflecting the ongoing weakness of the automotive market. While production revenues declined 23%, prototyping revenues in the automotive segment recorded an increase of 28% compared to the same quarter last year, with positive implications on the future development of the automotive business.

Revenues in the industrial market went up by 2% year-on-year with flat prototyping revenues and a growth of 3% in production revenues.

In the third quarter, X-FAB’s medical business generated record sales with a growth of 38% compared to the same quarter last year. Prototyping revenues went up by 85%, production revenues by 23%. As in the previous quarters, lab-on-a-chip applications remained the strongest growth driver.

Consumer, communications & computer business (CCC) declined 17% year-on-year. While prototyping revenues grew 45% mainly driven by RF applications for the Asian market, CCC production revenues were down 22% due to the declining legacy business manufactured at X-FAB France. This is however in line with the plan. The share of the French site’s revenues based on X-FAB technologies was at 14%. While it was down from the previous quarter, on average, it has been otherwise trending up over the past few quarters.

In the third quarter, X-FAB group overall prototyping revenue came in at USD 17.3 million. This is an increase of 23% year-on-year. Excluding the one-off effects caused by an IP sale in previous quarters, prototyping revenues reached an all-time high. They mainly include new contracts adding up to the project pipeline supporting future growth.

Bookings have been weak over the summer months with an uptick in September. In the third quarter, they came in at USD 121.4 million, down 6% year-on-year. Customers remained cautious in placing large orders, whereas the number of clients submitting orders for fast delivery increased over the third quarter, pointing towards lower inventory levels on customer side.

Operations update
All manufacturing sites continued their capacity expansion and optimization projects tailored to increase output and productivity, thereby taking advantage of the currently lower utilization levels.

X-FAB’s silicon carbide (SiC) activities progressed well. Revenues in the third quarter came in at USD 6.5 million, almost double the amount of the same quarter last year. Year-on-year, SiC prototyping revenues were flat while production revenues strongly increased by USD 3.2 million. This is due to the customers that have moved into volume production over the past nine months. In the third quarter, X-FAB added three new customers to its SiC customer base, all coming from the Asian region. The preparations for offering in-house epitaxy capabilities are on schedule with first prototypes to be manufactured until the end of 2019. Epitaxy refers to the process of depositing a thin epitaxial layer on a SiC raw wafer, which is a significant value-add step in the overall process of manufacturing silicon carbide semiconductors. X-FAB keeps expanding its SiC technologies and capabilities enabling high-performance products, and the pipeline for new customers and projects remains strong.

Capital expenditures for the third quarter came in at USD 18.6 million, down 20% compared to the same quarter last year. They mainly related to capacity and capability expansion projects, most of them initiated in 2018.

Profitability and FX volatility
Profitability of the third quarter was negatively impacted by a decrease of unfinished and finished goods inventories amounting to USD 5.7 million, after they had increased by USD 2.1 million in the previous quarter. Even though these quarterly fluctuations are part of normal business, they caused the gross profit of the third quarter to go down.

The actual exchange rate for the third quarter of 2019 was 1.11 with a corresponding EBITDA margin of 9.7%. At a constant US-Dollar/Euro exchange rate of 1.16 experienced in the third quarter of last year, the EBITDA margin in Q3 2019 would have been at 8.9%.

In order to limit the impact of US-Dollar/Euro exchange rate fluctuations on profitability and to have a better natural hedging in place, X-FAB continued its efforts to increase the share of Euro-denominated sales. While the target was set to reach 25% by the end of 2019, an even higher level of 27% was already achieved in the third quarter of 2019.

Given the overall market weakness and the low visibility going forward, X-FAB continued its cost-saving initiative. In addition to the ongoing productivity improvement projects and the deferral or reduction of capital expenditures, a set of measures to reduce costs related to staff, travel, electricity and raw materials, initiated earlier this year, has also produced significant savings in the third quarter.

Management comments & outlook
Commenting on the development of X-FAB’s business, Rudi De Winter, CEO of X-FAB Group, said: “The third quarter continued to be impacted by the low demand in the automotive segment that started in Q4 2018 and visibility going forward has not improved. However, we keep seeing many bright spots. Only recently we organized X-FAB’s first medical day in France, an event dedicated to all stakeholders in the med tech ecosystem, which generated a lot of interest and positive responses. Our medical revenues have been growing over many years and we support a great variety of different applications. Based on this, we consider ourselves well positioned to successfully develop this business in close collaboration with our customers. I am also very excited about the RF design wins for 5G base stations delivered out of our factory in France. 5G antennas are completely different from previous generation antennas as they include an array of semiconductors for which our RF technologies fit well. Finally, our prototyping revenues continue to develop strongly, which will materialize once the macroeconomic conditions improve and the market recovers.”

In the fourth quarter, X-FAB will continue its cost-saving initiative which has been yielding significant savings. The fourth quarter revenue guidance of USD 111-118 million partly results from the fab shutdown periods undertaken in the context of the cost-saving program. This has caused lead times to increase and deliveries to be moved into early next year.

X-FAB Quarterly Conference Call
X-FAB’s third quarter results will be discussed in a live conference call on Tuesday, October 29th, 2019 at 6.30 pm CET. The conference call will be in English. Please register in advance of the conference using the following link: http://emea.directeventreg.com/registration/1294907

Upon registering, you will be provided with participant dial-in numbers, Direct Event passcode and a unique registrant ID. In the 10 minutes prior to the call, you will need to use the conference access information provided in the email received at the point of registering.

The conference call will be available for replay from October 29th 11.30 pm CET until November 5th 11.30 pm CET. The replay number will be +44 (0) 3333009785, conference ID 1294907.

The fourth quarter 2019 results will be communicated on February 11th, 2020.

About X-FAB
X-FAB is the leading analog/mixed-signal and MEMS foundry group manufacturing silicon wafers for automotive, industrial, consumer, medical and other applications. Its customers worldwide benefit from the highest quality standards, manufacturing excellence and innovative solutions by using X-FAB’s modular CMOS processes in geometries ranging from 1.0 to 0.13 µm, and its special silicon carbide and MEMS long-lifetime processes. X-FAB’s analog-digital integrated circuits (mixed-signal ICs), sensors and micro-electro-mechanical systems (MEMS) are manufactured at six production facilities in Germany, France, Malaysia and the U.S. X-FAB employs about 4,000 people worldwide.

For more information, please visit www.xfab.com.

Forward-looking information
This press release may include forward-looking statements. Forward-looking statements are statements regarding or based upon our management’s current intentions, beliefs or expectations relating to, among other things, X-FAB’s future results of operations, financial condition, liquidity, prospects, growth, strategies or developments in the industry in which we operate. By their nature, forward-looking statements are subject to risks, uncertainties and assumptions that could cause actual results or future events to differ materially from those expressed or implied thereby. These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans and events described herein.

Forward-looking statements contained in this press release regarding trends or current activities should not be taken as a report that such trends or activities will continue in the future. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless legally required. You should not place undue reliance on any such forward-looking statements, which speak only as of the date of this press release.

The information contained in this press release is subject to change without notice. No re-report or warranty, express or implied, is made as to the fairness, accuracy, reasonableness or completeness of the information contained herein and no reliance should be placed on it.

Condensed Consolidated Statement of Profit and Loss

in thousands of USD

Quarter

ended
30 Sep 2019

unaudited

Quarter

ended
30 Sep 2018

unaudited

Quarter

ended
30 Jun 2019

unaudited

Nine months

ended
30 Sep 2019

unaudited

Nine months

ended
30 Sep 2018

unaudited

Revenue

130,462

151,448

131,560

393,027

450,475

  Revenues in USD in %

73

82

75

75

82

  Revenues in EUR in %

27

18

24

25

18

Cost of sales

-118,960

-119,743

-115,988

-361,425

-363,587

Gross Profit

11,503

31,704

15,571

31,602

86,888

Gross Profit margin in %

8.8

20.9

11.8

8.0

19.3

 

 

 

 

 

 

Research and development expenses

-8,055

-7,280

-8,221

-21,683

-23,406

Selling expenses

-2,013

-1,900

-2,011

-6,016

-6,048

General and administrative expenses

-7,248

-8,299

-7,778

-22,811

-23,702

Rental income and expenses from investment properties

-110

467

-361

-297

1,476

Other income and other expenses

-199

-299

-2,797

-2,775

-1,425

Operating profit

-6,122

14,393

-5,596

-21,980

33,783

Finance income

3,145

2,803

3,405

10,106

17,318

Finance costs

-3,851

-4,750

-4,964

-11,437

-23,840

Net financial result

-706

-1,947

-1,559

-1,331

-6,522

 

 

 

 

 

 

Profit before tax

-6,828

12,446

-7,155

-23,311

27,261

Income tax

-1,361

-372

-926

-3,323

-153

Profit for the period

-8,189

12,074

-8,081

-26,634

27,107

 

 

 

 

 

 

Operating profit (EBIT)

-6,122

14,393

-5,596

-21,980

33,783

Depreciation

18,807

15,292

17,365

52,956

44,705

EBITDA

12,685

29,685

11,769

30,976

78,488

EBITDA margin in %

9.7

19.6

8.9

7.9

17.4

 

 

 

 

 

 

Earnings per share at the end of period

-0.06

0.09

-0.06

-0.20

0.21

Weighted average number of shares

130,631,921

130,631,921

130,631,921

130,631,921

130,631,921

 

 

 

 

 

 

EUR/USD average exchange rate

1.11236

1.16271

1.12324

1.12398

1.19548

 

Amounts in the financial tables provided in this press release are rounded to the nearest thousand except when otherwise indicated, rounding differences may occur.

Condensed Consolidated Statement of Financial Position

in thousands of USD

Nine months ended
30 Sep 2019

unaudited

Nine months ended
30 Sep 2018

unaudited

Year ended
31 Dec 2018

audited

ASSETS

 

 

 

Non-current assets

 

 

 

Property, plant, and equipment

369,115

328,130

345,626

Investment properties

9,231

8,822

9,415

Intangible assets

8,355

8,470

9,023

Non-current investments

741

515

381

Other non-current assets

29,327

16,715

20,594

Deferred tax assets

34,397

35,953

34,234

Total non-current assets

451,166

398,605

419,272

 

 

 

 

Current assets

 

 

 

Inventories

153,026

131,139

147,150

Trade and other receivables

63,670

68,832

71,378

Other assets

23,475

19,802

26,699

Cash and cash equivalents

189,250

287,998

242,768

Total current assets

429,421

507,771

487,995

 

 

 

 

TOTAL ASSETS

880,587

906,377

907,268

 

 

 

 

EQUITY AND LIABILITIES

 

 

 

Equity

 

 

 

Share capital

432,745

432,745

432,745

Share premium

348,709

348,709

348,709

Retained earnings

-112,183

-79,726

-84,782

Cumulative translation adjustment

-496

-451

-539

Treasury shares

-770

-770

-770

Total equity attributable to equity holders of the parent

668,005

700,508

695,363

 

 

 

 

Non-controlling interests

377

363

364

 

 

 

 

Total equity

668,382

700,871

695,726

 

 

 

 

Non-current liabilities

 

 

 

Non-current loans and borrowings

93,381

80,624

72,328

Other non-current liabilities and provisions

7,435

8,232

7,446

Total non-current liabilities

100,816

88,856

79,774

 

 

 

 

Current liabilities

 

 

 

Trade payables

25,929

22,751

45,889

Current loans and borrowings

30,651

34,702

31,632

Other current liabilities and provisions

54,809

59,198

54,246

Total current liabilities

111,389

116,650

131,767

 

 

 

 

TOTAL EQUITY AND LIABILITIES

880,587

906,377

907,268

Condensed Consolidated Statement of Cash Flow

in thousands of USD

Quarter

ended
30 Sep 2019

unaudited

Quarter

ended
30 Sep 2018

unaudited

Quarter

ended
30 Jun 2019

unaudited

Nine months

ended
30 Sep 2019

unaudited

Nine months

ended
30 Sep 2018

unaudited

Income before taxes

-6,828

12,446

-7,155

-23,311

27,261

 

 

 

 

 

 

Reconciliation of net income to cash flow arising from operating activities:

19,154

16,894

19,807

52,794

48,791

Depreciation and amortization, before effect of grants and subsidies

18,807

15,292

17,365

52,956

44,705

Recognized investment grants and subsidies netted with depreciation and amortization

-712

-784

-742

-2,199

-2,423

Interest income and expenses (net)

382

112

424

1,224

765

Loss/(gain) on the sale of plant, property, and equipment (net)

0

58

6

6

729

Loss/(gain) on the change in fair value of derivatives (net) and financial assets (net)

-35

212

-182

-360

3,418

Other non-cash transactions (net)

713

2,004

2,936

1,167

1,596

 

 

 

 

 

 

Changes in working capital:

3,510

-3,087

-16,965

-21,399

-17,326

Decrease/(increase) of trade receivables

-763

11,874

-4,666

7,978

12,736

Decrease/(increase) of other receivables & prepaid expenses

-1,848

-862

-5,010

-12,940

-1,026

Decrease/(increase) of inventories

4,933

-12,197

-6,679

-5,875

-25,293

(Decrease)/increase of trade payables

2,480

-3,394

-3,387

-8,383

-10,449

(Decrease)/increase of other liabilities

-1,293

1,492

2,777

-2,178

6,706

 

 

 

 

 

 

Income taxes (paid)/received

-157

-162

-417

-667

-310

 

 

 

 

 

 

Cash Flow from operating activities

15,679

26,091

-4,730

7,417

58,416

 

 

 

 

 

 

Cash Flow from investing activities:

 

 

 

 

 

Payments for property, plant, equipment & intangible assets

-18,600

-23,278

-20,942

-63,356

-61,775

Payments for investments

0

0

-175

-350

0

Acquisition of subsidiary, net of cash acquired

0

0

0

0

0

Payments for loan investments to related parties

-63

-29

-60

-223

-156

Proceeds from loan investments related parties

44

46

40

177

142

Proceeds from sale of property, plant, and equipment

0

10

40

40

27

Interest received

672

840

624

1,959

2,253

 

 

 

 

 

 

Cash Flow used in investing activities

-17,947

-22,411

-20,473

-61,753

-59,509

Condensed Consolidated Statement of Cash Flow – con’t

in thousands of USD

Quarter

ended
30 Sep 2019

unaudited

Quarter

ended
30 Sep 2018

unaudited

Quarter

ended
30 Jun 2019

unaudited

Nine months

ended
30 Sep 2019

unaudited

Nine months

ended
30 Sep 2018

unaudited

Cash Flow from (used in) financing activities:

 

 

 

 

 

Proceeds from loans and borrowings

24,706

0

0

24,706

0

Repayment of loans and borrowings

-7,329

-8,675

-7,083

-21,913

-25,237

Receipts from sale & leaseback arrangements

1,181

0

0

1,181

0

Payments of lease installments

-1,311

-629

-2,156

-4,086

-1,943

Receipt of government grants and subsidies

6,300

0

0

6,300

357

Interest paid

-383

-544

-401

-1,194

-1,677

Gross proceeds from capital increase

0

0

0

0

0

Direct cost related to capital increase

0

0

0

0

0

Payment of preference dividend

0

0

0

0

0

Distribution to non-controlling interests

0

0

0

-11

-12

 

 

 

 

 

 

Cash Flow from (used in) financing activities

23,162

-9,848

-9,641

4,983

-28,512

 

 

 

 

 

 

Effect of changes in foreign currency exchange rates on cash

-2,877

-1,178

-1,200

-4,165

-1,632

Increase/(decrease) of cash and cash equivalents

20,895

-6,169

-34,844

-49,353

-29,606

Cash and cash equivalents at the beginning of the period

171,232

295,345

207,276

242,768

319,235

Cash and cash equivalents at the end of

the period

189,250

287,998

171,232

189,250

287,998

###

Contacts

X-FAB Press Contact
Uta Steinbrecher
Investor Relations
X-FAB Silicon Foundries
+49-361-427-6489
uta.steinbrecher@xfab.com

Contacts

X-FAB Press Contact
Uta Steinbrecher
Investor Relations
X-FAB Silicon Foundries
+49-361-427-6489
uta.steinbrecher@xfab.com