 | News Release | ||||
Amkor Technology Reports Financial Results for the Second Quarter 2020
Second Quarter Highlights
•Second quarter net sales $1.17 billion, up 31% year-on-year
•Operating income $87 million, operating margin 7.4%
•Net income $55 million, earnings per diluted share $0.23
•EBITDA $209 million
TEMPE, Ariz. - July 27, 2020 - Amkor Technology, Inc. (NASDAQ: AMKR), a leading provider of semiconductor packaging and test services, today announced financial results for the second quarter ended June 30, 2020.
“Broad based demand drove revenue well above the high end of expectations,” said Giel Rutten, Amkor’s president and chief executive officer. “The strategic investments we made in both advanced packaging technology and manufacturing capacity enabled significant growth in revenue and profitability.”
| Results | Q2 2020 | Q1 2020 | Q2 2019 | |||||||||||||||||
| ($ in millions, except per share data) | ||||||||||||||||||||
| Net sales | $1,173 | $1,153 | $895 | |||||||||||||||||
| Gross margin | 16.4% | 16.4% | 13.8% | |||||||||||||||||
| Operating income | $87 | $84 | $23 | |||||||||||||||||
| Operating margin | 7.4% | 7.3% | 2.5% | |||||||||||||||||
| Net income attributable to Amkor* | $55 | $64 | ($9) | |||||||||||||||||
| Earnings per diluted share* | $0.23 | $0.26 | ($0.04) | |||||||||||||||||
| EBITDA** | $209 | $210 | $149 | |||||||||||||||||
*Q2 2019 net income includes an $8 million charge, or $0.03 per share, related to the early redemption of $525 million of senior notes due 2022.
**EBITDA is a non-GAAP financial measure. The reconciliation to the comparable GAAP financial measure is included below under “Selected Operating Data.”
“The strong revenue performance and disciplined expense management resulted in operating income margin of 7.4% and earnings per diluted share of $0.23,” said Megan Faust, Amkor’s executive vice president and chief financial officer. “Our profitability and focus on free cash flow generation has further strengthened our balance sheet, and we ended the quarter with net debt of $450 million.”
At June 30, 2020, total cash and short-term investments was $1.1 billion, and total debt was $1.5 billion.
Business Outlook
“We expect sequential revenue growth in the third quarter, driven by the launch of flagship smart phones, including more 5G models where we have a strong footprint,” said Rutten. “We believe mid- and long-term growth drivers remain intact, and we will continue to invest in markets, including 5G, high performance computing and IoT, where we see the highest potential for growth.”
Third quarter 2020 outlook (unless otherwise noted):
•Net sales of $1.2 billion to $1.3 billion
•Gross margin of 15% to 18%
•Net income of $42 million to $85 million, or $0.17 to $0.35 per diluted share
•Full year 2020 capital expenditures of approximately $550 million
Conference Call Information
Amkor will conduct a conference call on Monday, July 27, 2020, at 5:00 p.m. Eastern Time. This call may include material information not included in this press release. This call is being webcast and can be accessed at Amkor’s website: www.amkor.com. You may also access the call by dialing 1-877-645-6380 or 1-404-991-3911. A replay of the call will be made available at Amkor’s website or by dialing 1-855-859-2056 or 1-404-537-3406 (conference ID 8565096). The webcast is also being distributed over NASDAQ OMX’s investor distribution network to both institutional and individual investors. Institutional investors can access the call via NASDAQ OMX’s password-protected event management site, Street Events (www.streetevents.com).
About Amkor Technology, Inc.
Amkor Technology, Inc. is one of the world’s largest providers of outsourced semiconductor packaging and test services. Founded in 1968, Amkor pioneered the outsourcing of IC packaging and test, and is now a strategic manufacturing partner for the world’s leading semiconductor companies, foundries and electronics OEMs. Amkor’s operational base includes production facilities, product development centers, and sales and support offices located in key electronics manufacturing regions in Asia, Europe and the USA. For more information, visit www.amkor.com.
Contact:
Vincent Keenan
Vice President, Investor Relations
480-786-7594
vincent.keenan@amkor.com
AMKOR TECHNOLOGY, INC.
Selected Operating Data
| Q2 2020 | Q1 2020 | Q2 2019 | |||||||||||||||
| Net Sales Data: | |||||||||||||||||
| Net sales (in millions): | |||||||||||||||||
| Advanced products (1) | $ | 729 | $ | 705 | $ | 433 | |||||||||||
| Mainstream products (2) | 444 | 448 | 462 | ||||||||||||||
| Total net sales | $ | 1,173 | $ | 1,153 | $ | 895 | |||||||||||
| Packaging services | 84 | % | 85 | % | 83 | % | |||||||||||
| Test services | 16 | % | 15 | % | 17 | % | |||||||||||
| Net sales from top ten customers | 69 | % | 67 | % | 62 | % | |||||||||||
| End Market Data: | |||||||||||||||||
| Communications (handheld devices, smartphones, tablets) | 38 | % | 38 | % | 37 | % | |||||||||||
Consumer (connected home, set-top boxes, televisions, visual imaging, wearables) | 27 | % | 24 | % | 15 | % | |||||||||||
Automotive, industrial and other (driver assist, infotainment, performance, safety) | 19 | % | 23 | % | 29 | % | |||||||||||
Computing (data center, infrastructure, PC/laptop, storage) | 16 | % | 15 | % | 19 | % | |||||||||||
| Total | 100 | % | 100 | % | 100 | % | |||||||||||
| Gross Margin Data: | |||||||||||||||||
| Net sales | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||
| Cost of sales: | |||||||||||||||||
| Materials | 45.2 | % | 45.3 | % | 38.0 | % | |||||||||||
| Labor | 13.9 | % | 14.2 | % | 17.4 | % | |||||||||||
| Other manufacturing | 24.5 | % | 24.1 | % | 30.8 | % | |||||||||||
| Gross margin | 16.4 | % | 16.4 | % | 13.8 | % | |||||||||||
(1) Advanced products include flip chip and wafer-level processing and related test services
(2) Mainstream products include wirebond packaging and related test services
AMKOR TECHNOLOGY, INC.
Selected Operating Data
In this press release, we provide EBITDA, which is not defined by U.S. GAAP. We define EBITDA as net income before interest expense, income tax expense and depreciation and amortization. We believe EBITDA to be relevant and useful information to our investors because it provides additional information in assessing our financial operating results. Our management uses EBITDA in evaluating our operating performance, our ability to service debt and our ability to fund capital expenditures. However, EBITDA has certain limitations in that it does not reflect the impact of certain expenses on our consolidated statements of income, including interest expense, which is a necessary element of our costs because we have borrowed money in order to finance our operations, income tax expense, which is a necessary element of our costs because taxes are imposed by law, and depreciation and amortization, which is a necessary element of our costs because we use capital assets to generate income. EBITDA should be considered in addition to, and not as a substitute for, or superior to, operating income, net income or other measures of financial performance prepared in accordance with U.S. GAAP. Furthermore our definition of EBITDA may not be comparable to similarly titled measures reported by other companies. Below is our reconciliation of EBITDA to U.S. GAAP net income.
| Non-GAAP Financial Measure Reconciliation: | |||||||||||||||||
| Q2 2020 | Q1 2020 | Q2 2019 | |||||||||||||||
| (in millions) | |||||||||||||||||
| EBITDA Data: | |||||||||||||||||
| Net income (loss) | $ | 56 | $ | 64 | $ | (9) | |||||||||||
| Plus: Interest expense | 16 | 17 | 19 | ||||||||||||||
| Plus: Income tax expense | 13 | 5 | 6 | ||||||||||||||
| Plus: Depreciation & amortization | 124 | 124 | 133 | ||||||||||||||
| EBITDA | $ | 209 | $ | 210 | $ | 149 | |||||||||||
In this press release, we provide net debt, which is not defined by U.S. GAAP. We define net debt as total debt as reported on the consolidated balance sheet less the sum of cash and cash equivalents, and short term investments. We believe net debt to be relevant and useful information to our investors because it provides them with additional information in assessing our capital structure, financial leverage, and our ability to reduce debt and to fund investing and financing activities. This measure should be considered in addition to, and not as a substitute for, or superior to, total debt, prepared in accordance with U.S. GAAP. Furthermore, our definition of net debt may not be comparable to similarly titled measures reported by other companies.
| Non-GAAP Financial Measure Reconciliation: | |||||||||||||||||
| Q2 2020 | Q1 2020 | Q2 2019 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Net Debt Data: | |||||||||||||||||
| Total Debt | $ | 1,545 | $ | 1,513 | $ | 1,308 | |||||||||||
| Less: Cash and Cash Equivalents | 783 | 941 | 551 | ||||||||||||||
| Less: Short-term Investments | 311 | 58 | 6 | ||||||||||||||
| Net Debt | $ | 451 | $ | 514 | $ | 751 | |||||||||||
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||
| Net sales | $ | 1,172,909 | $ | 895,305 | $ | 2,325,525 | $ | 1,790,269 | |||||||||||||||
| Cost of sales | 980,589 | 771,851 | 1,944,297 | 1,546,054 | |||||||||||||||||||
| Gross profit | 192,320 | 123,454 | 381,228 | 244,215 | |||||||||||||||||||
| Selling, general and administrative | 74,260 | 64,758 | 146,842 | 136,345 | |||||||||||||||||||
| Research and development | 31,536 | 36,186 | 63,789 | 71,940 | |||||||||||||||||||
| Total operating expenses | 105,796 | 100,944 | 210,631 | 208,285 | |||||||||||||||||||
| Operating income | 86,524 | 22,510 | 170,597 | 35,930 | |||||||||||||||||||
| Interest expense | 16,012 | 18,653 | 33,057 | 37,926 | |||||||||||||||||||
| Other (income) expense, net | 1,467 | 6,966 | (848) | 2,401 | |||||||||||||||||||
| Total other expense, net | 17,479 | 25,619 | 32,209 | 40,327 | |||||||||||||||||||
| Income (loss) before taxes | 69,045 | (3,109) | 138,388 | (4,397) | |||||||||||||||||||
| Income tax expense | 12,905 | 5,897 | 17,751 | 27,277 | |||||||||||||||||||
| Net income (loss) | 56,140 | (9,006) | 120,637 | (31,674) | |||||||||||||||||||
| Net income attributable to non-controlling interests | (716) | (444) | (1,324) | (655) | |||||||||||||||||||
| Net income (loss) attributable to Amkor | $ | 55,424 | $ | (9,450) | $ | 119,313 | $ | (32,329) | |||||||||||||||
| Net income (loss) attributable to Amkor per common share: | |||||||||||||||||||||||
| Basic | $ | 0.23 | $ | (0.04) | $ | 0.50 | $ | (0.14) | |||||||||||||||
| Diluted | $ | 0.23 | $ | (0.04) | $ | 0.49 | $ | (0.14) | |||||||||||||||
| Shares used in computing per common share amounts: | |||||||||||||||||||||||
| Basic | 241,098 | 239,508 | 241,009 | 239,461 | |||||||||||||||||||
| Diluted | 241,410 | 239,508 | 241,345 | 239,461 | |||||||||||||||||||
AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| June 30, 2020 | December 31, 2019 | ||||||||||
| (In thousands) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 783,228 | $ | 894,948 | |||||||
| Restricted cash | 931 | 610 | |||||||||
| Short-term investments | 310,634 | 6,348 | |||||||||
| Accounts receivable, net of allowances | 898,717 | 850,753 | |||||||||
| Inventories | 306,902 | 220,602 | |||||||||
| Other current assets | 41,383 | 28,272 | |||||||||
| Total current assets | 2,341,795 | 2,001,533 | |||||||||
| Property, plant and equipment, net | 2,471,977 | 2,404,850 | |||||||||
| Operating lease right of use assets | 146,013 | 148,549 | |||||||||
| Goodwill | 26,140 | 25,976 | |||||||||
| Restricted cash | 3,027 | 2,974 | |||||||||
| Other assets | 126,436 | 111,733 | |||||||||
| Total assets | $ | 5,115,388 | $ | 4,695,615 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Short-term borrowings and current portion of long-term debt | $ | 148,872 | $ | 144,479 | |||||||
| Trade accounts payable | 583,341 | 571,054 | |||||||||
| Capital expenditures payable | 259,344 | 77,044 | |||||||||
| Accrued expenses | 291,278 | 267,226 | |||||||||
| Total current liabilities | 1,282,835 | 1,059,803 | |||||||||
| Long-term debt | 1,396,389 | 1,305,755 | |||||||||
| Pension and severance obligations | 165,401 | 176,971 | |||||||||
| Long-term operating lease liabilities | 87,204 | 91,107 | |||||||||
| Other non-current liabilities | 66,631 | 71,740 | |||||||||
| Total liabilities | 2,998,460 | 2,705,376 | |||||||||
| Stockholders’ equity: | |||||||||||
| Preferred stock | — | — | |||||||||
| Common stock | 287 | 287 | |||||||||
| Additional paid-in capital | 1,934,047 | 1,927,739 | |||||||||
| Retained earnings | 353,390 | 234,077 | |||||||||
| Accumulated other comprehensive income (loss) | 19,272 | 19,115 | |||||||||
| Treasury stock | (217,592) | (217,479) | |||||||||
| Total Amkor stockholders’ equity | 2,089,404 | 1,963,739 | |||||||||
| Non-controlling interests in subsidiaries | 27,524 | 26,500 | |||||||||
| Total equity | 2,116,928 | 1,990,239 | |||||||||
| Total liabilities and equity | $ | 5,115,388 | $ | 4,695,615 | |||||||
AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Six Months Ended June 30, | |||||||||||
| 2020 | 2019 | ||||||||||
| (In thousands) | |||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income (loss) | $ | 120,637 | $ | (31,674) | |||||||
| Depreciation and amortization | 248,036 | 268,819 | |||||||||
| Other operating activities and non-cash items | 10,151 | 33,112 | |||||||||
| Changes in assets and liabilities | (136,422) | (101,329) | |||||||||
| Net cash provided by operating activities | 242,402 | 168,928 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Payments for property, plant and equipment | (134,340) | (273,672) | |||||||||
| Proceeds from sale of property, plant and equipment | 2,389 | 8,247 | |||||||||
| Proceeds from insurance recovery for property, plant and equipment | — | 1,538 | |||||||||
| Proceeds from sale of short-term investments | 8,593 | — | |||||||||
| Proceeds from maturities of short-term investments | 13,072 | 6,469 | |||||||||
| Payments for short-term investments | (325,632) | (5,935) | |||||||||
| Other investing activities | 805 | 2,330 | |||||||||
| Net cash used in investing activities | (435,113) | (261,023) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from revolving credit facilities | 282,000 | 85,000 | |||||||||
| Payments of revolving credit facilities | (216,000) | (5,000) | |||||||||
| Proceeds from short-term debt | 62,495 | 29,781 | |||||||||
| Payments of short-term debt | (66,609) | (25,548) | |||||||||
| Proceeds from issuance of long-term debt | 225,985 | 614,375 | |||||||||
| Payments of long-term debt | (201,425) | (732,178) | |||||||||
| Payments of finance lease obligations | (4,876) | (2,746) | |||||||||
| Other financing activities | 972 | (3,865) | |||||||||
| Net cash provided by (used in) financing activities | 82,542 | (40,181) | |||||||||
| Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash | (1,177) | 1,131 | |||||||||
| Net decrease in cash, cash equivalents and restricted cash | (111,346) | (131,145) | |||||||||
| Cash, cash equivalents and restricted cash, beginning of period | 898,532 | 688,051 | |||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 787,186 | $ | 556,906 | |||||||
Forward-Looking Statement Disclaimer
This press release contains forward-looking statements within the meaning of federal securities laws. All statements other than statements of historical fact are considered forward-looking statements including all of the statements made under “Business Outlook” above. These forward-looking statements involve a number of risks, uncertainties, assumptions and other factors that could affect future results and cause actual results and events to differ materially from historical and expected results and those expressed or implied in the forward-looking statements, including, but not limited to, the following:
•health conditions or pandemics, such as COVID-19, impacting labor availability and operating capacity, capital availability, the supply chain and consumer demand for our customers’ products and services;
•dependence on the highly cyclical, volatile semiconductor industry;
•industry downturns and declines in global economic and financial conditions;
•fluctuation in demand for semiconductors and conditions in the semiconductor industry generally, as well as by specific customers, such as inventory reductions by our customers impacting demand in key markets;
•changes in our capacity and capacity utilization rates and fluctuations in our manufacturing yields;
•the development, transition and ramp to high volume manufacture of more advanced silicon nodes and evolving wafer, packaging and test technologies, may cause production delays, lower manufacturing yields and supply constraints for new wafers and other materials;
•absence of backlog, the short-term nature of our customers’ commitments, double bookings by customers and deterioration in customer forecasts and the impact of these factors, including the possible delay, rescheduling and cancellation of large orders, or the timing and volume of orders relative to our production capacity;
•changes in costs, quality, availability and delivery times of raw materials, components and equipment, including any disruption in the supply of certain materials due to regulations and customer requirements, as well as wage inflation and fluctuations in commodity prices;
•dependence on key customers or concentration of customers in certain end markets, such as mobile communications and automotive;
•dependence on international factories and operations, and risks relating to our customers’ and vendors’ international operations;
•laws, rules, regulations and policies imposed by U.S. or foreign governments, such as tariffs, customs, duties and other restrictive trade barriers, national security, data privacy and cybersecurity, antitrust and competition, tax, currency and banking, labor, environmental, health and safety, and in particular the recent increase in tariffs, customs, duties and other restrictive trade barriers considered or adopted by U.S. and foreign governments;
•laws, rules, regulations and policies within China and other countries that may favor domestic companies over non-domestic companies, including customer- or government-supported efforts to promote the development and growth of local competitors;
•fluctuations in currency exchange rates, particularly the dollar/yen exchange rate for our operations in Japan;
•competition with established competitors in the packaging and test business, the internal capabilities of integrated device manufacturers, and new competitors, including foundries;
•decisions by our integrated device manufacturer and foundry customers to curtail outsourcing;
•difficulty achieving high capacity utilization rates due to high percentage of fixed costs;
•our substantial investments in equipment and facilities to support the demand of our customers;
•there can be no assurance regarding when our factory and research and development center in Korea will be fully utilized, or that the actual scope, costs, timeline or benefits of the project will be consistent with our expectations;
•the historical downward pressure on the prices of our packaging and test services;
•any warranty claims, product return and liability risks, and the risk of negative publicity if our products fail, as well as the risk of litigation incident to our business;
•our substantial indebtedness and restrictive covenants in the indentures and agreements governing our current and future indebtedness;
•difficulty funding our liquidity needs;
•our significant severance plan obligations associated with our manufacturing operations in Korea;
•maintaining an effective system of internal controls;
•difficulty attracting, retaining or replacing qualified personnel;
•our continuing development and implementation of changes to, and maintenance and security of, our information technology systems;
•challenges with integrating diverse operations;
•any changes in tax laws (including the recent enactment of U.S. tax reform), taxing authorities not agreeing with our interpretation of applicable tax laws, including whether we continue to qualify for tax holidays, or any requirements to establish or adjust valuation allowances on deferred tax assets;
•our ability to develop new proprietary technology, protect our proprietary technology, operate without infringing the proprietary rights of others, and implement new technologies;
•natural disasters and other calamities, health conditions or pandemics, political instability, hostilities or other disruptions; and
•the ability of certain of our stockholders to effectively determine or substantially influence the outcome of matters requiring stockholder approval.
Other important risk factors that could affect the outcome of the events set forth in these statements and that could affect our operating results and financial condition are discussed in the company’s Annual Report on Form 10-K for the year ended December 31, 2019 and in the company’s subsequent filings with the Securities and Exchange Commission made prior to or after the date hereof. Amkor undertakes no obligation to review or update any forward-looking statements to reflect events or circumstances occurring after the date of this press release except as may be required by law.