TowerJazz Reports Revenues of $323 million with Net Profit of $34 million for the Third Quarter of 2018

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.