TowerJazz Announces Second Quarter 2016 Results: Record Revenue of $305 million with Year over Year Growth of 29%, Increased Margins and Net Profit

Provides Third Quarter Revenue Guidance of $325 million, 33% Year over Year Growth

MIGDAL HAEMEK, Israel, Aug. 04, 2016 (GLOBE NEWSWIRE) -- TowerJazz (NASDAQ:TSEM) (TASE:TSEM) today reported results for the second quarter of 2016 ended June 30, 2016.

Highlights

  • Record revenues for the second quarter of 2016 of $305 million, 29% year over year growth;
  • Record EBITDA of $87 million, up 48% year-over-year;
  • Net profit of $38 million with basic earnings per share of $0.45, as compared with $8 million, or $0.10 basic earnings per share, in the second quarter of last year;
    • Excluding San Antonio fab acquisition gain and banks’ early repayment impact, net profit for the second quarter of 2016 was $35 million, analogous to $25 million in the first quarter of 2016 and $8 million in the second quarter of 2015;
  • Cash from operations of $82 million  as compared to $51 million for the second quarter of 2015, with free cash flow of $27 million as compared with $12 million for the second quarter of 2015;
  • Cash and short-term deposits balance as of June 30, 2016 of $311 million as compared to $245 million as of March 31, 2016;
  • Early repayment of Israeli bank loans through issuance of unsecured straight bonds due 2020-2023 carrying 2.79% coupon enabling greater business flexibility;
  • Third quarter revenue guidance with mid-range of $325 million, representing 33% year over year growth; 11 consecutive quarters of year-over-year growth and 6 consecutive quarters of quarter over quarter growth.

CEO Commentary
Mr. Russell Ellwanger, Chief Executive Officer of TowerJazz, commented, “Our strategy to answer the major analog trends, aligned with customers that are the leaders in their respective sectors, has proven itself. Having achieved a $1.2 billion annualized revenue run rate in the second quarter of 2016 with annualized $150 million net profit, and guiding a $1.3 billion run rate for the third quarter, up 30% over the fourth quarter of 2015 achieved target of $1 billion run rate, is a substantial verification of this strategy. Our major focus remains those trends that drive the Internet of Things namely seamless connectivity, low power consumption and sensors. To address those trends, our business units serve multiple diversified and growing application segments with unique and differentiated technology offerings.”

Second Quarter Results Overview
Revenues for the second quarter of 2016 were a record of $305 million, reflecting 29% growth as compared with $236 million in the second quarter of 2015 and 10% higher than $278 million in the immediately preceding quarter.

Second quarter of 2016 gross, operating profits and margins increased as compared with the second quarter of 2015 and with the immediately preceding quarter, mainly driven by the success of our strategy for capacity growth executed in Fab 2 and Fab 3, cross qualification and offloading optimization activities, as well as TPSCo third party customers’ revenue growth.

Gross profit for the second quarter of 2016 was $73 million or 24% gross margin. This represents an increase as compared with $52 million in gross profit in the second quarter of 2015 or 22% gross margin.

Operating profit for the second quarter of 2016 was $40 million, or 13% operating margin, as compared with $22 million reported in the second quarter of 2015 with 9% operating margin.

Net profit for the second quarter of 2016 was $38 million, or $0.45 basic earnings per share. Net profit for the second quarter of 2016 included $7 million non-cash financing expenses relating to the early repayment of the Israeli banks’ loans recorded in accordance with US GAAP ASC 825 and $10 million net gain from the acquisition of the San Antonio fabrication facility by TowerJazz Texas (“TJT”), calculated in accordance with US GAAP ASC-805 “Business Combinations”. Provisional gain from the San Antonio fab acquisition, net recorded during the six months ended June 30, 2016, totaled $51 million. Net profit was $8 million in the second quarter of 2015, and $66 million in the first quarter of 2016, which included $41 million gain from the San Antonio fab acquisition.

Excluding the San Antonio fab acquisition gain and banks’ early repayment impact, net profit for the second quarter of 2016 was $35 million, analogous to $25 million in the first quarter of 2016 and $8 million in the second quarter of 2015.

EBITDA for the second quarter of 2016 totaled $87 million, representing a 29% EBITDA margin. This represents a 48% increase as compared with $59 million or 25% EBITDA margin in the second quarter of 2015 and a 12% sequential increase as compared with $78 million or 28% EBITDA margin in the immediately preceding quarter.

On an adjusted basis, as described and reconciled in the tables below, adjusted net profit for the second quarter of 2016 was $40 million, as compared with $12 million for the second quarter of 2015 and $32 million in the immediately preceding quarter.

During the quarter, $113 million, net of fees was raised from the issuance of bonds, which carry a 2.79% annual coupon and are repayable in 2020-2023 (of which $2 million were held in escrow and received in July 2016 after all Israeli bank liens were released). Following this fundraising, the Company prepaid its entire $78 million outstanding Israeli bank loans.

During the second quarter of 2016, the Company generated $82 million cash from operations and invested $54 million in fixed assets, resulting in $27 million positive free cash flow. During the quarter, the Company received customer prepayments of $11 million, net, which were invested for capacity expansion equipment that are included in the $54 million investments noted above.

Cash and short-term deposits as of June 30, 2016 were $311 million, as compared with $245 million as of March 31, 2016, $206 million as of December 31, 2015 and $143 million as of June 30, 2015.

Shareholders' equity as of June 30, 2016 was $559 million, an increase of 11% as compared with $504 million as of March 31, 2016, an increase of 45% as compared with $386 million as of December 31, 2015 and an increase of 86% as compared with $300 million as of June 30, 2015.

Net debt amounted to $51 million as of June 30, 2016 as compared with net debt of $65 million as of March 31, 2016 and net debt of $105 million as of December 31, 2015.

First Half Results Overview
Revenues for the 2016 first half were a record of $583 million, reflecting 26% growth as compared with the first half of 2015.

Gross and operating profit for the first half of 2016 were $134 million and $71 million, respectively, representing 23% and 12% margins, as compared with $85 million and $24 million, or 19% and 5% margins, respectively, in the first half of 2015.

Net profit for the first half of 2016 was $104 million, or $1.22 in basic earnings per share. Net profit for the first half of 2016 includes $51 million gain from of the acquisition of San Antonio fab and $7 million non-cash financing expenses relating to the Israeli banks loans early repayment.  Net loss for the six months ended June 30, 2015 was $65 million and included $73 million non-cash finance expense associated with Bonds Series F accelerated conversion in accordance with US GAAP ASC 470-20.

EBITDA for the first half totaled $165 million, representing a 28% EBITDA margin. This represents a 50% increase as compared with $110 million, or 24% EBITDA margin, in the first half of 2015.

Business Outlook
TowerJazz expects revenues for the third quarter of 2016 ending September 30, 2016 to be $325 million, with an upward or downward range of 5%, representing approximately 33% year over year revenue growth as compared with the third quarter of 2015 and 7% growth as compared with the second quarter of 2016.

Teleconference and Webcast
TowerJazz will host an investor conference call today, August 4, 2016, 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 5:00 p.m. Israel time) to discuss the Company’s financial results for the second quarter 2016 and its third quarter 2016 outlook. This call will be webcast and can be accessed via TowerJazz’s website at www.towerjazz.com , or by calling: 1-888-668-9141 (U.S. Toll-Free), 03-918-0610 (Israel), +972-3-918-0610 (International).  For those who are not available to listen to the live broadcast, the call will be archived for 90 days.

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