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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.–(BUSINESS WIRE)–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.

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.

Contacts

Vincent Keenan

Vice President, Investor Relations

480-786-7594

vincent.keenan@amkor.com

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