Tower soars on optimistic guidance, expansion plan

Russell Ellwanger
Russell Ellwanger

Tower Semiconductor's second quarter results beat market estimates on both revenue and earnings.

Migdal Ha'emek-based Tower Semiconductor Ltd. (Nasdaq: TSEM; TASE: TSEM), (trading as TowerJazz), headed by CEO Russell Ellwanger, reported strong results for the second quarter of 2019, which explains the sharp rise in the company's share price in the past week. The share price is up 8.20% so far in today's session on the Tel Aviv Stock Exchange.

Tower Semiconductor posted $306 million revenue in the second quarter, 11% more than in the first quarter of the year. This excludes revenue from Panasonic in the TPSCo fabs and from Maxim in the San Antonio fab, fabs that Tower Semiconductor acquired. The company said that the organic revenue growth of $20 million offset to a great extent the $22 million Panasonic revenue reduction per the revised terms of the previously announced Panasonic contract extension, and a Maxim revenue reduction per the San Antonio fab acquisition agreement. The analysts estimate for Tower Semiconductor's second quarter revenue was $303.2 million.

The company's second quarter gross profit and operating profit totaled $53 million and $18 million, respectively, compared with $63 million and $27 million in the first quarter. Tower Semiconductor's EBITDA amounted to $70 million in the second quarter, which compares with $79 million in the first quarter.

Net profit for the second quarter of 2019 was $21 million, or $0.20 diluted earnings per share, which compares with $26 million, or $0.25 diluted earnings per share, in the previous quarter. On a non-GAAP basis, net profit for the second quarter was $25 million, or $0.24 per share, $0.02 above the consensus analyst' estimate.

Free cash flow for the quarter was $28 million, with $72 million cash flow from operations and $44 million investments in fixed assets, net. Cash and cash equivalents net of short and long-term debt was $378 million at the end of the second quarter, which compares with $374 million at the end of 2018.

Shareholders' equity at the end of the second quarter was a record $1.29 billion.

In its guidance, Tower says expects revenue for the third quarter of 2019 to grow to approximately $312 million, with an upward or downward range of 5%, representing 6% quarter over quarter organic revenue growth.

Tower also announced plans for expansion. "Following substantial increase in TPSCo’s 300mm foundry utilization and a forecasted customer demand exceeding the current capacity capabilities, TowerJazz is announcing a capacity expansion plan for the Uozu fab in Japan, adding capacity for the highly differentiated 300mm RF SOI, 65nm BCD Power Management and CMOS image sensor platforms and will allocate an amount of about $100 million to this plan. Capacity is targeted to be installed during the first half of 2020," the company said.

"We are pleased with our second quarter results, having achieved strong organic growth and guiding further increased organic and total revenues growth for the third quarter," CEO Russell Ellwanger said. "We are executing on exciting opportunities within all of our business units, many of which segue into new and large served markets. Of particular interest, our 300mm activities have resulted in strong demand and forecasted excess demand for which we are now investing to fulfill."

Published by Globes, Israel business news - en.globes.co.il - on July 29, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Russell Ellwanger
Russell Ellwanger
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