Tower Semiconductor Ltd. (Nasdaq: TSEM; TASE: TSEM), which trades as TowerJazz, released its third quarter results today, and disappointed investors, missing estimates for both revenue and profit. If that were not enough, the company also provided disappointing guidance for the rest of the year. Tower's share price responded with a fall of more than 10% on the resumption of trading in the stock.
Tower's revenue for the third quarter of 2018 was $323 million, which compares with a consensus analysts' estimate of $335 million. Revenue in in the corresponding quarter of 2017 was $355 million. The company expects revenue for the fourth quarter to be approximately $340 million, below the analysts' estimate of $365 million, and below the company's own previous guidance of $360-380 million.
Gross and operating profit for the third quarter of 2018 were $73 million and $39 million, respectively, which compare with $79 million and $44 million, respectively, in the prior quarter, and $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, which compares with $38 million, or $0.38 basic earnings per share and $0.37 diluted earnings per share, in the prior quarter and $55 million, or $0.56 basic earnings per share and $0.54 diluted earnings per share, in the third quarter of 2017.
Here too, Tower missed the earnings per share estimate for the third quarter of 2018 of $0.39-0.42.
Cash (including marketable securities), net of gross debt, totaled $315 million at the end of the third quarter, up from $226 million at the end of 2017.
This is the third consecutive quarter of disappointing results from Tower. CEO Russell Ellwanger attributes this to an erroneous strategy adopted in at the beginning of the year, and to a slowdown in world markets.
"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," Ellwanger said. "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.
“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. We have a base of technology and customer engagements that will provide engines for growth for the next several years.”
Published by Globes, Israel business news - en.globes.co.il - on October 29, 2018
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