GT Advanced Technologies Inc. (Nasdaq:GTAT) reported results for the third quarter of fiscal year 2013, which ended September 28, 2013.
- Repays $96 million credit facility
- Resets Fiscal 2013 guidance
- Will discuss long-range outlook on webcasted conference call
The company also announced that it has entered into a multi-year supply agreement with Apple Inc. to provide sapphire material. GT will own and operate ASF® furnaces and related equipment to produce the material at an Apple facility in Arizona where GT expects to employ over 700 people. Apple will provide GT with a prepayment of approximately $578 million. GT will reimburse Apple for the prepayment over five years, starting in 2015.
Although the agreement does not guarantee volumes, it does require GT to maintain a minimum level of capacity. GT will be subject to certain exclusivity terms during the duration of the agreement. GT expects this arrangement to be cash positive and accretive to earnings starting in 2014. Gross margins from this new materials business are expected to be substantially lower than GT's historical equipment margins. However, the company believes the strategic nature of this agreement and the benefits associated with building a recurring revenue stream are important to its continued diversification.
Continuing to Drive Sapphire Manufacturing Cost Improvements
GT has accelerated the development of its next generation, large capacity ASF furnaces to deliver low cost, high volume manufacturing of sapphire material. These R&D efforts will support its non-LED initiative with its new customer and are expected to enable the expansion of GT's LED, industrial and specialty sapphire businesses by positioning GT and its equipment customers as the industry's lowest cost sapphire producers.
"We are very excited about this agreement with Apple as it represents a significant milestone in GT's long term diversification strategy," said Tom Gutierrez, GT's president and chief executive officer.
"We believe that it is in the long-term best interests of our company, employees and shareholders to build a robust sapphire materials business with recurring revenues," Gutierrez continued. "By leveraging the new materials operation and our enhanced R&D efforts, we will be well positioned to drive the growth of other sapphire opportunities, including the expansion of our LED and industrial sapphire businesses in partnership with our ASF customers. "
"We remain committed to our other established and emerging capital equipment businesses, including our HVPE solution for downstream LED manufacturing, Hyperion thin substrate solutions, silicon carbide (SiC) growth platform and technologies to drive the next-generation of low cost solar. We are encouraged by the improving market conditions in each of these sectors and the technical progress we continue to make across these platforms. As a result, we remain confident in our ability to grow these businesses over the next several years," Gutierrez concluded.
Third Quarter Financial Details
To service the sapphire material agreement announced, the company has dedicated the vast majority of its ASF capacity in the second half of 2013 to expanding its own materials capacity. This shift in business model has effectively precluded the company from shipping significant levels of ASF units to other customers during the second half of 2013 and will continue to do so for the balance of the year. Q3 results, as presented below, reflect this shift in strategy.
|| Nine-Months Ended
||Sept. 28, 2013
|| June 29, 2013
|| Sept. 29, 2012
|| Sept. 28, 2013
|| Sept. 29, 2012
Revenue for the third quarter came in at $40.3 million including $28.6 million in polysilicon, $4.4 million in photovoltaic (PV), and $7.3 million in sapphire. This compares to revenue in the second quarter of $168.3 million and $110.1 million in the third quarter of fiscal 2012. Revenue for the first nine months of 2013 was $266.4 million compared to $631.2 million for the first nine months of 2012.
Gross profit for the third quarter was $17.8 million, or 44.1 percent of revenue. This compares to $58.6 million, or 34.8 percent of revenue in the second quarter and $35.0 million, or 31.8 percent of revenue for the third quarter of fiscal 2012. Gross profit for the first nine months of 2013 was $90.0 million, or 33.8 percent of revenue compared to $247.6 million, or 39.2 percent of revenue, for the first nine months of 2012.
Non-GAAP net income was a loss of $19.4 million in the third quarter, compared to income of $18.1 million in the second quarter and $692 thousand for the third quarter of fiscal 2012. Non-GAAP net income for the first nine months of 2013 was a loss of $10.2 million compared to income of $106.0 million for the first nine months of 2012.
Net income in the third quarter was a loss of $38.1 million, compared to earnings of $11.9 million in the second quarter and $2.3 million for the third quarter of fiscal 2012. Net income for the first nine months of 2013 was a loss of $44.9 million compared to earnings of $96.2 million for the first nine months of 2012.
Non-GAAP earnings per share on a fully-diluted basis was a loss of $0.16 in the third quarter. This compares to non-GAAP earnings per share of $0.15 in the second quarter and non-GAAP earnings per share of $0.01 in the third quarter of fiscal 2012. Non-GAAP earnings per share for the first nine months of 2013 was a loss of $0.09 compared to earnings of $0.88 for the first nine months of 2012.
Earnings per share on a fully-diluted basis was a loss of $0.31 in the third quarter, compared to earnings of $0.10 for the second quarter and earnings of $0.02 for the third quarter of fiscal 2012. Earnings per share for the first nine months of 2013 was a loss of $0.37 compared to earnings of $0.80 for the first nine months of 2012.
Q3 Orders, Backlog
New orders during the third quarter were approximately $7 million including $3 million of PV and $4 million of sapphire orders.
As of September 28, 2013 the company's reported backlog was $658 million. This included $301 million in the polysilicon segment, $2 million in the PV segment and $355 million in the sapphire segment. Included in the total backlog was approximately $62 million of deferred revenue.
Cash & Debt
At the end of the third quarter, the company had cash and cash equivalents on its balance sheet totaling $258.5 million and total debt of $261.3 million which included $95.9 million related to the company's credit facility and $165.4 million related to the carrying value of the company's convertible bonds. During the quarter, operations consumed $33.5 million of cash. The company had $294.7 million of cash and cash equivalents on its balance sheet and total debt of $260.4 million at the end of the second quarter of fiscal 2013 and $479.2 million of cash and cash equivalents and $298.1 million of total debt at the end of the third quarter of fiscal 2012.
Pay Down of Credit Facility
Subsequent to the close of the third quarter, the company used approximately $96 million of cash to pay down its credit facility and terminate its credit agreement in order to eliminate restrictions that would have impeded its ability to pursue the sapphire materials agreement announced.
Given the impact of its shift from ASF equipment sales to building ASF capacity for its own internal use as the company prepares to service the Apple agreement, GT is revising guidance for fiscal year 2013, which ends December 31, 2013, as follows:
- Revenue in the range of $290 million to $320 million
- Gross margin in the range of 30% to 32%
- Non-GAAP EPS in the range of a loss of $0.40 to a loss of $0.50
In addition to the items typically excluded from non-GAAP, the company's non-GAAP EPS guidance excludes restructuring charges, asset impairment charges, any potential DSS Purchase Order cancellation fees and any gain/loss associated with the disposition of the company's facility in St. Louis.
The company also indicated that it expects 2014 revenues to be in the range of $600 to $800 million with its sapphire segment comprising up to approximately 80% of the year's total revenue. The company's sapphire segment will include its ASF equipment business, its LED, industrial and specialty materials business, and the new materials business with Apple.
The company will discuss its 2014 and long-range outlook during its webcasted conference call. See below for details.
Conference Call, Webcast
Monday, November 4, 2013, at 5:00pm ET the company will host a live conference call with Tom Gutierrez, president and chief executive officer, and Richard Gaynor, chief financial officer, to discuss its third quarter FY2013 results, FY2013 guidance and outlook for FY2014 and beyond.
The call will be webcast live and can be accessed by logging on to the "Investors" section of GT Advanced Technologies' website, http://investor.gtat.com/. A slide presentation will accompany the call. The live call can also be accessed by dialing (631) 291-4543. No password is required to access the webcast or call.
A replay of the call will be available. To access the webcast replay, which will be available for 90-days, please go to http://investor.gtat.com/ and select the webcast replay link on the 'Events and Presentations' page. Or, please dial (404) 537-3406. The telephone replay will be available through November 12, 2013 and requires the passcode 78524470.
Investor Financial Summary Document
A comprehensive summary of the company's financial performance can be found on the Investor Relations section of its website on the "Q3 FY13 Earnings Call" webcast page. To access: http://investor.gtat.com.
About GT Advanced Technologies Inc.
GT Advanced Technologies Inc. is a leading diversified technology company producing advanced materials and innovative crystal growth equipment for the global consumer electronics, power electronics, solar and LED industries. Its technical innovations accelerate the use of advanced materials, enabling a new generation of products across this diversified set of global markets. For additional information about GT Advanced Technologies, please visit www.gtat.com.