EANS-Adhoc: ams AG / ams reports second quarter revenues at mid-point and profitability at top end of expectation range; resilient consumer demand compensates for Automotive and Industrial weakness ... EAE

Wednesday, 29. July 2020 07:02
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Selected financial information for the second quarter and first half 2020

Quarterly Report
29.07.2020

Premstaetten - (PR title cont'd) ... very good third quarter expected despite
Covid-19 with ams revenues of USD 530-570 million, up 20% quarter-on-quarter at
midpoint, and strong ams adj. EBIT margin of 21-24% reflect­ing consumer ramps;
OSRAM acquisition successfully closed, moving towards start of integration

Premstaetten, Austria (29 July 2020) -- ams (SIX: AMS), a leading worldwide
supplier of high performance sensor solutions, reports record revenues for the
second quarter, up 13% year-on-year and at the mid-point of the expectation
range, with strong adjusted operating profitability at the top end of the
expectation range. This growth was driven by demand in ams' consumer business,
even with the ongoing Covid-19 pandemic and its macro-economic and end market
impact which resulted in muted automotive and industrial demand. Despite these
factors ams expects a very good third quarter with revenues of USD 530-570
million and continued strong profitability resulting in an adjusted operating
(EBIT) margin of 21-24%.

Second quarter group revenues were USD 460.3 million, down 8% sequentially from
the first quarter and up 13% from USD 407.3 million in the same quarter 2019.
Group revenues for the first half of 2020 were USD 960.9 million, up 22%
compared to USD 785.8 million recorded in the first half of 2019. Adjusted gross
margin for the second quarter was 40% (excluding acquisition-related and share-
based compensation costs) compared to 37% in the same quarter 2019 (37%
including acquisition-related and share-based compensation costs, 35% in the
same quarter 2019). For the first half of 2020, adjusted gross margin was 40%
(excluding acquisition-related and share-based compensation costs) compared to
35% in the first half of 2019 (37% including acquisition-related and share-based
compensation costs, 32% in the first half of 2019).

The adjusted result from operations (EBIT) for the second quarter was USD 90.1
million or 20% of revenues (excluding acquisition-related and share-based
compensation costs), increasing from USD 49.0 million in the same period 2019
(USD 39.2 million or 9% of revenues including acquisition-related and share-
based compensation costs, up from USD 21.5 million in the same period 2019). For
the first half of 2020, the adjusted EBIT was USD 191.0 million or 20% of
revenues (excluding acquisition-related and share-based compensation costs),
significantly up from USD 71.8 million in the same period 2019 (USD 99.0 million
or 10% of revenues including acquisition-related and share-based compensation
costs, up from USD 17.1 million in the first half year 2019).

For transparent and consistent presentation of ams' business ams shows the net
result and earnings per share adjusted for acquisition-related and share-based
compensation costs from this quarter onwards, corresponding to adjusted gross
profit and adjusted operating profit (EBIT). Adjusted net income for the second
quarter was USD 56.8 million (excluding acquisition-related and share-based
compensation costs), compared to USD 52.2 million for the same period 2019
(second quarter 2020: USD 5.9 million including the aforementioned costs).
Adjusted basic/diluted earnings per share for the second quarter were CHF 0.21/
0.20 or USD 0.22/0.20 based on 256,750,833/261,613,899 shares or CHF 0.02/0.01
or USD 0.02/0.01 including the aforementioned costs (second quarter 2019: CHF
0.66/0.61 or USD 0.65/0.60 based on 80,773,555/86,504,145 shares; all weighted
average).

Adjusted net income for the first half year 2020 was USD 82.2 million (excluding
acquisition-related and share-based compensation costs), compared to USD 70.2
million for the same period 2019 (first half 2020: USD -9.8 million including
aforementioned costs). Adjusted basic/diluted earnings per share for the first
half were CHF 0.47/0.50 or USD 0.48/0.52 per share based on 169,720,047/
175,619,483 shares or CHF -0.06/0.00 or USD -0.06/0.00 including aforementioned
costs (first half 2019: CHF 0.89/0.88 or USD 0.87/0.86 based on 80,504,466/
81,864,338 shares; all weighted average).

Operating cash flow for the second quarter was USD 106.2 million, strongly up
from USD 49.7 million in the same quarter 2019, and operating cash flow for the
first half was USD 340.6 million, significantly higher than USD 142.9 million in
the first half 2019. Total backlog on 30 June 2020 (excluding consignment stock
agreements) was USD 249.6 million compared to USD 255.1 million at the end of
the first quarter 2020 and USD 298.4 million on 30 June 2019.

ams' business showed a very good performance in the second quarter and first
half of 2020 against the backdrop of the continuing impact of Covid-19 on
economies and end markets worldwide. ams achieved second quarter results at the
midpoint or upper end of the published expectation range. This positive
development was again driven by ams' consumer business and continuing resilient
demand in the consumer market overall.

As the key development in the second quarter ams is proud to have successfully
closed the acquisition of OSRAM on 9 July 2020. Following the closing ams owned
69% of OSRAM shares (excluding treasury shares) at a transaction value of around
EUR 2.7 billion, as of today ams has further increased its holdings to around
71% of OSRAM shares. Prior to the closing and shortly afterwards, ams
successfully placed a multi-tranche issue of around EUR 1.25 billion equivalent
5-year senior notes with international inves­tors comprising EUR 850 million and
USD 450 million notes in total. The debt issue served to secure a long-term
financing structure for the acquisition in line with ams' plans. Beyond that it
is ams' intention to utilize future excess cash flow from operations to support
increasing its OSRAM shareholdings further.

The closing was a vital milestone for this highly strategic and transformative
acquisition that will now combine the complementary strengths of ams and OSRAM.
ams is bringing together two leaders in their respective areas and is fully
convinced of the outstanding technology, market and earnings potential of this
combination. ams is welcoming OSRAM's worldwide employees into the new global
combined company team and is aligning all necessary steps to start integrating
both organizations.

With ams and OSRAM now coming together, ams has defined a vision for the
combined company: to create the uncontested leader in optical solutions. To this
end, ams will focus on the three areas of Sensing, Illumination and
Visualization offering exciting solutions for innovative applications. ams looks
forward to building an outstanding technology platform delivering strong
profitability and growth. This encompasses bold technology investments in
innovation and ongoing smart transformation of the company in line with ams'
vision.

ams has declared the intention to pursue a domination and profit and loss
transfer agreement (DPLTA) for OSRAM and is driving towards implementing this
step. As ams is keen to realize this agreement in a timely manner ams is already
engaged in required preparations. Based on these and ams' current assessment,
ams regards an implementation of a DPLTA broadly around year-end 2020 as a
feasible timeline following required approvals. ams will provide further
information on the timeline and the steps involved as this information becomes
available. On the basis of the DPLTA ams will be able to drive and accelerate
the integration and alignment of ams' and OSRAM's businesses in the most
efficient way to build a strongly profitable combined company within the next
years.

Notwithstanding the DPLTA process ams is now starting to work closely with OSRAM
on the basis of ams' majority share ownership, taking first steps towards a
successful integration of the two companies. These include joint initiatives to
prepare the future organizational and business structure, align joint customer-
facing marketing and sales activities and set up combined financial management
and reporting. At the same time, ams is in the process of realizing its
representation on the Supervisory Board of OSRAM where ams plans to take four
seats. In this context OSRAM will remain an independent majority-owned listed
subsidiary of ams until additional steps such as a DPLTA are concluded and
implemented.

As ams moves towards the combination, ams is making profitability, earnings
growth and cash flow generation the primary focus for all its businesses as well
as the combined company. ams will therefore drive its strategic positioning and
portfolio in strong alignment with these target metrics.

Looking at ams' business, ams' consumer solutions once more provided the largest
contribution to its overall results in the second quarter and first half.
Leading in optical sensing ams' market position is based on ams' wide range of
solutions for 3D sensing including VCSEL (Vertical Cavity Surface-Emitting
Laser) illumination, high quality display management including behind-OLED
(BOLED) sensing, micro-scale proximity sensing, spectral and bio-sensing, and
other optical applications.

As a key player in 3D sensing ams leverages an extensive portfolio and industry-
leading system know-how and address all architectures, structured light (SL),
time-of-flight (iToF/dToF), and active stereo vision (ASV). Building on its
advanced VCSEL products and optics capabilities for front-side and world-facing
use ams offers high performance 3D illumination for SL, ToF and ASV. ams is
shipping high volume 3D sensing products to the leading smartphone OEMs with the
Android market contributing attractively in the first half. Here ams serves
several platforms with different VCSEL 3D illumination solutions for world-
facing iToF 3D sensing. These camera enhancement systems have become successful
in the market as they allow OEMs to offer significantly improved picture
quality. ams is extending its 3D sensing focus and technology offering through
the targeted integration of high quality NIR image sensing for specific
architectures. Further expanding ams' coverage of 3D technology and its system
expertise, this roadmap enables solution designs where ams' NIR technology can
drive high QE and other performance aspects.

In display management, behind-OLED (BOLED) light and proximity sensing solutions
are continuing their adoption in major Android platforms through this year.
Eliminating bezel-placed components from the device face, ams' unmatched
technology makes light and proximity sensing invisible by measuring from behind
the OLED display. Leading Android OEMs have been driving penetration of the
technology which is becoming a common entry on high-end feature lists. Against
this backdrop ams is realizing an expanding multi-generation BOLED roadmap for
the coming years. Across its overall display management portfolio ams is
shipping very high volumes of differentiated sensing solutions to top consumer
OEMs.

ams focuses on innovation in optical sensing through ongoing significant R&D
investments for new technologies and applications. ams already introduced
innovative technology for camera automatic white balancing (AWB) earlier this
year where ams' highly accurate spectral sensor opens a new way of boosting
mobile camera performance. Precise spectrum analysis of the light environment
enables previously impossible white balancing accuracy for smartphone cameras
through advanced optical sensing. This drives significantly better picture
quality and excellent natural color expression for outstanding results and
measurable benchmark improvement. The solution is shipping in high volume into a
first flagship platform and ams expects broader adoption of the technology going
forward.

ams is pursuing a development roadmap for dToF 3D technology, a more complex ToF
architecture that offers significant advantages for longer distances. High
performance dToF illumination and systems that build on ams' industry-leading 3D
illumination and sensing expertise are an innovation focus for the next years as
ams sees dToF emerging into an important 3D area and market interest in future
world-facing applications is growing. ams continues development activities to
create front-facing 3D sensing technology for face authentication behind the
display, making it invisible and eliminating components from the device face.
Leveraging ams' singular BOLED know-how and 3D system capabilities which are
built around VCSEL illumination, NIR sensing, software and algorithms ams plans
to demonstrate BOLED 3D technology using ASV around year-end. Later on, ams
plans to explore potential architectures for BOLED 3D sensing related to SL. All
in all, ams sees dToF and BOLED 3D technology as very attractive opportunities
for the coming years. Audio sensing which includes ams' range of active noise
cancelling solutions performed in line with expectations based on ams' strong
position in high performance digital and hybrid noise cancelling technologies.

Looking out into the next years, ams sees a number of new optical sensing
opportunities and potential applications ams is pursuing across the top
smartphone OEMs. These are based on ams' strong relationships and high level of
engagement at each of these customers. ams is working to bring new and better
solutions to customers that are driven by ams' focus on high value innovation
and differentiating capabilities.

ams' automotive, industrial, and medical businesses as a whole showed a muted
performance in the second quarter and first half. This development reflected
expectations due to the continued impact of Covid-19 though end markets differed
in the respective effects recorded. In Automotive, global demand weakness and
lowered automotive production remained apparent in order trends and volume
requirements so ams' business performed in line with expectations. ams navigates
through this challenging environment looking forward to a more significant
strengthening of automotive production globally. ams is well positioned for
attractive automotive sensing markets in safety, driver assistance/autonomous
driving, position sensing, and chassis control, and continues to invest in R&D
and project-based development efforts.

For 3D LIDAR ams supports illumination in several programs at different Tier 1
system suppliers where ams' high power VCSEL arrays enable advanced scan/non-
scan LIDAR architectures. Beyond this, ams is seeing ongoing good market
traction in LIDAR from its partnership with LIDAR technology leader IBEO. ams'
internal VCSEL production, where a ramp-up continues through this year, is
already fully automotive qualified which offers further differentiation in the
VCSEL market. The emerging area of optical in-cabin sensing (ICS) shows positive
momentum as OEM and Tier 1 suppliers are highly interested in new in-cabin
comfort and safety applications such as monitoring. ams is developing products
for first secured ICS projects including illumination and sees future
opportunities around its 3D solution capabilities.

ams industrial business also recorded a continued subdued performance in the
second quarter reflecting ongoing weak demand in industrial markets due to
Covid-19 impacts worldwide. As ams progresses towards recovery of demand its
broad customer base and leading position in high performance sensing for
industrial and factory automation, HABA, imaging and other industrial uses
remain supportive factors in the current environment. Built around ams' leading
global shutter technology, ams' imaging business for industrial applications and
machine vision saw a similar development and performed in line with
expectations.

ams' medical business continued to perform well in the second quarter in
contrast to other AIM markets. ams is a leading supplier of medical imaging
solutions for CT, digital X-ray, and mammography as well as miniature camera
endoscopy. In light of the Covid-19 pandemic ams has been fulfilling demand for
broader deployment of computed tomography (CT) scanners that help clinical
Covid-19 diagnostics. Driving innovation ams notes positive momentum for its
recently announced new use of spectral sensing technology in medical lateral
flow testing (LFT). Here ams enables fast diagnostics by optically analyzing LFT
results at the point-of-care with very high accuracy. ams has announced a
partnership with European medical test manufacturer Senova for an integrated LFT
test kit for Covid-19 antibody identification that incorporates ams' spectral
sensor, and expects first production runs to start in the second half of this
year. Given the strength of ams' unmatched technology ams is already exploring
several additional industry partnerships for different medical LFT uses and sees
a meaningful growth opportunity for the coming years.

In manufacturing operations, ams has maintained volume production in all its
locations despite the continued Covid-19 related restrictions and challenges. As
ams continues detailed measures to safeguard the health of its employees as well
as the ability to manufacture ams remains fully aligned with customer
requirements and able to support evolving customer demand. ams' Singapore
manufacturing showed a strong operational performance through the first half and
ams expects this to continue as capacity utilization increases with expected
higher production volumes in the third quarter and second half. Capital
expenditures remained low through the first half of 2020, even when compared to
2019, underlining the successful management of investment requirements for ams'
business. ams therefore expects capital expenditures to continue to be limited
for the remainder of the year.

For the third quarter 2020, ams expects very good growth for the ams business
despite the ongoing Covid-19 pandemic impacting economies and its end markets,
on a sequential basis. This growth will be driven by volume ramps for smartphone
sensing solutions while ams' non-consumer business in Automotive and Industrial
continues to show limited demand and provide a muted contribution to the
results. ams will be fully consolidating OSRAM as of the beginning of the third
quarter 2020 and intends to include OSRAM as a separate reporting segment. Going
forward, ams plans to continue its practice of providing a financial outlook for
the current quarter. Given the current financial guidance structure of OSRAM,
however, ams' financial outlook for the third quarter 2020 below only comprises
the ams business.

Based on available information and the above mentioned definition, ams expects
third quarter revenues for the ams business of USD 530-570 million, up 20%
sequentially at the midpoint. This positive outlook encompasses strength in ams'
consumer business compensating for ongoing demand weakness in the majority of
ams' non-consumer business. Despite this situation, ams also expects robust
profitability for the third quarter with an expected adjusted operating (EBIT)
margin of 21-24%, on the basis of ams' operational strength. The expectations
above assume no further unforeseen negative effects from the Covid-19 pandemic
that would result in a meaningful negative impact on ams' business.

The half year report 2020 including additional financial information is
available on the company website at https://ams.com/financial-reports [https://
ams.com/financial-reports].

###

Important notice:
This announcement may contain statements about ams and/or its subsidiaries
(together "ams Group") that are or may be "forward-looking statements". Forward-
looking statements include, without limitation, statements that typically
contain words such as "anticipate", "target", "expect", "estimate", "intend",
"plan", "believe", "hope", "aims", "continue", "will", "may", "should", "would",
"could", or other words of similar meaning. By their nature, forward-looking
statements involve risks and uncertainties because they relate to events and
depend on circumstances that may or may not occur in the future. ams cautions
you that forward-looking statements are not guarantees of the occurrence of such
future events or of future performance and that in particular the actual results
of operations, financial condition and liquidity, the development of the
industry in which ams Group operates and the outcome or impact of the
acquisition and related matters on ams Group may differ materially from those
made in or suggested by the forward-looking statements contained in this
announcement. Any forward-looking statements speak only as at the date of this
announcement. Except as required by applicable law, ams does not undertake any
obligation to update or revise publicly any forward-looking statement, whether
as a result of new information, future events or otherwise.

About ams
ams is a global leader in the design and manufacture of advanced sensor
solutions. Our mission is to shape the world with sensor solutions by providing
a seamless interface between humans and technology.
ams' high-performance sensor solutions drive applications requiring small form
factor, low power, highest sensitivity and multi-sensor integration. Products
include sensor solutions, sensor ICs, interfaces and related software for
consumer, communications, industrial, medical, and automotive markets.
With headquarters in Austria, ams employs around 9,000 people globally and
serves more than 8,000 customers worldwide. ams is listed on the SIX Swiss
Exchange (ticker symbol: AMS). More information about ams can be found at https:
//ams.com [https://ams.com/]

Join ams social media channels:
>Twitter [https://twitter.com/amsAnalog] >LinkedIn [https://www.linkedin.com/
company/ams-ag] >Facebook [https://www.facebook.com/amsAnalog] >YouTube [https:/
/www.youtube.com/user/amsAnalog]

ams is a registered trademark of ams AG. In addition many of our products and
services are registered or filed trademarks of ams Group. All other company or
product names mentioned herein may be trademarks or registered trademarks of
their respective owners. Information provided in this press release is accurate
at time of publication and is subject to change without advance notice.

Further inquiry note:
Moritz M. Gmeiner
Vice President Investor Relations
Tel: +43 3136 500-0
Fax: +43 3136 500-931211
Email: investor@ams.com

end of announcement                         euro adhoc
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issuer:       ams AG
              Tobelbader Strasse   30
              A-8141 Premstaetten
phone:        +43 3136 500-0
FAX:          +43 3136 500-931211
mail:         investor@ams.com
WWW:          www.ams.com
ISIN:         AT0000A18XM4
indexes:      
stockmarkets: SIX Swiss Exchange
language:     English

EAX0003    2020-07-29/07:02

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