Aixtron posts Q3 results

Company expects increase in both order intake and sales in Q4

Deposition equipment firm Aixtron has announced its financial results for the first nine months and the third quarter 2019. Revenues increased to €184.6 million (+2 percent) compared to previous year. Operating result (EBIT) increased to €24.5 million year-on-year (+18 percent). Operating expenses improved to €50.2 Million year-on-year (-13 percent). Order intake in Q3/2019 rose to €52.2 million (+17 percent).

Business Development

In Q3/2019, as expected, the order situation showed a slight recovery compared to the previous quarter. Sales were lower than in the previous quarters, partly due to longer than expected processes to grant export licenses. Nevertheless, sales for the first nine months of 2019 increased slightly year-on-year. An increase in both order intake and sales is expected for the fourth quarter of the year.

In September 2019, Aixtron officially unveiled its new fully automated SiC production system as part of the review of its technology and product portfolio, and has already received initial orders from the industry for the delivery of this system.

Its Gen2 OLED system is being operated in a pilot production line at our customer‘s plant jointly by engineers from our customer and our subsidiary APEVA in a pilot production line. At present, intensive efforts are being made to optimize the system as well as the process parameters for manufacturing OLEDs using the OVPD process. This is expected to confirm the performance of the OVPD technology in the coming months and create the data required for the customer‘s decision to place a follow-up order for a further OVPD tool.

As expected, order intake including spare parts and service declined by 35 percent year-on-year to €150.6m in 9M/2019.

Equipment order backlog as of September 30, 2019 decreased by 29 percent year-on-year to €108.4m. Revenues in 9M/2019 increased by 2 percent year-on-year to €184.6m. With a share of 44 percent, MOCVD systems for optoelectronics made the largest contribution to equipment revenues, while the LED systems business accounted for 39 percent of equipment revenues.

Power electronics equipment accounted for 13 percent of equipment revenues. Cost of sales rose from €102.7m in 9M/2018 to €109.8m in 9M/2019 representing 60 percent of revenues in the first nine months of 2019 (9M/2018: 57 percent).

Parallel to the slight year-on-year decline in gross margin to 40 percent due to a change in the product mix, gross profit also fell by 4 percent to €74.7m in 9M/2019. At €50.2m, operating expenses were down 13 percent on the previous year (9M/2018: €57.6m), mainly due to increased other income. Operating result (EBIT) in 9M/2019 improved year-on-year by 18 percent to €24.5m. This development is mainly attributable to the business and cost development described above.

Net profit in 9M/2019 was lower year-on-year at €20.2m. However, the prior-year period was positively impacted by the recognition of deferred tax assets of €9.0m in 9M/2018.

Free cash flow in the first nine months of 2019 amounted to €-2.7m. The negative free cash flow in 9M/2019 was mainly due to the increased working capital, including investment in beta tools, as well as the growth of inventories and reflects the current order situation. Cash including other financial assets (bank deposits with a maturity of at least three months) amounted to €260.6m as of September 30, 2019, slightly below the level as of December 31, 2018 but higher than June 30, 2019 (December 31, 2018: €263.7m; June 30, 2019: €258.9m).

Management Review

Bernd Schulte, president of Aixtron SE, said: "Overall, business development up to September 30, 2019, was in line with our expectations, even though the prolonged review of export licensing had an impact on Q3 results. However, the increased order intake in the third quarter makes us optimistic that we will achieve our targets for the current fiscal year. The further reduction in costs as well as the still advantageous USD/€exchange rate are helping us to achieve our targets".

"We continue to assess the medium- and long-term prospects for our core markets in optoelectronics and power electronics as positive. As the market and technology leader in optoelectronics, we are in an excellent position both in laser and special LED applications as well as in power electronics. At the end of September, we presented our new production system for SiC to the public, for which we have received positive customer feedback and initial orders in recent months. In addition, our OLED subsidiary APEVA is working intensively with our customers to prove the performance of the OVPD technology and thus to create the decision-making basis in favour of a follow-up order for a further OVPD system - even if we do not expect this in the current fiscal year," adds Felix Grawert, president of Aixtron SE.

Guidance

Based on the good results for the first nine months of 2019 and the assessment of the development of demand in the current market environment, Aixtron Management firms up its forecast for 2019 sales and orders. Accordingly, management expects a stable revenue development compared to 2018. In the final quarter of the year, despite low visibility a further increase in demand is expected.

Based on the 9M/2019 results, the present assessment of the order situation and the budget exchange rate of 1.20 USD/EUR, management refines its forecast for 2019, now expecting to receive orders for the current financial year of around €220 million (previously: €220 million to €260 million). With revenues of around €260 million (previously: €260 million to €290 million), management expects to achieve a gross margin of around 40 percent and an EBIT of around 13 percent of revenues in 2019. Furthermore, Management anticipates a free cash flow around €15 million in 2019 (previously €15 million to €25 million). This forecast takes the longer than expected review processes for granting export licences as well as the expectation of a follow up OLED order no longer in the financial year 2019 into account. Expectations for 2019 fully include the results of Aixtron‘s APEVA subsidiary, including all necessary investments to continue the development of OLED activities.

Developments in Aixtron‘s markets are positive. In particular, the increasing use of lasers in optical data transmission and 3D sensor technology, the expansion of the 5G network and the increasing use of energy-efficient power electronics are expected to lead to further growth in the corresponding target markets.