Aixtron meets guidance and looks forward to growth

Strong revenues and order intake in the final quarter

Aixtron SE, a provider of deposition equipment to the semiconductor industry, has announced its financial results for 2019. Order Intake for 2019 was slightly higher than expected at €231.9 million. Orders in Q4/2019 were at €81.4 million rising by 56 percent quarter-on-quarter. Revenues were as guided at €259.6 million, Q4/2019 Revenues of €75.1 million were up by 43 percent quarter-on-quarter.

Gross profit was as guided at €108.7 million or 42 percent of revenues. Gross Profit in Q4/2019 amounted to €34.0 million (45 percent of revenues) increasing quarter-on-quarter by 54 percent. Operating result (EBIT) was slightly higher than expected at €39.0 million or 15 percent of revenues, Q4/2019 EBIT was €14.4 million (19 percent of revenues) and almost tripled quarter-on-quarter

Order Intake for 2019 was €231.9 million. The expected lower level of 2019 orders for MOCVD systems for the production of VCSELs was partially offset by demand for power semiconductors and telecommunications production systems as well as by strategic investments of our customers in Mini- and Micro LEDs production feasibility projects. In a sequential quarterly comparison, orders increased from €52.2 million in Q3/2019 to €81.4 million in Q4/2019.

Equipment order backlog was €116.7m as of December 31, 2019, 16 percent below the previous years' level. Compared to September 30, 2019, backlog increased by 8 percent from €108.4 million.

Revenues (including service and spare parts) in 2019 were broadly stable at €259.6m. 43 percent of total equipment revenues of €207.3m were generated by MOCVD systems for the production of optoelectronic components, followed by equipment for LED production (including red-orange-yellow and specialty LEDs) with 35 percent and power electronics with 18 percent. In a quarterly comparison, Revenues increased by 43 percent from €52.6 million in Q3/2019 to €75.1 million in Q4/2019.

Gross Profit in 2019 amounted to €108.7 million or 42 percent of Revenues. In a quarterly comparison, Gross Profit increased by 54 percent from €22.1 million (42 percent of Revenues) in Q3/2019 to €34.0 million (45 percent of Revenues) in Q4/2019. The Operating Result (EBIT) was €39.0 million or 15 percent of Revenues which was slightly higher than expected. In a quarterly comparison, the Operating Result almost tripled from €5.5 million (10 percent of Revenues) in Q3/2019 to €14.4 million (19 percent of Revenues) in Q4/2019.

Net profit in 2019 was €32.5 million. The year-on-year difference was largely due to the capitalisation of deferred taxes in 2018, which led to a tax credit in that year. Compared to the previous quarter, net profit almost tripled from €4.4 million in Q3/2019 to €12.2 million in Q4/2019.

Free cash flow in 2019 was €36.0 million (2018: €4.4m). The increase is mainly due to a stable level of working capital in 2019 compared with increases in the previous year.

Cash and cash equivalents including short-term financial investments (bank deposits with a maturity of at least three months) as of December 31, 2019 were €298.3 million compared to €263.7 million as of December 31, 2018.

Management Review

Bernd Schulte, president of Aixtron SE, comments: "In light of the many challenges we faced, we are very pleased with the past year. We have met our full year guidance and further strengthened our global market leadership position in MOCVD equipment. Our strategy to serve multiple end applications with one product platform has proven to be very effective in 2019: We were able to largely compensate for the somewhat weaker sales in the Laser/VCSEL segment, primarily through sales in power electronics and specialty LEDs, and thus achieve an operating result similar to that of the previous year".

"Last year we paid particular attention to the development of new or enhanced products within our product portfolio. The successful start with our new production system for SiC applications in 2019 was very promising. We expect the same from the enhancement of our next generation products for optoelectronics and power electronics, which we will be bringing to market in the course of this and next year. In addition, we expect a decision on the further development of our OLED qualification project with a major Asian display manufacturer in 2020," comments Felix Grawert, president of Aixtron SE, whose contract has been renewed.

Business Development 2019

2019 was a challenging year in which Aixtron said it successfully maintained its leading market position in MOCVD equipment and applications. Despite a market environment characterised by political and economic uncertainties, it met its full-year guidance. Free cash flow was higher than expected, mainly due to significantly higher cash inflows at the end of the reporting period.

In 2019, Aixtron invested significantly in the development of new or enhanced products for all major applications. The launch of its new fully automated, high throughput SiC production tool in September 2019 was followed by first customer qualifications and orders for the AIX G5 WW C.

As part of this comprehensive product initiative, Aixtron has been working intensively on the enhanced next generation MOCVD equipment for optoelectronics and power electronics. In doing so, it focuses on high-performance tools for the production of high quality devices based on GaAs and GaN or SiC. The new products have been or will be released in the 2020/21 timeframe. The portfolio addresses a variety of innovative applications in e-mobility (powertrains, charging infrastructure), telecommunications (5G network), display technology (mini and micro LEDs) and consumer electronics (3D sensing, fast charging).

In the OLED area, its subsidiary APEVA continued last year to work on the qualification of a Gen2 system (370 x 470 mm) together with a large Asian display manufacturer. APEVA expects a decision on the further development of this project this year.

The company's cost structure remained stable last year. At €150.9 million, cost of sales in 2019 remained at the previous year's level (2018: €151.2 million). Cost of sales as a percentage of revenues increased to 58 percent (2018: 56 percent) due to lower margin ROY LED systems shipped in the first half of the year.

At €69.7 million, operating expenses decreased both in absolute terms (2018: €76.2 million) and relative to revenues (2019: 27 percent; 2018: 28 percent).

In 2019, Aixtron become a carbon neutral company.

Guidance

For fiscal year 2020, Aixtron expects an overall stable to growing development of revenues compared to 2019. In terms of order intake, customer demand is expected across all technology areas. Due to this diversity, the development of orders in the second half of 2020 is difficult to predict. The company is optimistic about the long-term positive outlook, both for demand for MOCVD systems for the production of 3D sensing lasers or lasers for optical data transmission as well as for LED-based display applications. In particular, it expects the demand for systems for the production of power electronics made of the wideband gap materials SiC and GaN to increase again in 2020 compared to 2019.

Based on the current corporate structure, the assessment of the order situation and the budget exchange rate of 1.20 USD/EUR, the company expects order intake for the Group during 2020 to be in a range between €260 million and €300 million. With revenues in a range between €260 million and €300 million, Management expects to achieve a gross margin of around 40 percent and an EBIT margin of between 10 percent and 15 percent of revenues in fiscal year 2020. The expectations for 2020 include in full the results of the APEVA Group including all necessary investments to further advance the development of OLED activities and are based on the assumption that the coronavirus COVID-19 outbreak will not have a significant impact on the development of our business.