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Tower Semiconductor Ltd. Investor Presentation 2016
7095_rns_2016-05-18_8e8d6bec-89d7-478a-b0b2-8332d20d5517.pdf
Investor Presentation
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May 2016
Disclaimers
Forward Looking Statements
This presentation contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and beliefs and are subject to a number of risks, uncertainties and assumptions that could cause actual results to differ materially from those described in the forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. For example, statements regarding expected (i) customer demand, (ii) utilization and cross utilization of our Fabs, (iii) growth in our end markets, (iv) market and technology trends, and (v) growth in revenues, cash flow, margins and net profits are all forward-looking statements. Actual results may differ materially from those projected or implied by such forward-looking statements due to various risks and uncertainties risks applicable to TowerJazz's business as described in the reports filed by Tower Semiconductor Ltd. ("Tower") the Securities and Exchange Commission (the "SEC") and the Israel Securities Authority ("ISA"), including the risks identified under the heading "Risk Factors" in Tower's most recent filing on Forms 20-F as filed with the SEC and in Section 3.7 of Tower's Shelf Prospectus filed as an Other Report or Announcement with the ISA on May 10, 2016. These filings identify and address important factors that could cause TowerJazz's future financial and operational results to differ materially from those contained in the forward-looking statements set forth in this document. Accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what impact they will have on the results of operations or financial condition of TowerJazz.
TowerJazz is providing this information as of the date of this presentation and expressly disclaims any obligation to update any of the forward-looking statements or other information contained in this document as a result of new information, future events or otherwise.
The Global Specialty Analog Foundry
Specialty Analog IC Manufacturing
- Proprietary Process Technology
- Analog-Accurate Design Kits
- Design Services
- Global manufacturing capacity
** TowerJazz Proprietary Information **
Specialty Foundry Advantages
| Digital Moore's Law Foundries | Specialty Analog Foundries | |||
|---|---|---|---|---|
| Capacity Capex | High | Low | ||
| Technology Capex | High | Low | ||
| Product Lifetime | Short | Long | ||
| Customer Engagement |
Typically multi-source | Sole or limited source | ||
| Technology Differentiation |
At leading edge only | Across process technologies | ||
| Segment Sizes | Large | Many niches through mid-size | ||
| Process Technologies |
CMOS | SiGe, BiCMOS, MEMS, CIS | ||
| Technology Nodes | 65nm-22nm | 350nm-65nm – SPECIALTY |
||
| High speed data crunching and storage |
Real world interfacing to digital world |
Foundry Landscape
| (\$M) | 2005 | 2010 | 2015 | Accumulated Growth |
|||
|---|---|---|---|---|---|---|---|
| A | TSMC | 8,217 | TSMC | 13,307 | TSMC | 26,439 | 222% |
| B | UMC | 3,259 | UMC | 3,965 | GlobalFoundries | 4,990 | 341% |
| C | SMIC | 1,171 | GlobalFoundries | 3,510 | UMC | 4,464 | 37% |
| D | PowerChip | 1,587 | PowerChip | 2,424 | SMIC | 2,222 | 90% |
| E | Chartered | 1,132 | SMIC | 1,555 | PowerChip | 1,268 | -20% |
| 1 | Vanguard | 353 | TowerJazz | 509 | TowerJazz | 961 | 842% |
| 2 | Dongbu | 347 | Vanguard | 505 | Vanguard | 736 | 108% |
| 3 | HHNEC | 313 | Dongbu | 495 | Hua Hong Semi |
650 | 108% |
| 4 | SSMC | 280 | SSMC | 330 | Dongbu HiTek |
585 | 69% |
| 5 | He Jian | 250 | X-Fab | 320 | SSMC | 460 | 64% |
11 Tower 102
Digital Deep Sub Micron
Specialty Analog The fastest growing foundry in the world
Source: IC Insights, EE Times, Company Reports
| Financials | 2005 | Present Run Rate |
|---|---|---|
| Revenues \$M | 100 | 1,200 |
| Net Debt \$M |
550 | 65 |
| Operations | 2005 | Present Run Rate |
|---|---|---|
| # of Fabs | 2 | 7 |
| Locations | 1 | 3 continents/ 6 locations |
| Capacity KWPY | 290 | 2,350 |
| Employees | 900 | 4,500 |
| Customers | ~30 | >300 |
TowerJazz & TPSCo Worldwide Manufacturing Facilities Over 2.3 million wafers per year!
Midgal HaEmek, Israel Newport Beach, USA
- 6″, 150mm
- CMOS, CIS, Power, Discrete
- 1μm to 0.35μm
Midgal HaEmek, Israel
- 8″, 200mm
- CMOS, CIS, Power, Discrete, MEMS
- 0.18μm to 0.13μm Cu
- 8″, 200mm
- CMOS, CIS, MEMS, RF Analog
- 0.5 μm to 0.13μm
San Antonio, USA
- 8" (200mm)
- Power, RF Analog
- 0.18µm
- Al BEOL
Arai, Japan
- 8″, 200mm
- Analog, CIS
- 0.13μm to 0.11μm
- Thick Cu RDL
Tonami, Japan
- 8″, 200mm
- Power Discrete, NVM, CCD
- 0.35μm to 0.15μm
Uozu, Japan
- 12″, 300mm
- CMOS, CIS, RF
- 65nm to 45nm
Annual Revenues
** TowerJazz Proprietary Information **
How we have built revenue stability
First Quarter 2016 Financial Highlights
Q1 Revenues
\$278 million
RECORD REVENUES
Strong and continuous revenue growth
- Record revenues of \$278 million (23% YoY growth, 9% QoQ)
- Strong Q2 2016 mid range revenue guidance of \$300 million (27% YoY growth; 8% QoQ)
- Substantial net profit and margins increase
- Net profit of \$66 million, including \$41 million San Antonio Fab acquisition net gain
- Record EBIDTA of \$78 million (51% YoY increase)
- Gross profits of \$61 million (up from \$33 million in Q1'15)
- Strong Balance Sheet and Financial Ratios
- Generated Record cash from operations of \$77 million, with free cash flow of \$20 million
- Received an A rating from S&P Maalot (Israel), an S&P Global Ratings fully owned company
- Reduced net debt to \$65 million, reflecting < 0.3X annual net debt to EBITDA ratio
- Increased cash and short-term deposits to \$245 million
- Record shareholders equity of \$504 million, as compared to \$386 million as of Dec'31, 2015
Continuous Quarterly Revenue Growth
* mid-range guidance
Key Financial Metrics
Revenue
Net Profit
Net Profit (excluding one-time items)
** TowerJazz Proprietary Information **
Key Financial Metrics
Gross Debt
Shareholders Equity
Financial Performance (\$ in millions)
| Q1'05 | Q1'14 | Q1'15 | Q2'15 | Q3'15 | Q4'15 | Q1'16 | |
|---|---|---|---|---|---|---|---|
| Revenue | 23 | 133 | 226 | 236 | 244 | 255 | 278 |
| EBITDA | (14) | 27 | 51 | 59 | 63 | 75 | 78 |
| Non-GAAP Net profit | (21) | 19 | 50 | 54 | 58 | 70 | 75 |
| Net Profit | (55) | 39 | (73) | 8 | 14 | 22 | 66 |
| Net Profit excl. one-time items * | (55) | (41) | 2 | 8 | 14 | 22 | 25 |
| Shareholders' Equity | 113 | 200 | 292 | 300 | 325 | 386 | 504 |
| Cash On Hand | 35 | 183 | 134 | 143 | 155 | 206 | 245 |
| Gross Debt | 524 | 588 | 296 | 293 | 289 | 311 | 310 |
| Net Debt | 489 | 405 | 162 | 160 | 134 | 105 | 65 |
| Net Debt/ Annual Ebitda Run-Rate ** |
infinite | 3.75X | <0.8X | <0.7X | <0.6X | <0.4X | <0.3X |
* One time items included (i) for Q1'15, \$85 million non-cash bonds F conversion effect and \$10 million tax non-cash income; (ii) for Q1'14, \$151 million TPSCo net acquisition gain and \$71 million Nishiwaki cessation relates costs, net; (iii) for Q1'16, \$41 million San Antonio Fab net acquisition gain
** "Annual EBITDA" for each quarter is each quarter's EBITDA times 4
Q1'16 Results – Balance Sheet (\$ in thousands)
| March 31, | December 31, | March 31, | ||
|---|---|---|---|---|
| 2016 | 2015 | 2015 | ||
| A S S E T S | ||||
| CURRENT ASSETS | ||||
| Cash and short term deposits | \$ 244,577 \$ |
205,575 \$ | 134,216 | |
| Trade accounts receivable | 122,918 | 110,065 | 105,491 | |
| Other receivables | 9,363 | 7,376 | 7,408 | |
| Inventories | 128,031 | 105,681 | 86,153 | |
| Other current assets | 16,666 | 18,030 | 20,314 | |
| Total current assets | 521,555 | 446,727 | 353,582 | |
| LONG-TERM INVESTMENTS | 11,816 | 11,737 | 11,785 | |
| PROPERTY AND EQUIPMENT, NET | 582,250 | 459,533 | 408,513 | |
| INTANGIBLE ASSETS, NET | 35,601 | 34,468 | 41,225 | |
| GOODWILL | 7,000 | 7,000 | 7,000 | |
| OTHER ASSETS, NET | 5,688 | 6,759 | 6,391 | |
| TOTAL ASSETS | \$ 1,163,910 \$ |
966,224 \$ | 828,496 | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
| CURRENT LIABILITIES | ||||
| Short term debt and current maturities of loans and debentures | \$ 49,150 \$ |
33,259 \$ | 26,721 | |
| Trade accounts payable | 104,617 | 91,773 | 108,616 | |
| Deferred revenue and customers' advances | 31,061 | 23,373 | 8,112 | |
| Other current liabilities | 73,929 | 62,714 | 59,102 | |
| Total current liabilities | 258,757 | 211,119 | 202,551 | |
| LONG-TERM DEBT | 260,201 | 256,875 | 225,841 | |
| LONG-TERM CUSTOMERS' ADVANCES | 28,444 | 21,102 | 6,181 | |
| EMPLOYEE RELATED LIABILITES | 14,387 | 14,189 | 15,973 | |
| DEFERRED TAX LIABILITY | 95,638 | 69,744 | 75,854 | |
| OTHER LONG-TERM LIABILITIES | 2,116 | 7,609 | 10,057 | |
| Total liabilities | 659,543 | 580,638 | 536,457 | |
| TOTAL SHAREHOLDERS' EQUITY | 504,367 | 385,586 | 292,039 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | \$ 1,163,910 \$ |
966,224 \$ | 828,496 |
Q1'16 Results – P&L Report (\$ in thousands)
| Three months ended | ||||
|---|---|---|---|---|
| March 31, | December 31, | March 31, | ||
| 2016 | 2015 | 2015 | ||
| REVENUES | \$ 278,043 \$ |
254,602 \$ | 226,217 | |
| COST OF REVENUES | 216,696 | 190,072 | 193,225 | |
| GROSS PROFIT | 61,347 | 64,530 | 32,992 | |
| OPERATING COSTS AND EXPENSES | ||||
| Research and development | 15,237 | 15,704 | 14,837 | |
| Marketing, general and administrative | 15,923 | 15,478 | 16,161 | |
| Nishiwaki Fab restructuring costs and impairment, net | (627) | (991) | -- | |
| 30,533 | 30,191 | 30,998 | ||
| OPERATING PROFIT (LOSS) | 30,814 | 34,339 | 1,994 | |
| INTEREST EXPENSE, NET | (3,358) | (2,366) | (3,633) | |
| OTHER NON CASH FINANCING EXPENSE, NET | (3,969) | (12,751) | (84,596) | |
| GAIN FROM ACQUISITION, NET | 41,140 | -- | -- | |
| OTHER INCOME (EXPENSE), NET | -- | 70 | (9) | |
| PROFIT (LOSS) BEFORE INCOME TAX | 64,627 | 19,292 | (86,244) | |
| INCOME TAX BENEFIT (EXPENSE) | (79) | 4,779 | 10,894 | |
| PROFIT (LOSS) BEFORE NON CONTROLLING INTEREST | 64,548 | 24,071 | (75,350) | |
| NON CONTROLLING INTEREST | 1,396 | (1,992) | 2,286 | |
| NET PROFIT (LOSS) | \$ 65,944 \$ |
22,079 \$ | (73,064) | |
| BASIC EARNINGS (LOSS) PER ORDINARY SHARE | \$ 0.78 \$ |
0.28 \$ |
(1.15) | |
| DILUTED EARNINGS PER ORDINARY SHARE | \$ 0.69 \$ |
0.25 |
Q1'16 Results – Adjusted Net Profit and EBITDA (\$ in thousands)
| Three months ended | ||||||
|---|---|---|---|---|---|---|
| March 31, | December 31, | March 31, | ||||
| 2016 | 2015 | 2015 | ||||
| RECONCILIATION FROM GAAP NET PROFIT TO ADJUSTED NET PROFIT | ||||||
| GAAP NET PROFIT (LOSS) | \$ 65,944 |
\$ | 22,079 | \$ | (73,064) | |
| Stock based compensation | 2,156 | 1,975 | 1,310 | |||
| Amortization of acquired intangible assets | 2,241 | 2,374 | 2,082 | |||
| Other non-cash financing expense, net associated with Bonds | ||||||
| Series F accelerated conversion | -- | 6,998 | 73,121 | |||
| Gain from acquisition, net | (41,140) | -- | -- | |||
| Other non-recurring items | 2,378 | (7,380) | (11,000) | |||
| ADJUSTED NET PROFIT | \$ 31,579 |
\$ | 26,046 | \$ | (7,551) | |
| ADJUSTED NET PROFIT PER SHARE | ||||||
| Basic | \$ 0.37 |
\$ | 0.33 | \$ | (0.12) | |
| Diluted | \$ 0.34 |
\$ | 0.29 | (0.03) | ||
| Fully diluted | \$ 0.32 |
\$ | 0.28 | \$ | (0.03) | |
| Number of shares and other securities used for the above calculation: | ||||||
| Basic | 84,521 | 79,607 | 63,581 | |||
| Diluted | 92,902 | 91,086 | 96,173 | |||
| Fully diluted | 105,794 | 102,420 | 101,945 | |||
| EBITDA CALCULATION: | ||||||
| GAAP OPERATING PROFIT | \$ 30,814 |
\$ | 34,339 | \$ | 1,994 | |
| Depreciation of fixed assets | 40,064 | 37,841 | 45,950 | |||
| Stock based compensation | 2,156 | 1,975 | 1,310 | |||
| Amortization of acquired intangible assets | 2,241 | 2,374 | 2,082 | |||
| Other non-recurring items | 2,378 | (991) | -- | |||
| EBITDA | \$ 77,653 |
\$ | 75,538 | \$ | 51,336 |
Q1'16 Results – Cash Flow (Sources & Uses) Report (\$ in thousands)
| Three months ended | ||||
|---|---|---|---|---|
| March 31, | December 31, | March 31, | ||
| 2016 | 2015 | 2015 | ||
| Cash and short term deposits at beginning of period | \$ 205,575 \$ |
155,348 \$ | 187,167 | |
| Cash from operations | 77,442 | 53,180 | 40,290 | |
| Investments in property and equipment, net | (57,533) | (58,291) | (27,944) | |
| Exercise of warrants and options, net | 5,881 | 4,168 | 6,471 | |
| Loans received | 17,000 | 70,592 | -- | |
| Debt repayment - principal | (10,254) | (18,006) | (46,683) | |
| Nishiwaki's employees retirement related payments | -- | -- | (24,907) | |
| Effect of foreign exchange rate change | 9,029 | 154 | (178) | |
| TPSCo dividend to Panasonic | (2,563) | (1,570) | -- | |
| Cash and short term deposits at end of period | \$ 244,577 \$ |
205,575 \$ | 134,216 |
Bonds Debt Summary
| Security Type | Linked to | Outstanding principal (\$M) |
Key Terms |
|---|---|---|---|
| Bonds Series D | Israeli price index |
6 (12) | Principal is due in December 2016; Straight bond, i.e not-convertible; Annual coupon of 8% payable once/year in December |
| Bonds Series F | \$ | 1 (197) | 7.8% coupon payable twice / year; convertible at \$10 into ordinary shares; principal is due in 2 installments on Dec' 2015 and Dec' 2016 |
| Jazz Bonds due 2015 | \$ | 0 (45) | Annual coupon of 8% payable twice a year; Straight bond, i.e not-convertible; Principal was scheduled for June 2015; buy back done in January 2015 |
| Jazz Bonds due 2018 | \$ | 58 | Annual coupon of 8% payable twice a year; convertible at \$10.07 into ordinary shares of Tower ; Principal is due on December 2018 |
Banks Debt Summary
| Security Type | Linked to | Outstanding principal (\$M) |
Key Terms |
|---|---|---|---|
| IL Bank Loans | \$ | 78 (101) |
Leumi & Po'alim Banks 50%:50%; \$1M payable Q2'16, \$56M 2017, \$21M 2018; Annual interest rate of Libor+ 3.9% |
| Jazz Wells Fargo Bank Credit Line |
\$ | 19 | \$19M actual drawdown under up to \$70M credit line; Annual interest rate of Libor + 1.5%; principal is due Dec'2018 |
| Japanese Loan to TPSCo (TowerJazz Panasonic entity) |
JPY | 148 (74) |
Tibor + 1.65% - 2.00% term loans from JA Mitsui, Sumitomo Mitsui Trust bank, Showa & Bank Of Tokyo; payable from 2016 through 2020 |
• Total Debt as of March 31, 2016 is \$310M vs. \$505M as of December 31, 2014:
• Net debt is \$65M
•Reflecting < 0.3X Net Debt to EBITDA ratio
Continued revenue growth
- Special focus on SA new fab and TPSCo 3 rd party business
- Maximized free cash flow
- Increasing net profit
- Margins growth
- Cap-Ex investments for growth to meet excess customer demand:
- Customer funded programs for capacity reservation
- Assured mid to short term ROI
- Full utilization of potential cross qualification between our fabs
TowerJazz Business Units – Specialty Technology Leader
RF HPA Markets and Solutions
RF SOI and SiGe LNA/PA Wireless Front-Ends
High Growth driven by Smartphones and IoT
High Performance SiGe Wireline Front-Ends
High Growth driven by video, data internet traffic
High Performance SiGe
mmWave Emerging Value driven by radar and other highfrequency applications
Complementary BiCMOS High Performance Analog
Steady Volume driven by cloud-based HDD and analog component market
Power Markets and Solutions
Display, Audio, Touch, Power Management
0.18um BCD Technology
High Volume driven by consumer device growth
Automotive & Communication
0.18um BCD + NVM and digital
High Value driven by more integrated power
LED Lighting
700V Power Technology
Emerging Market in low energy lighting for power semiconductors
Industrial & Infrastructure
High Power Modules
High Power motor drivers
Specialty CIS Key Markets and Solutions
Technology, Flexibility, Experience and Commitment allows our customers to bring to the market the best in class products
Professional Photography Medical X-Ray
Highest requirements for image quality Large sensors, very high resolution, demanding frame rate Very low defect count Very high sensitivity, dynamic range & low noise
Industrial & High Speed
High speed and high accuracy Global shutter technology "Intelligent" pixels 2D and line sensors
Market Leader for dental x-ray CMOS Supplying all Tier-1 vendors Smallest endoscopy solution
Automotive & Security
High sensitivity and high dynamic range High NIR sensitivity Linear HDR for color imagers
3D Gesture Control
High NIR sensitivity
Design wins with market leaders
ToF and structured light solutions
High volume and yet good margin market
Market MEGATRENDS driven by Internet of Things Key megatrends driving rapid growth in Analog/Mixed-Signal applications
"Leadership and learning are indispensable to each other"
- John F. Kennedy
To maintain number one analog foundry – we learn best from our customers. By edict, all business units roadmaps are to be aligned with 1 st tier customer.
Analog Market Opportunity
** TowerJazz Proprietary Information **
Wireless FEM content example
** TowerJazz Proprietary Information **
TowerJazz Begins Mass Production of a New Integrated SiGe Based "Front-End Module on a Chip" RF Platform Tailored to Meet the Challenges of the Internet of Things
TowerJazz has partnered with industry leader, Skyworks Solutions, Inc., an innovator of high performance analog semiconductors connecting people, places and things, to deliver a first of its kind integrated wireless FEM using this technology. "We are pleased that our long partnership with TowerJazz on SiGe BiCMOS for PA based products is now in volume production for key customers of Skyworks Solutions," said Bill Vaillancourt, GM/VP Skyworks Connectivity Solutions.
Sell Price Increase From New Products/ Gen's/ Technologies
Low cost, low risk, WIN WIN capacity acquisition
Low cost, low risk, WIN WIN capacity acquisition
Company Highlights
- Manufacture analog IC in growing markets such as consumer, automotive, medical, industrial, and aerospace & defense
- Offer advanced specialty process technologies including RF/HPA, PM, CIS, MS/CMOS, and MEMS capabilities
Strong performance & financials
- Q2'16 annualized mid-range guidance of \$1.2B as compared to \$961M in 2015
- Substantial margins increase with sustainable model for growing net profit
- Strong balance sheet and financial ratios
Well Positioned in Growth Markets
- RF SOI and SiGe for wireless smartphone, IoT, and data networks
- CMOS Image Sensor and 3D Gesturing
- Power management and conversion
- Strong available capacity in TPSCo and San Antonio and investing in additional capacity
Driving Strong Financial Performance
- Strong revenue growth throughout 2015 with expected growth in 2016
- Sustainable business and financial model for margins and net profit growth
- Strong balance sheet and financial ratios
- Free cash flow "state of mind"
