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AIXTRON: Challenging H1/2016 in line with expectations

Management confirms 2016 outlook / EBITDA expectation for 2017 under review

Executive and Supervisory Boards recommend accepting the Takeover Offer by Grand Chip Investment GmbH

AIXTRON SE (FSE: AIXA; NASDAQ: AIXG) a leading provider of deposition equipment to the semiconductor industry, today announced financial results for the first half and the second quarter 2016. Additionally has AIXTRON today published the reasoned opinion from the Executive and Supervisory Boards on the takeover offer by Grand Chip Investment GmbH (“GCI”) for all outstanding AIXTRON shares in which both governing bodies recommend acceptance of the offer. In this statement, the GCI offer and the planned transaction is deemed positive as it could provide AIXTRON with the relevant support to successfully develop all targeted technologies to market maturity and to better access growth markets as underlined by the following examples:

  • GCI has committed to support AIXTRON to continue developing existing product lines, for its customers’ benefit and to maintain the existing global set up.
  • GCI has also committed that the IP portfolio is to remain with and be used solely by AIXTRON while protecting sensitive and confidential customer information.
  • GCI has committed to support a regional expansion, especially in China, which would allow better exploitation of the most significant growth opportunities.
  • The fairness opinion of J.P. Morgan supports that the GCI’s takeover offer reflects a fair and adequate offer price.
  • Alternative scenarios for AIXTRON would either be very risky or would result in a smaller AIXTRON with reduced growth potential.

In light of the foregoing, after thoughtful consideration both AIXTRON Boards deem the Takeover Offer as fair to, and in the best interest of AIXTRON and its stakeholders, including AIXTRON Shareholders and AIXTRON Group’s employees. Therefore, the Boards recommend acceptance of the offer. AIXTRON’s work councils also welcome the offer.

The joint reasoned opinion is available at http://www.aixtron.com/en/investors.


Financial Highlights

Although total order intake in H1/2016 decreased by 6% to EUR 95.5m (H1/2015: EUR 101.4m) year-on-year, it improved by 15% sequentially (Q2/2016: EUR 51.1m; Q1/2016: EUR 44.4m). Equipment order backlog in the first half 2016 was slightly down against the previous year at EUR 86.2m, but increased by 27% compared to March 31, 2016 (H1/2015: EUR 91.2m; Q2/2016: EUR 86.2m; Q1/2016: EUR 67.7m).

H1/2016 total revenues decreased to EUR 55.5m (H1/2015: EUR 80.7m) while revenues in Q2/2016 improved against the previous quarter (Q2/2016: EUR 34.1m; Q1/2016: EUR 21.4m).

Despite the fact that the first half 2016 revenues were 31% weaker compared to the first six months of 2015, the development of revenues and earnings in the first half 2016 was in line with Management expectations and the significant revenue growth expectation for the remainder of 2016 is supported by the quarterly sequential development in total order intake and backlog.

Free cash flow in H1/2016 was at EUR -41.0m (H1/2015: EUR -12.3m; Q2/2016: EUR ‑20.7m; Q1/2016: EUR -20.3m) which was mainly due to a payment to San’an, an agreed milestone payment for the purchase of PlasmaSi in Q1/2016, higher inventories in preparation for stronger planned shipments in the remainder of the year as well as timing effects.


Key Financials

 

2016

2015

+/-

2016

2016

+/-

(in EUR million)

H1

H1

 

Q2

Q1

 

Revenues

55.5

80.7

-31%

34.1

21.4

59%

Gross profit

10.0

12.4

-19%

6.9

3.1

123%

Gross margin

18%

15%

3pp

20%

15%

5pp

Earnings before interest, tax, depreciation and amortization (EBITDA)

-20.0

-21.8

 8%

-8.2

-11.7

 29%

Operating result (EBIT)

-25.9

-26.7

3%

-11.2

-14.7

24%

EBIT margin

-47%

-33%

-14pp

-33%

-69%

36pp

Net result

-26.6

-27.6

4%

-11.1

-15.5

28%

Net result margin

-48%

-34%

-14pp

-33%

-72%

39pp

Net result per share - basic (EUR)

-0.23

-0.25

8%

-0.09

-0.14

36%

Net result per share - diluted (EUR)

-0.23

-0.25

8%

-0.09

-0.14

36%

Free Cash Flow FCF*

-41.0

-12.3

-233%

-20.7

-20.3

-2%

Total order intake

95.5

101.4

-6%

51.1

44.4

15%

Equipment order backlog (end of period)

86.2

91.2

-5%

86.2

67.7

27%

*Operating CF + Investing CF + Changes in Cash Deposits, adjusted for acquisition effects   (upfront payments and loan)


Business Development

The development of revenues and earnings was in line with expectations while manufacturers remain cautious concerning capacity expansion. The development in revenues and order intake in Q2/2016 was mainly driven by demand for production systems for opto and power electronics as well as for the silicon industry.

As described above, H1/2016 revenues at EUR 55.5m were down by 31% year-on-year (H1/2015: EUR 80.7m). This reflects lower demand from GaN LED- and Silicon applications, particularly in Q1/2016. Compared to the previous quarter, revenues in Q2/2016 increased to EUR 34.1m (Q1/2016: EUR 21.4m).

The year-on-year decrease of cost of sales to EUR 45.5m in H1/2016 were mainly attributable to lower volume in H1/2016 and higher qualification costs for the AIX R6 in H1/2015. Against the previous quarter, cost of sales were lower relative to revenues at EUR 27.2m (Q1/2016: EUR 18.3m).

Due to an improved gross margin (H1/2016: 18%; H1/2015: 15%; Q2/2016: 20%; Q1/2016: 15%) despite lower revenues year-on-year, gross profit was EUR 10.0m (H1/2015: EUR 12.4m; Q2/2016: EUR 6.9m; Q1/2016: EUR 3.1m).

Operating expenses in H1/2016 of EUR 35.9m were 8% lower year-on-year compared to EUR 39.1m in H1/2015. The additional costs from PlasmaSi and the comparative negative currency effect in Q1/2016 were offset by higher productivity, better cost control and a contractual settlement. In a quarterly sequential comparison, operating costs were stable at EUR 18.0m compared to EUR 17.8m in Q1/2016 despite increased revenues in the same period.

The H1/2016 development mentioned above led to a slight improvement in EBITDA (H1/2016: EUR -20.0m; H1/2015: EUR -21.8m; Q2/2016: EUR -8.2m; Q1/2016: EUR -11.7m).

The operating result (EBIT) improved in a year-on-year comparison from EUR -26.7m in H1/2015 to EUR -25.9m in H1/2016. Compared to the previous quarter, the operating result in Q2/2016 improved to EUR -11.2m (Q1/2016: EUR -14.7m).

The net result for H1/2016 amounted to EUR -26.6m which improved against the previous year (H1/2015: EUR -27.6m) as well as sequentially (Q2/2016: EUR -11.1m; Q1/2016: EUR ‑15.5m).

Cash and cash equivalents (including cash deposits with a maturity of more than 90 days) were at EUR 161.3m as of June 30, 2016 compared to EUR 209.4m as of December 31, 2015. The difference is mainly attributable to the negative operating result, the payment of the second installment of the agreed return of advance payments to San’an and an agreed milestone payment for the purchase of PlasmaSi (acquired in 2015) in Q1/2016.


Management Review

“Despite the weak development of revenues in the first half, we reiterated our 2016 full year revenue guidance due to a solid order momentum which is set to continue into Q3/2016. Before transaction related impacts, 2016 results and free cash flow are expected to improve slightly compared to 2015 but to remain negative as revenue volumes still remain too low to enable full financing of all products in the development pipeline.”, explains Martin Goetzeler, President and CEO of AIXTRON SE.

“In our joint reasoned opinion which was also published today, the Executive Board and Supervisory Board after thoughtful consideration recommend that our shareholders accept the takeover offer from Grand Chip Investment. Compared to alternative scenarios which may either be very risky or would result in a smaller, potentially restructured AIXTRON with reduced total growth opportunities, we believe that the transaction is the right step for all our stakeholders. Our works councils agree with this assessment and have issued their own statement also supporting the takeover offer.”


Guidance

Despite the fact that the first half 2016 revenues were 31% weaker compared to the first six months of 2015, Management expects stronger revenues in the second half of 2016 compared to the first half. Total order intake in Q2/2016 as well as equipment backlog were up compared to the previous quarter, supporting Management’s expectation of significant revenue growth for the second half of 2016. Consequently, Management reiterates the full year 2016 revenue guidance given in February 2016.

Based on the assessment of AIXTRON’s current order situation, including current risks and opportunities as well as on the internal budget rate of USD/EUR 1.10, Management expects to achieve for fiscal year 2016 revenues between EUR 170 and 200 million. Total 2016 order intake is expected to be between EUR 180 and 200 million.

Based on the internal budget rate of USD/EUR 1.10 and depending on the successful completion of qualification processes, market entry efforts as well as the achievement of revenues at the high end of the guidance range, Management expects to achieve another improvement of results in 2016. Before transaction related impacts, EBITDA, EBIT, net result and free cash flow are expected to improve slightly compared to 2015 but to remain negative for the full year 2016.

Due to uncertainties in terms of investment requirements for certain product groups, potential restructuring costs or consequences from the transaction, Management will review EBITDA development for 2017.


Financial Tables

The H1/2016 results presentation will be available at http://www.aixtron.com/en/investors/ir-presentation. The consolidated financial statements (statement of financial position, income statement, cash flow statement, statement of changes in equity) relating to this press release are available at http://www.aixtron.com/en/investors/financial-reports/ as part of AIXTRON’s first half 2016 financial report.


Investor Conference Call

AIXTRON will host a financial analyst and investor conference call on Tuesday, August 11, 2016, 3:00 p.m. CEST (6:00 a.m. PDT, 9:00 a.m. EDT) to review the first half 2016 results. From 2:45 p.m. CEST (5:45 a.m. PDT, 8:45 a.m. EDT) you may dial in to the call at +49 (69) 247501–899 or +1 (212) 444–0297. A conference call audio replay or a transcript of the conference call will be available at http://www.aixtron.com/en/investors/events/conference-call/ following the conference call.


Contact:

Guido Pickert
Investor Relations and Corporate Communications
T: +49 (2407) 9030-444
F: +49 (2407) 9030-445
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