Richard W. Blickman, President and Chief Executive Officer of Besi, commented: “We are pleased to report that our second quarter revenue and net income met our expectations. Our revenue was roughly equal to Q1-11 as we experienced sales growth of multi chip and flip chip die bonders for more advanced packaging applications which offset decreased shipments of certain single chip die bonders for more mainstream package types. Our net income benefitted from gross margins at the high end of guidance due to a more favorable percentage of advanced packaging systems in our sales mix and lower interest expense due to the redemption of our 5.5% Convertible Notes. Profit for Q2-11 came in slightly lower than Q1-11 due to a higher effective tax rate but on a combined basis resulted in record net income of € 18.4 million for the six month period, a 43.8% increase as compared to H1-10.
We executed a number of actions in Q2-11 to improve our liquidity and shareholder returns. Our net cash position increased to € 45.7 million from € 19.6 million at Q1-11 as a result of the Note redemption which positions us favorably to take advantage of future growth opportunities. We initiated a share repurchase program under which we have purchased approximately 1.1 million shares to date to reduce associated share dilution from the Note redemption which will improve our earnings per share in 2011. In total, we utilized € 8.9 million of our cash flow from operations in Q2-11 to pay cash dividends to shareholders, repurchase shares and reduce bank debt outstanding.
However, our business was not immune to the market downturn which began during the quarter and has been noted recently by many industry participants. Orders declined by 6.6% sequentially in Q2-11 reflecting customer caution in the face of slowing consumer expenditures for tablets, smart phones and other electronic devices and renewed concerns as to the global economy. In spite of such decline, we continued to experience bookings growth for die bonding and ultra thin molding systems for ever smaller, denser and more complex packaging applications which we expect to drive our revenue growth in future years. Based on our backlog and customer feedback, we expect that our revenue will decline by 15-20% in Q3-11 vs. Q2-11 as the industry slow down continues after a period of strong growth over the past two years."
28 July 2011 Page 2 of 8
Second Quarter Results of Operations
Besi’s Q2-11 revenue of € 89.9 million decreased by € 1.2 million (1.3%) as compared to Q1-11 as lower shipments of single chip die bonders was partially offset by increased sales of multi chip and flip chip die bonders for advanced packaging applications. Q2-11 revenue increased by € 0.4 million (0.4%) as compared to Q2-10 as higher die attach revenue, in particular, increased sales of multi chip and flip chip die bonding systems, was partially offset by lower wire bonding revenue due to its business rationalization in Q2-10.
Orders for Q2-11 were € 82.5 million, a decrease of € 5.8 million, or 6.6%, as compared to Q1-11. The quarterly sequential order decrease was primarily focused on reduced demand by customers, particularly IDMs, as they became more cautious in adding new capacity. Q2-11 orders declined by € 51.2 million, or 38.3%, from a cyclical peak reached in Q2-10 primarily due to decreased demand for die attach systems as a result of the current industry slow down. On a customer basis, the sequential order decrease in Q2-11 reflected a € 0.6 million (1.3%) decrease by subcontractors and a € 5.2 million (12.5%) decrease by IDMs. Backlog at June 30, 2011, was € 66.3 million, a decrease of € 7.4 million, or 10.0%, as compared to March 31, 2011.
Besi’s gross margin increased to 41.2% in Q2-11 as compared to 40.0% in Q1-11 due to increased molding and multi chip die bonding margins. Q2-11 gross margins were above prior guidance (39.0%-41.0%). The Q2-11 gross margin increased by 2.5 points as compared to 38.7% in Q2-10 due primarily to higher die attach gross margins, particularly for advanced packaging applications, and higher wire bonding gross margins due to cost reductions implemented at this business unit.
Besi’s operating expenses were € 25.0 million in Q2-2011 as compared to € 22.9 million in Q1-2011 and € 20.7 million in the Q2-10 and were above prior guidance (€ 22.9-24.0 million). Higher sequential quarterly operating expenses were primarily due to increased development personnel and materials in support of Besi’s next generation common die bonding platform and the upward movement of the Swiss franc versus the euro as well as certain one-time stock based compensation and bonus accruals. In Q2-11, Besi capitalized € 2.3 million of development expenses as compared to € 1.5 million in Q1-11. As a % of revenue, total operating expenses were 27.9% in Q2-11 as compared to 25.1% in Q1-11 and 23.2% in Q2-10.
Financial expense (income), net improved from expense of € 1.3 million in Q1-11 to income of € 0.2 million in Q2-11 as a result of the redemption of Besi’s Convertible Notes in June 2011 and a sequential decrease in losses on foreign currency contracts. Financial expense (income), net was € 0.9 million in Q2-10.
Q2-11 net income of € 8.8 million decreased by € 0.8 million from € 9.6 million in Q1-11 primarily due to an increase in the effective tax rate from 21.5% in Q1-11 to 27.5% in Q2-11 due to a change in Besi’s earnings mix from its European operations during the quarter. Q2-11 net income declined by € 6.6 million as compared to € 15.4 million in Q2-10 primarily due to the absence of a € 4.8 million tax benefit recognized in Q2-10 and an increase in the effective tax from 19.0% in Q2-10.
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Daar zit dus de verklaring voor de lagere winst tov omzet, die al lager was dan verwacht.