By Alexa Adler
Medill Reports
Despite record quarterly revenue and strong operating results, Cabot Microelectronics Corp., which supplies planarization polishing slurries and pads used in the manufacture of semiconductor devices, reported a loss of 12 cents per share for its first quarter ended Dec. 31, 2017, compared with earnings per share of 88 cents in the prior-year period.
The loss was driven largely by a one-time charge of $32.9 million occasioned by the recent tax reform legislation. On a non-GAAP basis, excluding the tax charge and an amortization charge, earnings per share were $1.19, compared with analysts’ estimate of $1.02 per share compiled by Yahoo Finance.
The stock closed at $102.66, up 95 cents.
The company’s performance was powered by record revenues of $140.0 million, up 13.6 percent from the year-earlier period, which reflected year-over-year quarterly revenue growth in its tungsten slurry, pads products and dialectics slurry businesses of 13.7 percent, 16.5 percent and 8.4 percent respectively. Operating expenses of $36.9 million were up 10.3 percent over the prior-year number, reflecting higher staffing-related expenses. Operating income was $37.1 million, up 32.3 percent from the first quarter of fiscal 2017.
Net loss for the quarter was $3.1 million compared with net income of $22.2 million in the prior-year quarter, largely the result of the tax charge. The company expects its earnings to benefit for the balance of the year from the tax reform legislation, according to a press release. Gross profit was 52.9 percent of revenue as compared with 49.9 percent in the year-earlier period.
David Li, president and CEO, in a press release attributed the strong quarterly revenue and operating performance to a continuation of “momentum from last year in three key product areas- CMP slurries for polishing tungsten, dielectrics slurries, and CMP pads.” Li went on, ”Looking ahead, I am confident that we are well-positioned for continued profitable growth.”
Scott Beamer, the company’s newly-hired chief financial officer, in a conference call with analysts stated that the tungsten slurry business generated 45 percent of total quarterly revenue and added that the company “expects this key product area will continue to drive profitable growth.”
Beamer affirmed the company’s gross profit guidance for the 2018 fiscal year of between 50 percent and 52 percent of revenue, which represents a decrease from the 52.9 percent realized in the first quarter. He attributed this to an anticipated increase in operating expenses for the full fiscal year resulting in part from a seasonal increase in the March quarter due to merit salary increases, annual meeting costs and payroll taxes. This elicited a question from Chris Kapsch of Loop Capital, who questioned whether the company should consider revising this guidance upwards, given the continuing strength in the tungsten slurry area. Beamer declined to do so, noting again that the business was somewhat seasonal, with a yearly pickup in costs in March.
