Modeling TowerJazz's High Free Cash Flow
Jaret Wilson • 34 Comments
Jaret Wilson • 34 Comments
TowerJazz: Restructuring Charge Masks Huge Margin Improvement And Earnings Beat
Lisa Thompson • 27 Comments
Lisa Thompson • 27 Comments
TowerJazz: Fair Value Of $5 Per Share
Jay Yoon • 96 Comments
Jay Yoon • 96 Comments
Wed, Jun. 22, 10:36 AM
- The company's Q2 revenue outlook of $300M was higher than he expected, says SA contributor Jaret Wilson, updating his bull thesis from April 6 on TowerJazz (TSEM +1.1%). Revenue was no doubt helped by a higher yen, but there's also been a quicker ramp in multiple underutilized factories. Wilson expects this will continue through at least the end of 2017.
- Along with this ramp is the need for additional capacity, and a $15M customer prepayment just secured for capex will help.
- There's also the recent sale of $100M in A-rated bonds to refinance debt carrying burdensome covenants. This will allow Tower the freedom to consider small strategic acquisitions, such as enhancing its MEMS manufacturing capabilities.
- On a conference call yesterday, management suggested an expansion into China is still being considered - a very plausible idea given the country's semiconductor ambitions. A move into China though, will likely be a "cash-in" activity, not an acquisition.
Tue, May 31, 3:15 AM
- TowerJazz (NASDAQ:TSEM) received binding commitments from institutional investors to invest approximately $100M in its long-term unsecured straight bonds ('Series G Bonds"), which will have final maturity date of March 2023. The Series G Bonds are payable in seven semi-annual principal installments from 2020 to 2023, carry an annual coupon of 2.79%, are denominated in NIS and are not linked to any index or to any other currency.
- Both the Series G Bonds and the Company have received an "A" rating from Standard & Poor's.
- Proceeds from this fundraising will be used by the Company to early repay and replace its outstanding $78M Israeli bank' loans in order to further strengthen its balance sheet and provide better financial and business flexibility, including through the removal of the extensive restrictions and covenants under the Israel bank loan agreement, as well as the release of all the fixed and floating liens that were charged in favor of these banks.
- TSEM closed Friday -0.75% at $12.60.
- Source: Press Release
Mon, May 9, 6:36 AM
Tue, Mar. 8, 11:50 AM
- TowerJazz (TSEM -5.1%) saw a 1.68M-share block trade (covered nearly 3% of outstanding shares) priced this morning at $13.11 ($0.55 below yesterday's close). For reference, the company's 3-mon daily volume average is 584K.
- Shares are off on a day the Nasdaq is down 0.8%.
- Two weeks ago: TowerJazz higher after Q4 beat; Q1 sales getting a lift from Maxim deal
Tue, Mar. 8, 9:17 AM
- Gainers: SUNE +29%. LEU +24%. OMER +14%. BNTC +12%. TERP +11%. URBN +8%. ORIG +7%. SOL +6%. BCRX +5%.
- Losers: PSG -35%. EMITF -18%. OCLR -15%. REXX -14%. EPE -11%. FBR -11%. CRK -10%. LINE -10%. SHAK -9%. VNR -8%. SDRL -8%. BCEI -7%. LNCO -7%. RIO -7%. CRC -7%. BHP -6%. VSLR -6%. BTU -6%. JBLU -6%. ARP -6%. TSEM -6%. DNR -6%. BBL -6%. MT -5%. VALE -5%.
Wed, Feb. 24, 2:39 PM
- After previously trading lower post-earnings, TowerJazz (TSEM +1.8%) is now up slightly. The specialty foundry's Q4 beat has been accompanied Q1 sales guidance of $276M - that's officially above a $250.3M consensus, but (starting in February) includes revenue stemming from TowerJazz's acquisition of Maxim's San Antonio fab.
- Q4 revenue rose 21% Y/Y on an organic basis (excludes Panasonic revenue), and 8% otherwise. Lifting EPS: non-GAAP Gross margin rose to 41% from Q3's 38% and Q4 2014's 36%. TowerJazz ended 2015 with $206M in cash and $291M in debt.
- TowerJazz's Q4 results, earnings release
Wed, Feb. 24, 6:47 AM
Fri, Jan. 22, 8:37 AM
- Needham has launched coverage on TowerJazz (NASDAQ:TSEM) with a Strong Buy rating and $18 target.
- The vote of confidence comes with the Israeli specialty foundry's shares down 16% in 2016 as of Thursday's close. They tumbled last week after hedge fund Spruce Point Capital issued a bearish report taking aim at TowerJazz's accounting and business model.
- TowerJazz hasn't yet moved premarket - Nasdaq futures are up 1.9%. The company's Q4 report is expected in the coming weeks.
Thu, Jan. 14, 2:33 PM
- "In our opinion, Tower is a collection of old semi foundries cobbled together from acquisitions, which produce significantly below industry average GAAP gross margins," reads the start of a 79-slide presentation from Spruce Point Capital making a bear case for TowerJazz (NASDAQ:TSEM). "Tower has a speculative business model that does not appear to make money, and appears dependent on issuing its inflated equity to finance transactions with larger industry counterparties ... Valuing Tower at between 0.5x and 0.8x 2016E revenues gets us a valuation range of approximately $3.00 - $6.00 per share (50 -75% downside)."
- In a Seeking Alpha article summarizing his firm's bear case, Spruce Point's Ben Axler notes TowerJazz's shares count has grown 34% since 2005, and that the company spends just ~15% of revenue on capex vs. the ~40% spent by other chip foundries. It argues partnerships with Micron and Panasonic "reflect a short-term business strategy designed to bolster revenue growth for short periods, which allow its partners to sunset aged product cycles," and asserts TowerJazz marks the value of its Panasonic JV at a 250%+ premium to Panasonic's valuation.
- Spruce Point also believes TowerJazz has "engaged in other questionable accounting maneuvers to give the appearance of strong Non-GAAP gross margins, profitability, and free cash flow such as: 1) Shifting COGS expenses to R&D and SG&A; 2) Changing the presentation of capex from “gross” to “net”; 3) Extending the useful life of its assets to reducing depreciation expense; 4) Excluding depreciation and amortization to present Non-GAAP results (not industry standard); 5) Haircutting its convertible and bank debt by inappropriately interpreting the accounting guidance." In addition, the firm questions the academic credentials of CEO Russell Ellwanger.
- TowerJazz has fallen below $11 on volume of 4.5M shares vs. a 3-month daily average of 499K.
Dec. 17, 2015, 2:41 PM
- TowerJazz (TSEM) has struck a 3-year deal with Indian government agency/wafer fab owner Semiconductor Laboratory to process engineering and equipment maintenance services for the agency's facilities.
- The deal is expected to produce revenue of $35M; for reference, TowerJazz's Q4 sales consensus is at $252.7M. The company asserts the agreement allows it to "realize profits and cash generation from its valuable manufacturing expertise and its skilled engineering manpower."
Dec. 14, 2015, 6:34 PM
- Oppenheimer has launched coverage on Cypress Semi (NASDAQ:CY) and TowerJazz (NASDAQ:TSEM) with Outperform ratings after the bell. The firm's targets are respectively $14 and $20.
- Both companies are showing modest after hours gains for now. The launches come after Cypress fell 2% and TowerJazz fell 5.4% in regular trading on a somewhat weak day for chip stocks.
- Last week: TowerJazz/Panasonic JV obtains $70M term loan
- Last month: Cypress CEO Rodgers buys shares
Dec. 8, 2015, 2:44 PM
- Japanese banks JA Mitsui, Sumitomo Mitsui, and Showa Lesing have provided TowerJazz's (TSEM +0.7%) chip manufacturing JV with Panasonic (known as TPSCo, launched in 2013) with a new ¥8.5B ($70M) term loan. The loan sports an interest rate of TIBOR + 2%, matures in Q4 2020, and comes on top of an existing ¥8.8B loan, of which ¥2.5B will be repaid in 2016.
- TowerJazz had $155M in cash and $134M in net debt at the end of Q3. The specialty foundry is less than a month removed from announcing a $40M deal to buy a Maxim San Antonio fab.
Nov. 18, 2015, 10:37 AM
- TowerJazz (NASDAQ:TSEM) is buying analog/mixed-signal chipmaker Maxim's (MXIM +1.3%) San Antonio, TX wafer fab for $40M in stock. The deal is expected to close in January.
- The fab manufactures chips on 8" (200mm) wafers, supports analog process nodes of 130nm and higher, and will boost TowerJazz's total production capacity to 28K wafers/month.
- As part of the deal, Maxim (already a TowerJazz client) has struck a long-term supply deal with TowerJazz related to the San Antonio facility. TowerJazz plans to "quickly qualify its core specialty technologies, including its advanced Radio-Frequency Silicon-on-Insulator (RF-SOI) offering," for use at the fab.
- TowerJazz's shares have hit $16 for the first time since June. The 52-week high is $18.29.
Nov. 11, 2015, 12:17 PM
- TowerJazz (NASDAQ:TSEM) has rallied above $15 after beating Q3 estimates and guiding for Q4 revenue of $252M (+/- 5%), above a $249.9M consensus at the midpoint and representing 21% Y/Y organic growth (7% overall growth).
- Q3 organic growth (excludes Micron and Panasonic) was 28%, with photomasks and design wins both rising 13%. The specialty foundry declares it has "confidence in a very strong 2016 and beyond." $45M in advance payments have been received for capacity bookings.
- Financials: Gross margin (non-GAAP) rose to 38% from 37% in Q2 and 30% a year ago. R&D spend rose by $0.4M Y/Y to $15.8M; MG&A spend fell by $0.2M to $14.8M. TowerJazz ended Q3 with $155M in cash, and $134M in net debt.
- Q3 results, PR
Nov. 11, 2015, 6:09 AM
- Tower Semiconductor (NASDAQ:TSEM): Q3 EPS of $0.62 beats by $0.05.
- Revenue of $244.18M (+8.0% Y/Y) beats by $0.38M.
Nov. 6, 2015, 4:47 PM
- The Philadelphia Semi Index (SOXX +2.6%) rallied after Nvidia (NVDA +13.9%) beat estimates and provided strong guidance (gaming GPUs led the way), Skyworks (SWKS +7.1%) offered good calendar Q4 guidance and RF chip peer Qorvo (QRVO +23.2%) posted better-than-feared results and guidance. The Nasdaq rose just 0.4%.
- Also: Analog/Ethernet chipmaker Microsemi (MSCC +4.9%) beat calendar Q3 revenue estimates and offered solid Q4 guidance: Revenue of $325M-$329M and EPS of $0.70-$0.74 vs. a consensus of $323.5M and $0.72.
- Big gainers today included specialty foundry/Skyworks supplier TowerJazz (TSEM +6%), smart TV/home automation chipmaker Sigma Designs (SIGM +16.6%), telecom/networking IC provider InPhi (IPHI +6.7%), touch controller/LCD driver supplier Synaptics (SYNA +6.1%), FPGA maker Lattice Semi (LSCC +6.6%), network processor vendor Cavium (CAVM +5.6%), DSP core IP provider CEVA (CEVA +7.2%), and analog/mixed-signal chipmakers MagnaChip (MX +4.6%) and Semtech (SMTC +5.4%).
- On its earnings call (transcript), Qorvo mentioned Chinese smartphone demand (a recent headwind) is "seeing a bit of a rebound," and that the launch of 5-mode and 6-mode Chinese 4G phones is boosting RF chip content. Qorvo also thinks Chinese base station activity (an issue for many telecom chip/component firms) bottomed in Q3, but cautions a mobile infrastructure recovery is expected to be gradual.
- Microsemi stated on its call (transcript) broadband gateway chip sales were a Q3 strong point, that telecom infrastructure began to improve, and that defense/aerospace sales are expected to rebound in 2016. Industrial demand remained soft in Q3.
- MKM's Ian Ing has upgraded Nvidia to Buy, calling shares "expensive and worth it." Ing: "We see a sustainable growth trajectory, given [Nvidia's] positioning to lead in significant paradigm changes favoring more valuable semiconductor solutions: automotive evolving from driver assist to autonomous driving, gaming transitioning to virtual reality and professional or social E-sports, and cloud computing increasingly using GPU accelerators for machine learning."
- Chip ETFs: SMH, XSD, PSI, SOXL, USD, SOXS, SSG
- Last week: Chip stocks sell off after NXP, STMicro, others issue soft guidance
Tower Semiconductor Ltd. engages in the manufacture of integrated circuits. Its products include semiconductors and integrated circuits used in consumer electronics, personal computers, communications, automotive, industrial, and medical device products. The company was founded in 1993 and is... More
Industry: Semiconductor - Integrated Circuits
Country: United States
Other News & PR