Tower Semiconductor Ltd.(NASDAQ: TSEM) stock fallen 16.6% on October 29th, 2018 (as of 11:10 AM GMT-4 ; Source: Google finance) after the company reported lower than expected results for the third quarter of 2018. TSEM in the third quarter of FY 18 has reported the adjusted earnings per share of 37 cents, missing the analysts’ estimates for the adjusted earnings per share of 40 cents. Tower missed the earnings per share estimate for the third quarter of 2018 of $0.39-0.42. The company had reported the adjusted revenue of $322.6 million in the third quarter of FY 18, missing the analysts’ estimates for revenue of $335 billion. This is the third consecutive quarter of disappointing results from Tower. CEO Russell Ellwanger attributes this to an erroneous strategy adopted in at the beginning of the year, and to a slowdown in world markets.
For the third quarter of 2018, TSEM reported the Net profit of $34 million compared to $38 million in the prior quarter and as compared to $55 million in the third quarter of 2017. Free cash flow for the quarter was $29 million, with $69 million cash flow generated from operations and $41 million invested in fixed assets, net. The other main cash activities during the third quarter of 2018 were $43 million of debt repaid, net of debt received, which included mainly the early repayment of the $40 million loan borrowed in 2016 from JA Mitsui in relation to the acquisition of the San Antonio fab from Maxim and its ramp. Cash (including marketable securities), net of gross debt, as of September 30, 2018, totaled $315 million as compared to net cash of $226 million as of December 31, 2017. Shareholders’ equity as of September 30, 2018 totaled to $1.15 billion, as compared to $1.03 billion as of December 31, 2017. Cash from operations of $69 million with free cash flow of $29 million.
The company has entered the year having decided to focus on profitability, rather than utilizing valuable capacity for lower margin businesses. This has had a greater than expected revenue impact in 2018 while building the higher value mix and with some high-end replacements not having met customer forecasts.
The company expects revenue for the fourth quarter to be approximately $340 million, below the analysts’ estimate of $365 million, and below the company’s own previous guidance of $360-380 million.