KEMET Corp. (NYSE:KEM) Q3 2018 Earnings Conference Call - Final Transcript

Feb 01, 2018 • 09:00 am ET


KEMET Corp. (NYSE:KEM) Q3 2018 Earnings Conference Call - Final Transcript


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Robin Blackwell

Thank you, Charles; and good morning, everyone. This is Robin Blackwell. Welcome to KEMET's conference call to discuss the financial results for the third quarter fiscal year 2018 ending December 31, 2017.

Joining me today on the call is Per Loof, Chief Executive Officer; and Bill Lowe, Executive Vice President and Chief Financial Officer.

As a reminder to you, a presentation is available on the website, which will help you follow along in the financial portion of the discussion.

Before we begin, we'd like to advise you that all statements addressing expectations or projections about the future are forward-looking statements. Some of these statements include words such as expects, anticipates, plans, intends, projects and indicates. Although they reflect our current expectations, these statements are not guarantees of future performance and they involve a number of risks, uncertainties and assumptions. Please refer to our 10-Ks, our 10-Qs and our registration filing statements for additional information on the risks and uncertainties.

Now, I'll turn the call over to Per.

Per-Olof Loof

Thank you, Robin, and good morning, everyone. It's been another strong quarter for KEMET, better than expected. Revenue for this quarter was $306.4 million, up 1.6% over the prior quarter.

Referring to slides 6 and 7 in the web slide deck, sales at $306.4 million for the quarter versus a year ago were up 63% from $188 million. On a pro forma basis, including the acquisition of TOKIN, sales were up 16.4% from $263.3 million versus a year ago.

Gross margins were 30.2%, up 200 basis points from Q2 and up 490 basis points from a year ago.

EPS fully diluted and on a GAAP basis was $0.32, up $0.10 from last quarter. Non-GAAP basis come in -- came in at $0.52, up $0.07 from last quarter and up $0.41 from a year ago.

As you may recall, we forecasted revenue down in Q3 due to the normal Christmas closures, especially in the US and Europe, which, of course, leads to the possibility that orders might not be able to be shipped. This year was different. The Christmas effect was not as pronounced as in previous years. In fact, we could have shipped more if we had, had the capacity to do so.

As Bill will discuss, we continue to generate cash and added $30.5 million of cash this quarter, and we have generated $58.5 million in cash since July 1, raising the cash balance to $284.2 million at quarter-end. This, of course, gives us additional degrees of freedom to invest in M&A, R&D and capacity. This was a well-executed quarter.

Because of strong cash flow generation and the need to further increase our capabilities in profitable markets, as we have previously announced, there will be an increase in CapEx by an additional $20 million, bringing the total CapEx spend to approximately $60 million this fiscal year. This will provide an overall combined capacity increase of 10% for the company. This increase is targeted in areas where demand is strong and where we are