Tower Semiconductor Reports Record Revenues and Strong Margins Growth Third quarter 2021 with 25% total and 40% organic year over year revenue growth Exhibit 99.1 Gross profit for the third quarter of 2021 was $85 million, 60% higher than $53 million recorded in the third quarter of 2020 and 16% higher than $74 million recorded in the second quarter of 2021. Operating profit for the third quarter of 2021 was $44 million, more than double the $19 million recorded in the third quarter of 2020 and 30% higher t ...

Financial Data and Key Metrics Changes - Revenue for Q2 2021 was $362 million, a record for the company, representing a 17% year-over-year increase and 26% organic growth [9][33] - Gross profit for Q2 2021 was $74 million, up 28% year-over-year, while operating profit was $34 million, a 54% increase year-over-year [38] - Net profit for Q2 2021 was $31 million, or $0.29 basic earnings per share, reflecting a 62% year-over-year increase [38] Business Line Data and Key Metrics Changes - RFSOI segment saw over 40% year-over-year organic growth, power IC grew by 35%, image sensors increased by 30%, and power discrete grew by 23% [9] - RF mobile business accounted for 25% of revenues and is expected to show strong growth, driven by the anticipated doubling of 5G handset shipments [20] - Imaging business represented 15% of revenues, with growth in medical, dental x-ray, and industrial sensors [24] Market Data and Key Metrics Changes - The company expects to achieve a revenue run rate exceeding $1.5 billion annually, with Q3 guidance set at $385 million, indicating a 24% total growth year-over-year and 38% organic growth [10][33] - Demand for 5G technology is increasing average selling prices in the RF mobile segment, expected to continue for several quarters [21] Company Strategy and Development Direction - The company is executing a $250 million capacity expansion plan to increase production capabilities in 8-inch and 12-inch fabs [34] - A partnership with ST Microelectronics aims to accelerate the ramp-up of the Agrate 300-millimeter manufacturing facility, expected to triple current capacity [12][13] - The company is actively involved in the CHIPS Act discussions, targeting funding for growth initiatives in the U.S. [15][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued top and bottom line growth, driven by strong customer demand and capacity expansions [11][42] - The company anticipates increased margins in Q3 and expects to exceed a 50% incremental gross profit model in Q4 [42][65] Other Important Information - The company is about to issue its first formal Environmental Social Governance (ESG) report, emphasizing its commitment to sustainability [30][31] - Current assets ratio stands strong at 3.7x, indicating a stable financial position [39] Q&A Session Summary Question: Gross margins outlook for the year - Management expects gross margins to exceed 50% in Q4 due to higher selling prices and a richer mix of products [49][51] Question: Partnership rationale with ST Micro - The partnership aims for a faster ramp to high utilization and reduced fixed costs, benefiting both companies [53][55] Question: Capacity expansion plans - The company is including silicon germanium in its capacity expansion plans, addressing growing demand in data centers [58] Question: Operating expenses expectations - Operating expenses are expected to remain flat, allowing for earnings leverage in the second half of the year [101][102]

Tower Semiconductor Ltd. (NASDAQ:TSEM) Q1 2021 Earnings Conference Call May 12, 2021 10:00 AM ET Company Participants Noit Levy - Senior Vice President of Investor Relations & Corporate Communications Russell Ellwanger - Chief Executive Officer Oren Shirazi - Chief Financial Officer Conference Call Participants Rajvindra Gill - Needham & Company Cody Acree - Loop Capital Richard Shannon - Craig-Hallum Mark Lipacis - Jefferies Operator Ladies and gentlemen, thank you for standing-by. Welcome to the Tower Sem ...

PART I [Key Information](index=6&type=section&id=ITEM%203.%20KEY%20INFORMATION) Outlines primary business, securities, and operational risks, including demand volatility, competition, and Israeli geopolitical instability [Risk Factors](index=6&type=section&id=D.%20RISK%20FACTORS) Identifies business, securities, and operational risks, including production bottlenecks, competition, debt, and cyber threats - **Over-demand** for foundry services could lead to production bottlenecks, an inability to fulfill customer orders, and the potential loss of customers and revenue[36](index=36&type=chunk) - The company's growth strategy relies on acquisitions and **capacity expansion**, which carries risks such as integration difficulties, competition for acquisition targets, and potential financing challenges[37](index=37&type=chunk)[40](index=40&type=chunk) - The **semiconductor foundry business** is highly competitive, with rivals potentially having greater manufacturing capacity, financial resources, and better cost structures[44](index=44&type=chunk)[45](index=45&type=chunk) - In **2020**, **one customer** (**NTCJ**, formerly **PSCS**) accounted for **25%** of **revenues**, and **five other customers** each generated between **4%** and **11%**, indicating significant **customer concentration risk**[52](index=52&type=chunk) - The **COVID-19 pandemic** presents risks such as raw material shortages, reduced employee attendance, and potential downturns in customer orders[54](index=54&type=chunk) - As of **December 31, 2020**, the company had approximately **$392 million** in consolidated **long-term debt**, which could limit its ability to fund strategic growth, increase vulnerability to adverse economic conditions, and place it at a competitive disadvantage[65](index=65&type=chunk)[67](index=67&type=chunk) - A **cybersecurity attack** in **September 2020** caused a temporary, proactive halt in operations at some manufacturing facilities, highlighting the risk of security breaches to operations and reputation[97](index=97&type=chunk) - Operations in **Israel**, which include **two manufacturing facilities** (**Fab 1** and **Fab 2**), are subject to risks from political, economic, and military instability in the region[104](index=104&type=chunk)[105](index=105&type=chunk) [Information on the Company](index=22&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) Provides an overview of Tower Semiconductor's history, operations as a specialty foundry, structure, and global assets [History and Development of the Company](index=22&type=section&id=A.%20HISTORY%20AND%20DEVELOPMENT%20OF%20THE%20COMPANY) Details Tower Semiconductor's growth since **1993** through strategic acquisitions, expanding its global fab footprint - **Tower** was founded in **1993** by acquiring National Semiconductor's **150-mm** wafer **fab** (**Fab 1**) in Migdal Haemek, **Israel**[116](index=116&type=chunk) - In **2008**, the company merged with Jazz Technologies, acquiring **Fab 3** in Newport Beach, California, which specializes in **analog and mixed-signal semiconductor devices**[118](index=118&type=chunk) - In **2014**, **Tower** acquired a **51% equity stake** in **TPSCo** from Panasonic, gaining **three manufacturing facilities** in **Japan** and expanding its capacity to **300mm** wafers[119](index=119&type=chunk) - In **2016**, the company acquired a fabrication facility in San Antonio, Texas (**Fab 9**) from Maxim, further expanding its US manufacturing footprint[120](index=120&type=chunk) [Business Overview](index=23&type=section&id=B.%20BUSINESS%20OVERVIEW) Operates as a specialty foundry, focusing on advanced technologies and expanding through acquisitions amid intense competition - The company specializes in **manufacturing semiconductors** using technologies like **CMOS image sensors**, **RFCMOS**, **BiCMOS**, **SiGe**, **silicon photonics**, and **power management**[114](index=114&type=chunk) - Key focused process technologies include **RF CMOS**, **SiGe**, **CMOS image sensors** (**CIS**), advanced analog **CMOS**, **RFID**, **BiCMOS**, high voltage **CMOS**, and **SOI platforms**[142](index=142&type=chunk)[143](index=143&type=chunk) - The company competes with **specialty foundries** like **GlobalFoundries** and **Vanguard**, as well as large **pure-play foundries** like **TSMC**, **UMC**, and **SMIC**, and **IDMs** with foundry operations[177](index=177&type=chunk) Revenue by Geography (2018-2020) | Region | 2020 (%) | 2019 (%) | 2018 (%) | | :--- | :--- | :--- | :--- | | **United States** | **44%** | **52%** | **52%** | | **Japan** | **28%** | **29%** | **34%** | | **Asia, excluding Japan** | **22%** | **15%** | **10%** | | **Europe** | **6%** | **4%** | **4%** | | **Total** | **100%** | **100%** | **100%** | - In **2020**, **six significant customers** each contributed between **4%** and **25%** of **revenues**. This compares to **six customers** contributing **5%** to **27%** in **2019**, and **four customers** contributing **7%** to **33%** in **2018**[172](index=172&type=chunk) [Organizational Structure](index=36&type=section&id=C.%20ORGANIZATIONAL%20STRUCTURE) Details the company's structure, including its Israeli parent, wholly-owned US subsidiaries, and **51%** stake in **TPSCo Japan** - **Tower Semiconductor Ltd.** is the **parent company**, incorporated in **Israel**, directly operating **Fab 1** and **Fab 2**[205](index=205&type=chunk)[206](index=206&type=chunk) - US operations (**Fab 3** and **Fab 9**) are managed through **wholly-owned US subsidiaries**, including **Tower US Holdings Inc.** and its subsidiaries[206](index=206&type=chunk)[208](index=208&type=chunk) - The company holds a **51% equity stake** in the Japanese entity **TPSCo**, which operates **three fabs**. The remaining **49%** is held by **NTCJ**[207](index=207&type=chunk) [Property, Plants and Equipment](index=36&type=section&id=D.%20PROPERTY,%20PLANTS%20AND%20EQUIPMENT) Operates **seven global fabs** supporting diverse process geometries, with increased **2020 capex** for **capacity expansion** - The company manufactures semiconductor wafers at **seven facilities**: **Fab 1** & **2** (**Israel**), **Fab 3** (California, US), **Fab 9** (Texas, US), and **three TPSCo fabs** (**Japan**)[209](index=209&type=chunk) Net Capital Expenditures | Year | Net Capex ($M) | | :--- | :--- | | **2020** | **257** | | **2019** | **172** | - The lease for **Fab 3** in Newport Beach, California has been extended through **March 2027**, though there is an ongoing dispute with the landlord regarding **noise abatement actions**[218](index=218&type=chunk) - All **manufacturing facilities** are certified with key international standards, including **ISO 9001** (**quality**), **IATF16949** (**automotive quality**), **ISO 14001** (**environmental**), and **OHSAS 45001** (**health and safety**)[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk) [Operating and Financial Review and Prospects](index=39&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) Analyzes **2020 financial performance**, **liquidity**, **R&D**, and **industry trends**, noting revenue growth and increased **capex** [Operating Results](index=39&type=section&id=A.%20OPERATING%20RESULTS) Reports **2020 revenue growth** to **$1.27 billion**, stable operations despite challenges, and a slight net profit decrease Financial Performance Comparison (2020 vs. 2019) | Metric | 2020 ($M) | 2019 ($M) | Change | | :--- | :--- | :--- | :--- | | **Revenues** | **1,265.7** | **1,234.0** | +**$31.7M** | | **Gross Profit** | **233.3** | **229.7** | +**$3.6M** | | **Operating Profit** | **91.0** | **86.7** | +**$4.3M** | | **Net Profit Attributable to Company** | **82.3** | **90.0** | -**$7.7M** | - The **COVID-19 pandemic** did not materially adversely affect **2020** results; a significant revenue increase began in **H2 2020**, driven by demand for **RF products** for **data centers** and **cloud computing**[232](index=232&type=chunk)[234](index=234&type=chunk) - A **cyber event** in **September 2020** caused a temporary, proactive halt in some **manufacturing facilities** but had no material impact on the business due to quick restoration and insurance coverage[238](index=238&type=chunk) - **Capital expenditures** increased by nearly **50%** to **$256.5 million** in **2020** from **$172.2 million** in **2019** to address growing customer demand[237](index=237&type=chunk) Revenue by Geography (2020 vs. 2019) | Region | 2020 (%) | 2019 (%) | | :--- | :--- | | **United States** | **44%** | **52%** | | **Japan** | **28%** | **29%** | | **Asia (ex-Japan)** | **22%** | **15%** | | **Europe** | **6%** | **4%** | [Liquidity and Capital Resources](index=44&type=section&id=B.%20LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Details **2020 liquidity**, cash flow, and debt position, noting sufficient resources for operations but potential need for acquisitions Cash and Debt Position (as of Dec 31, 2020) | Item | Amount ($M) | | :--- | :--- | | **Cash and cash equivalents** | **211.7** | | **Short-term deposits** | **310.2** | | **Marketable securities** | **189.0** | | **Total Debt (Current + Long-term)** | **390.3** | - Major cash activities in **2020** included **$276.6 million** generated from operations, **$313.7 million** invested in property and equipment, and **$63.7 million** used for debt repayment[272](index=272&type=chunk) - The company has a shelf registration statement in **Israel**, providing a platform for future fundraising to support strategic opportunities like acquisitions or **capacity expansion**[275](index=275&type=chunk) - Key **long-term debt** includes approximately **$104 million** in **Series G debentures**, a **$107 million JP Loan** for **TPSCo**, and significant capital lease obligations[278](index=278&type=chunk)[279](index=279&type=chunk) [Research and Development, Patents and Licenses](index=46&type=section&id=C.%20RESEARCH%20AND%20DEVELOPMENT,%20PATENTS%20AND%20LICENSES) Focuses on **R&D activities** for process improvement, with expenses steadily increasing to **$78.3 million** in **2020** Net Research and Development Expenses | Year | R&D Expense ($M) | | :--- | :--- | | **2020** | **78.3** | | **2019** | **75.6** | | **2018** | **73.1** | [Trend Information](index=46&type=section&id=D.%20TREND%20INFORMATION) Addresses **semiconductor industry trends**, focusing on **specialty analog technologies** and **capacity expansion** for growth - The company's strategy focuses on **differentiated specialty analog technologies** to counter pricing pressure on larger geometry products[286](index=286&type=chunk) - **Tower** targets **high-growth end markets** including **IoT**, **mobile applications**, **wireless communications**, **consumer electronics**, **automotive**, and **industrial markets**[287](index=287&type=chunk) - The company is accelerating plans to expand **manufacturing capacity**, including its **300mm fab**, and is actively evaluating **acquisition opportunities** to secure additional capacity and technology[289](index=289&type=chunk)[291](index=291&type=chunk) [Directors, Senior Management and Employees](index=48&type=section&id=ITEM%206.%20DIRECTORS,%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) Details leadership, compensation, board structure, and global workforce, including **unionized** employees and compliance [Directors and Senior Management](index=48&type=section&id=A.%20DIRECTORS%20AND%20SENIOR%20MANAGEMENT) Outlines the executive team and board of directors, led by **CEO Russell C Ellwanger** and **Chairman Amir Elstein** - **Russell C. Ellwanger** has served as **Chief Executive Officer** since **May 2005**[294](index=294&type=chunk) - **Amir Elstein** has served as the **Chairman of the Board of Directors** since **January 2009**[308](index=308&type=chunk) [Compensation](index=53&type=section&id=B.%20COMPENSATION) Details the **performance-based compensation policy**, including **2020 aggregate pay** and **shareholding guidelines** - An amended and restated **compensation policy** for executive officers and directors was approved by shareholders on **September 17, 2020**[320](index=320&type=chunk) 2020 Aggregate Compensation for Directors & Senior Management | Compensation Type | Amount ($M) | | :--- | :--- | | **Salaries, Fees, Bonuses** | **7.3** | | **Social & Other Benefits** | **2.0** | - In **September 2020**, shareholders approved an equity grant to the **CEO** valued at **$5.1 million**, comprising **40% time-based RSUs** and **60% performance-based PSUs**, vesting over three years[335](index=335&type=chunk)[341](index=341&type=chunk) - The **compensation policy** includes **minimum shareholding guidelines** requiring the **CEO** to own shares valued at **3x** his annual **base salary** by **May 2024**, and other executives/directors to own **0.5x** their annual fee/salary by **July 2025**[343](index=343&type=chunk) [Board Practices](index=57&type=section&id=C.%20BOARD%20PRACTICES) Describes the **nine-member Board of Directors**, its committees, and compliance with **Nasdaq independence rules** - The **Board of Directors** is currently comprised of **nine directors**[345](index=345&type=chunk) - The company has elected to exempt itself from the Israeli requirement to appoint **external directors** and instead complies with **Nasdaq listing rules** for **independent directors** and committee composition[348](index=348&type=chunk)[349](index=349&type=chunk) - The **Audit Committee** consists of **four members**, all of whom are determined to be **independent** and are classified as **audit committee financial experts** under **SEC rules**[352](index=352&type=chunk)[355](index=355&type=chunk) - The **Compensation Committee** is comprised of **three independent directors**[357](index=357&type=chunk)[359](index=359&type=chunk) [Employees](index=61&type=section&id=D.%20EMPLOYEES) Reports **5,511 global employees** as of **2020**, with a majority in manufacturing and a portion **unionized** Employee Headcount by Year | Year | Total Employees | | :--- | :--- | | **2020** | **5,511** | | **2019** | **5,279** | | **2018** | **5,586** | Employees by Function (as of Dec 31, 2020) | Function | Number of Employees | | :--- | :--- | | **Manufacturing and operations** | **3,858** | | **Process/product engineering, R&D, design** | **994** | | **Manufacturing support** | **386** | | **Sales, marketing, finance & admin** | **273** | | **Total** | **5,511** | - As of **December 31, 2020**, the company had **2,561** employees in **Japan**, **1,518** in **Israel**, and **1,416** in the **United States**[367](index=367&type=chunk) - A portion of employees in the Newport Beach, CA fab and most employees in the **Japan fabs** are represented by unions and covered by **collective bargaining agreements**[370](index=370&type=chunk)[372](index=372&type=chunk) [Major Shareholders and Related Party Transactions](index=63&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) Discloses major institutional shareholders as of **March 2021** and confirms no material related party transactions Major Shareholders (as of March 31, 2021) | Shareholder | Ownership (%) | | :--- | :--- | | **Wellington Management Group LLP** | **8.11%** | | **Senvest Management, LLC** | **7.04%** | | **Phoenix Holdings Ltd.** | **6.07%** | | **Harel Insurance Investments & Financial Services Ltd.** | **5.48%** | - As of **March 31, 2021**, no individual director or senior manager beneficially owned **1%** or more of the company's outstanding **ordinary shares**[373](index=373&type=chunk) - The company has not been a party to any **material related party transactions** involving directors, executive officers, or major shareholders[383](index=383&type=chunk) [Financial Information](index=64&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) References financial statements, notes a **Fab 3 lease dispute**, and states no anticipated dividends due to growth focus - The company is in a **dispute** with the landlord of its **Fab 3** facility in Newport Beach, CA, regarding **noise abatement actions**, with the landlord claiming a right to terminate the lease[386](index=386&type=chunk) - The company does not anticipate paying **dividends** in the foreseeable future, intending to **retain earnings** for growth. **Dividend** payments are also restricted by **covenants** in its **Series G Debentures**[387](index=387&type=chunk) [Additional Information](index=65&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) Covers corporate and legal information, including articles of association, material contracts, exchange controls, and taxation [Material Contracts](index=66&type=section&id=C.%20MATERIAL%20CONTRACTS) Highlights the key **manufacturing** and **lease agreements** with **NTCJ** for the **three TPSCo fabs** in **Japan** - In **March 2019**, the **manufacturing agreement** with **PSCS** (now **NTCJ**) for production at the **three TPSCo fabs** in **Japan** was extended for an additional three-year period with a revised pricing structure[401](index=401&type=chunk) - In **September 2020**, **Nuvoton Technology Corp.** acquired **PSCS** from Panasonic, and the new entity, **NTCJ**, assumed the existing **manufacturing** and **lease agreements** with **Tower** and **TPSCo**[401](index=401&type=chunk) [Taxation](index=67&type=section&id=E.%20TAXATION) Details Israeli and US tax implications for the company and investors, including '**Preferred Enterprise**' status - The standard Israeli corporate tax rate is **23%**, but **Tower's Israeli facilities** qualify as a "**Preferred Enterprise**," entitling them to a reduced tax rate of **7.5%** on preferred income[404](index=404&type=chunk)[425](index=425&type=chunk)[431](index=431&type=chunk) - Non-Israeli residents are generally exempt from Israeli capital gains tax on the sale of shares in a publicly traded Israeli company, provided the gains are not from a permanent establishment in **Israel** and other conditions are met[410](index=410&type=chunk) - **Dividends** distributed to non-resident individuals are subject to a **25%** withholding tax (or **30%** for a "**substantial shareholder**"), which may be reduced by an applicable tax treaty. **Dividends** from a **Preferred Enterprise** are generally taxed at **20%**[416](index=416&type=chunk) - For **U.S. Holders**, **dividends** paid by the company may qualify for reduced tax rates as "**qualified dividend income**," as the company is eligible for benefits under the **U.S.-Israel Tax Treaty** and its shares are traded on an established U.S. market[447](index=447&type=chunk)[451](index=451&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=77&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Discusses **market risks** from **interest rate** and **foreign currency fluctuations**, and **hedging strategies** employed - The company's major debt instruments, including **Series G Debentures** and the **JP Loan**, bear **fixed interest rates**, limiting cash flow exposure to **interest rate fluctuations**[467](index=467&type=chunk) - The company is exposed to **foreign exchange risk** from its operations in **Israel** (**NIS**) and **Japan** (**JPY**). Appreciation of the **NIS** increases Israeli labor and purchase costs in **USD** terms[469](index=469&type=chunk)[472](index=472&type=chunk) - To mitigate **currency risk**, the company uses **foreign currency cylinder transactions** for a portion of its **NIS** and **JPY** exposure and has fully hedged its **NIS-denominated Series G Debentures** with a **cross-currency swap**[472](index=472&type=chunk)[473](index=473&type=chunk) - In **2020**, the **USD** depreciated **7.0%** against the **NIS** and **5.0%** against the **JPY**[471](index=471&type=chunk)[474](index=474&type=chunk) PART II [Controls and Procedures](index=79&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Management and auditors concluded **disclosure controls** and internal financial reporting controls were **effective** in **2020** - Management concluded that the company's **disclosure controls and procedures** were **effective** as of **December 31, 2020**[483](index=483&type=chunk) - Based on an evaluation using the **COSO 2013 framework**, management concluded that the company's **internal control over financial reporting** was **effective** as of **December 31, 2020**[484](index=484&type=chunk) - The independent registered public accounting firm, **Brightman Almagor Zohar & Co. (Deloitte)**, audited and issued an **unqualified opinion** on the **effectiveness** of the **internal control over financial reporting** as of **December 31, 2020**[486](index=486&type=chunk) [Corporate Governance](index=81&type=section&id=ITEM%2016G.%20CORPORATE%20GOVERNANCE) Outlines **corporate governance practices** as a **foreign private issuer**, noting Israeli law divergences from **Nasdaq rules** - As a **foreign private issuer**, the company follows certain **home country (Israeli) corporate governance practices** in lieu of specific **Nasdaq Listing Rules**[496](index=496&type=chunk) - Exemptions taken include practices related to the distribution of annual reports, meetings of **independent directors**, officer compensation approval, and quorum requirements for shareholder meetings[496](index=496&type=chunk) - The company follows **Israeli law** for **shareholder approval** of **corporate actions**, which may not align with all requirements of **Nasdaq Listing Rule 5635**, particularly regarding **equity compensation plans**[497](index=497&type=chunk) PART III [Financial Statements](index=83&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) Presents audited consolidated financial statements for **2020**, with an **unqualified auditor's opinion** and key notes Consolidated Balance Sheet Highlights (as of Dec 31, 2020) | Metric | Amount ($M) | | :--- | :--- | | **Total Assets** | **2,094.1** | | **Total Current Assets** | **1,102.9** | | **Property and Equipment, Net** | **839.2** | | **Total Liabilities** | **639.2** | | **Total Current Liabilities** | **272.9** | | **Long-Term Debt** | **283.8** | | **Total Shareholders' Equity** | **1,454.9** | Consolidated Statement of Operations (Year Ended Dec 31, 2020) | Metric | Amount ($M) | | :--- | :--- | | **Revenues** | **1,265.7** | | **Gross Profit** | **233.3** | | **Operating Profit** | **91.0** | | **Net Profit** | **83.3** | | **Net Profit Attributable to Company** | **82.3** | | **Diluted EPS** | **$0.76** | Consolidated Statement of Cash Flows (Year Ended Dec 31, 2020) | Metric | Amount ($M) | | :--- | :--- | | **Net Cash from Operating Activities** | **276.6** | | **Net Cash used in Investing Activities** | **(363.6)** | | **Net Cash used in Financing Activities** | **(61.2)** | | **Decrease in Cash & Cash Equivalents** | **(143.9)** | - The independent auditor, **Brightman Almagor Zohar & Co. (Deloitte)**, identified the determination of the **income tax provision** in a multinational environment as a **critical audit matter** due to the **significant judgments and estimates** involved[526](index=526&type=chunk)[527](index=527&type=chunk)

Financial Data and Key Metrics Changes - The company reported revenues of $1.266 billion for the full year 2020, representing a year-over-year growth of 3% and 5% organic growth [8] - For Q4 2020, revenues were $345 million, exceeding mid-range guidance, with an 11% year-over-year total growth and 20% organic growth [8][41] - EBITDA for Q4 2020 was $95.8 million, with a net profit of $31 million, marking significant increases from previous quarters [8][44] - The company expects Q1 2021 revenues to be around $345 million, indicating a 15% year-over-year total growth and 20% organic growth [9] Business Line Data and Key Metrics Changes - Infrastructure revenue was approximately $230 million, while wireless revenue was about $425 million [10][11] - Automotive revenue reached $180 million, and consumer revenue was around $220 million [11] - The power IC organic business grew 25% in 2020, with strong demand in hybrid and electric vehicles [21] - The interactive smart systems segment, which includes image sensors, generated about $230 million, with a 7% growth despite challenges in the medical sector [15] Market Data and Key Metrics Changes - The company noted strong demand in the RF-SOI market, particularly for 200-millimeter and 300-millimeter platforms [104] - The automotive sector is experiencing significant demand, although the company does not have many customers exclusively serving this market [103] - The industrial sensor market is recovering, with increased demand noted in manufacturing lines [72] Company Strategy and Development Direction - The company is investing $150 million to expand capacity across several facilities to meet increasing customer demand [40][46] - The focus on silicon photonics and advanced RF technologies is expected to drive future growth, with a strong customer base already engaged [18][82] - The company is exploring opportunities in MEMS microphones and micro LED displays, indicating a strategic shift towards high-growth markets [32][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand environment, noting that existing factories are not fully utilized, allowing for revenue growth without immediate capacity constraints [61] - The company anticipates a margin increase in the latter half of 2021 as new capacity comes online and higher-margin products are prioritized [64] - Management highlighted the importance of customer loyalty and adapting to changing demand patterns while maintaining profitability [62] Other Important Information - The company reported a strong balance sheet with shareholders' equity reaching $1.45 billion [55] - The lease contract for manufacturing facilities was extended, resulting in an increase in fixed assets and liabilities [48] - The company has implemented currency hedging strategies to mitigate risks associated with fluctuations in the Japanese yen and Israeli shekel [49][52] Q&A Session Summary Question: Thoughts on the $150 million CapEx investment and supply-demand environment - Management indicated that the investment is driven by increased demand and is expected to yield a good return on investment [60] Question: Gross profit fall-through metrics and expectations - Management expects to see a 50% incremental margin starting in Q4 2021, with lower margins in the initial quarters due to ramp-up costs [66] Question: Recovery in power discretes and automotive production impacts - Management noted a recovery in discrete components and indicated that automotive demand is strong, but decisions on allocation are primarily made by customers [70][103] Question: New projects and customer wins contributing to growth - Management highlighted ongoing projects in silicon photonics and MEMS microphones as significant growth drivers, with many new tape-outs occurring [81][90] Question: CapEx forecast for 2021 - Management provided guidance that CapEx payments will be concentrated in Q3 and Q4 2021, with maintenance CapEx returning to previous levels [92] Question: Utilization rates and capacity constraints - Management clarified that while utilization rates are reasonable, there is room for growth, and some CapEx is aimed at addressing bottlenecks in production [100]

Tower Semiconductor Ltd (NASDAQ:TSEM) Q3 2020 Earnings Conference Call November 12, 2020 10:00 AM ET Company Participants Noit Levy - SVP, IR & Corporate Communications Russell Ellwanger - CEO & Director Oren Shirazi - CFO & SVP, Finance Conference Call Participants Rajvindra Gill - Needham & Company Cody Acree - Loop Capital Markets Mark Lipacis - Jefferies Richard Shannon - Craig-Hallum Lisa Thompson - Zacks Investment Research David Duley - Steelhead Securities Operator Ladies and gentlemen, thank you fo ...

Financial Data and Key Metrics Changes - The company reported Q2 2020 revenues of $310 million, meeting guidance, with EBITDA of $82 million and net profit of $19 million, reflecting a strong financial position with record shareholders' equity and total balance sheet [6][21][22] - Revenue increased from $300 million in Q1 2020 and $306 million in Q2 2019, with gross profit rising to $58 million from $53 million in the previous quarter [22][24] - Net profit for Q2 2020 was $19 million, up from $17 million in Q1 2020, but down from $21 million in Q2 2019 [23][25] Business Line Data and Key Metrics Changes - The Analog IC business unit, particularly silicon germanium optical, showed strength driven by 5G infrastructure and datacenter demand, with a projected 20% revenue growth year-over-year [10][12] - The mobile RF business is expected to grow 10% to 15% year-over-year despite a 20% market pullback due to COVID-19 [12][38] - The Power IC business anticipates 20% year-over-year growth, particularly in battery management for electric vehicles, despite some impacts from COVID-19 [14][62] - The Sensor business unit forecasts single-digit growth, with some segments adversely affected by COVID-19, particularly dental x-ray sensors [16] Market Data and Key Metrics Changes - Utilization rates in various fabs showed improvement, with Newport Beach at 70% and San Antonio also at 70%, indicating increased demand for silicon germanium [18] - The company is experiencing strong demand in the 5G and datacenter markets, contributing to overall growth despite challenges in other sectors [10][79] Company Strategy and Development Direction - The company is focused on capacity expansion, particularly in its 300mm facility, to meet increasing technology demands [6][10] - Continued investment in new technology and partnerships with Tier 1 customers, such as the collaboration with Infinera for advanced optical transceivers, is a key strategic focus [11] - The company aims to maintain its leadership position in silicon germanium and silicon photonics technologies [11][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the COVID-19 pandemic, ensuring business continuity and safety for employees [7][9] - The outlook for the second half of 2020 remains positive, with expectations of continued revenue growth driven by strong customer demand in key markets [10][19] - Management noted that while there is short-term caution in the mobile sector due to customer visibility issues, long-term growth prospects remain strong [13][54] Other Important Information - The company achieved a current assets ratio of 3.5x and record shareholders' equity of $1.39 billion, indicating a strong financial position [21][27] - The company has implemented currency hedging activities to mitigate risks associated with fluctuations in the Japanese yen and Israeli shekel [28][30] Q&A Session Summary Question: Organic growth rates - The company indicated that most organic growth was in silicon germanium for datacenters and 5G, with specific numbers to be provided later [32][34] Question: Capacity expansion - Management confirmed that capacity built out in 2018 and 2019 allows for a potential increase of 30% to 35% from current high start levels [36] Question: Mobile market growth - The company reaffirmed a 10% to 15% year-over-year growth in RF SOI despite a market pullback, attributing this to market share gains [38] Question: Sensing projects - Management noted multiple customers for fingerprint sensors and time-of-flight projects, with significant opportunities expected in 2021 [46] Question: Automotive exposure - The company has a solid automotive exposure through long-term agreements and anticipates a rebound in this sector [61][62] Question: RF SOI market share - Management stated that there is no natural limit to growth in RF SOI, with strong advanced flows and plans for further expansion [66][68]

Financial Data and Key Metrics Changes - First quarter revenues were $300 million, meeting guidance, with EBITDA of $73 million and net profit of $17 million [6][29] - Year-over-year organic revenue growth was 10%, or $19 million, while nonorganic revenue decreased by $29 million due to a renewed contract with Panasonic [29][30] - Gross profit for Q1 2020 was $53 million, down from $63 million in Q1 2019, and operating profit was $16 million compared to $27 million in the prior year [29][30] Business Line Data and Key Metrics Changes - The analog IC business unit saw strong growth in mobile RF due to increased market share and 5G handset rollouts, although growth expectations were tempered by COVID-19 impacts [11][12] - The silicon germanium optical business unit reported a resurgence in orders driven by 5G infrastructure, with expectations for strong growth through 2020 [13] - The power IC business unit maintained good performance despite challenges in the automotive sector, with new product ramps expected to mitigate COVID-19 impacts [14][15] Market Data and Key Metrics Changes - Utilization rates varied across facilities, with Fab 1 at 60%, Fab 2 at 70%, and Fab 3 at 55%, with significant increases expected in Q2 due to demand for silicon germanium [22][23] - The 12-inch foundry business in Japan had an 80% utilization rate, a 10-point increase from the previous quarter, indicating strong demand [23] Company Strategy and Development Direction - The company is focused on capacity expansion in its 300-millimeter facility to meet existing and future demand, with investments in equipment reaching $63 million [6][29] - Continued investment in new technologies and partnerships, such as with Renesas for advanced satellite terminals, is a priority [14] - The company aims to maintain a strong balance sheet, with a current assets ratio of 3.8x and record shareholders' equity of $1.36 billion [28][33] Management Comments on Operating Environment and Future Outlook - The management acknowledged the challenges posed by COVID-19 but noted stable demand in early 2020, with expectations for quarter-over-quarter growth throughout the year [10][24] - There is uncertainty in customer forecasts, but the company remains optimistic about growth in various markets, particularly silicon germanium and RF mobile [44][57] - The management emphasized the importance of diversified end markets to mitigate risks associated with downturns in specific sectors [43][82] Other Important Information - The company reported a tax benefit of $1.7 million due to the CARES Act [31] - Standard & Poor's Ma'alot affirmed the company's corporate credit rating of ilAA- with a stable outlook [35] Q&A Session Summary Question: Customer demand improvements around 300-millimeter capacity - Management noted that demand is driven by diversified end markets and market share gains, despite uncertainties [43][44] Question: Market share growth in silicon germanium - Management indicated that while market share is high, the overall market is expanding, particularly in data centers and 5G infrastructure [45][46] Question: Gross margin decline - Management explained that gross margins were stable, with expectations for improvement as revenue increases [47][48] Question: Guidance for Q2 and organic growth rates - Management maintained guidance for Q2 at $310 million, reiterating expectations for low double-digit organic growth for the year [50][56] Question: Capacity increase due to non-litho bottlenecks - Management provided details on expected capacity increases and the impact of alleviating bottlenecks [60] Question: Supply risk management - Management emphasized strong relationships with suppliers and proactive inventory management to mitigate supply chain risks [62][63] Question: Sustainability of data center orders - Management expressed confidence in the strength of data center demand and its sustainability for the remainder of the year [84] Question: Growth drivers for 2021 - Management highlighted RF mobile, silicon germanium, and new technologies like fingerprint sensors as key growth drivers for the next year [78][79]

Financial Performance - Revenues for the year ended December 31, 2019, were $1,234,003 thousand, a decrease of 5.4% from $1,304,034 thousand in 2018[37] - Gross profit for 2019 was $229,671 thousand, down 21.5% from $292,947 thousand in 2018[37] - Operating profit for 2019 was $86,716 thousand, a decline of 44% compared to $154,943 thousand in 2018[37] - Net profit attributable to the Company for 2019 was $90,048 thousand, a decrease of 33.6% from $135,579 thousand in 2018[37] - Basic earnings per share for 2019 were $0.85, down from $1.35 in 2018, representing a decline of 37%[37] Assets and Equity - Total assets increased to $1,932,833 thousand in 2019, up from $1,789,977 thousand in 2018, reflecting a growth of 8%[38] - Cash, cash equivalents, and short-term interest-bearing deposits rose to $571,170 thousand in 2019, compared to $505,170 thousand in 2018, an increase of 13%[38] - Shareholders' equity increased to $1,346,723 thousand in 2019, compared to $1,236,205 thousand in 2018, a rise of 9%[38] Research and Development - Research and development expenses for 2019 were $75,579 thousand, up from $73,053 thousand in 2018, indicating a growth of 3.5%[37] Customer Concentration - In 2019, 27% of the company's revenues were generated from one customer (PSCS), with five additional customers each contributing between 5% to 9% of revenues[55] - Revenue from PSCS decreased by approximately $70 million in the nine-month period ended December 31, 2019, due to reduced selling prices under a renewed agreement[56] Risks and Challenges - The company faces risks related to manufacturing difficulties, which could adversely impact delivery times and financial results[40] - The company may face adverse effects on financial results due to global economic conditions, including a potential global recession and the impact of the coronavirus pandemic[60][61] - The company relies on export licenses and other permits for operations, which may pose risks to business continuity[57] - The company is dependent on maintaining key customer relationships; loss of significant customers could materially harm financial results[55] - The company may need to obtain financing for strategic opportunities, which could dilute shareholder holdings or incur additional debt[54] - The company faces risks related to international operations, including compliance with foreign regulations and geopolitical instability[68][69] - Manufacturing facilities may experience disruptions due to natural disasters, which could adversely affect production and revenues[65] - The company’s financial results may be negatively impacted if it cannot operate facilities at satisfactory utilization rates, as a large portion of costs are fixed[64] - Cash flow fluctuations could adversely affect the company's business and financial position, influenced by factors such as revenue levels and capital expenditures[73] - Over-demand for foundry services may lead to customer loss and revenue decline, impacting profitability[74] - The company faces challenges in retaining qualified personnel due to intense competition in the semiconductor industry, which may increase compensation costs[75] - The lack of significant backlog makes it difficult for the company to forecast future revenues and margins accurately[76] - Future revenues are expected to depend heavily on purchase orders received in the preceding quarters, with no assurance of order continuity[77] - Manufacturing based on forecasted demand may result in obsolete inventory, negatively impacting financial results[78] - Long sales cycles may lead to excess capacity and lower utilization of facilities if received orders do not meet expectations[79] - Delays in procuring equipment and raw materials could result in production delays and loss of customers[80] - The company is subject to conditions from Israeli government grants, which may impose liabilities if not met[82] - The company is subject to various litigations that may divert management focus and adversely affect business operations and financial results[96] - The semiconductor industry frequently faces litigation regarding patent and intellectual property rights, which may impact the company's ability to manufacture certain products[97] - Future infringement claims could lead to substantial financial burdens, including legal fees and potential damages, affecting business operations and revenues[98] - Compliance with environmental regulations in multiple countries may result in increased manufacturing costs and potential liabilities[99] - The company operates as an independent semiconductor foundry, relying on the trend of outsourcing foundry services, which if not sustained, could negatively impact financial results[101] - Collaboration with electronic design automation vendors is crucial; difficulties in this area may harm the company's ability to meet customer design needs[102] - The company may face challenges in selling excess and unused equipment, which could negatively affect financial results if not managed effectively[103] - Compliance with governmental regulations regarding semiconductor exports may disrupt business operations and increase costs[105] - Product liability claims due to defective integrated circuits could damage the company's reputation and financial condition[106] - Unionized workforce dynamics may lead to increased manufacturing costs and operational disruptions, impacting overall performance[107] Dividends and Financing - The company does not expect to pay any dividends in the foreseeable future, intending to retain future earnings for growth and acquisition strategies[122] - The company may seek additional funding sources, including debt refinancing and sale of new securities, to manage its debt obligations and support growth plans[72] Debt and Interest Rates - As of December 31, 2019, the company had approximately $290 million of consolidated principal amount of long-term debt outstanding, including $135 million in Series G debentures, $101 million in JP Loan, and $54 million in capital lease agreements[71] - As of December 31, 2019, the outstanding principal of Debentures Series G is approximately $135 million, bearing an annual fixed interest of 2.79%[474] - As of December 31, 2019, the company has approximately $101 million in TPSCo's loans at a fixed interest rate of 1.95% and $54 million in equipment capital lease agreements with interest rates of 1.85% or 1.95%[482] - The company is exposed to market risk due to fluctuations in interest rates on cash deposits and investments, which may affect interest income and fair market value[472] Currency and Inflation - The company operates in three regions: Japan, the United States, and Israel, with the functional currency for U.S. and Israeli entities being USD, and for the Japanese subsidiary being JPY[476] - During the year ended December 31, 2019, the USD depreciated against the NIS by 7.8%, compared to an 8.1% appreciation in 2018[477] - Assuming a 10% appreciation of the NIS against the USD, the effective impact on quarterly Israeli expenses would be approximately $3 million higher[480] - Assuming a 10% appreciation of the JPY against the USD, the effective impact on quarterly results would be a decrease in profitability by approximately $2 million[481] - The company holds approximately $74 million in cash and cash equivalents in JPY currency accounts, partially mitigating JPY debt exposure[482] - A 10% appreciation of the JPY against the USD would not have a material effect on the company's balance sheet as of December 31, 2019[482] - Inflation in Israel has ranged between -1% to 1% over the last 6 years, having a minor effect on the company's business[483] - The company's dollar costs in Israel may increase if inflation exceeds the devaluation of the NIS against the USD[483]

Tower Semiconductor Ltd (NASDAQ:TSEM) Q4 2019 Earnings Conference Call February 18, 2020 10:00 AM ET Company Participants Noit Levy - Vice President of Investor Relations and Corporate Communications Russell Ellwanger - Chief Executive Officer Oren Shirazi - Chief Financial Officer and Senior Vice President of Finance Conference Call Participants Mark Lipacis - Jefferies. Cody Acree - Loop Capital Raj Gill - Needham & Company Achal Sultania - Credit Suisse Richard Shannon - Craig Hallum Capital Group Lisa T ...