Orbotech Reports Third Quarter 2015 Results

05 Nov, 2015, 06:00 ET from Orbotech Ltd.

YAVNE, Israel, Nov. 5, 2015 /PRNewswire/ --

2015 third quarter highlights compared with 2014 third quarter

  • Revenues of $190.5 million, up 13.9% compared with $167.3 million
  • Non-GAAP EPS of $0.55 (diluted), compared with $0.36 adjusted to acquiring SPTS on July 1st, 2014
  • GAAP EPS of $0.37 (diluted), compared with $0.17 (diluted)

2015 fourth quarter guidance

  • Revenue range: $184 million to $192 million
  • Gross margin: approximately 45%.

ORBOTECH LTD. (NASDAQ: ORBK) today announced its consolidated financial results for the third quarter and nine months ended September 30, 2015.

Commenting on the results, Asher Levy, Chief Executive Officer, said: "We are very pleased to report robust top-line growth and profitability.  We continue to execute consistently on our business plan and make strong progress towards achieving our operating model goals.  We remain committed to innovation, as evidenced by today's announcement of the launch of two products designed for Printed Circuit Board Solder Mask production.  The Company's results for the third quarter and year-to-date clearly demonstrate the strength of our business model - which enjoys healthy diversification across businesses, industries, product lines and geographies.  As we look forward into 2016, we are confident in our ability to continue to capitalize on the growth opportunities available to the Company."

Revenues for the third quarter of 2015 totaled $190.5 million, up 13.9% from $167.3 million in the third quarter of 2014.

In the Company's Production Solutions for Electronics Industry segment:

   -   Revenues from the Company's semiconductor device ("SD") business were $70.2 million, including $58.4 million in equipment sales, in the third quarter of 2015.  This compares to SD business revenues of $53.3 million (including $45.6 million in equipment sales) in the third quarter of 2014.  Revenues from the SD business on a standalone basis for the full third quarter of 2014 totaled $57.3 million.

   -    Revenues from the Company's printed circuit board ("PCB") business were $64.2 million, including $34.5 million in equipment sales, in the third quarter of 2015.  This compares to PCB revenues of $71.7 million (including $41.4 million in equipment sales) in the third quarter of 2014.

   -   Revenues from the Company's flat panel display ("FPD") business were $48.5 million, including $38.6 million in equipment sales, in the third quarter of 2015.  This compares to FPD revenues of $34.9 million (including $26.7 million in equipment sales) in the third quarter of 2014.

Revenues in the Company's other segments were $7.6 million in the third quarter of 2015, compared with $7.4 million in the third quarter of 2014.

Service revenues for the third quarter of 2015 were $53.5 million, compared with $47.8 million in the third quarter of 2014.

Revenues for the first nine months of 2015 totaled $564.3 million, compared with $385.3 million in the first nine months of 2014 (excluding the Company's SD business, revenues totaled  $372.1 million, up 12.1% from $332.0 million the first nine months of 2014).

Gross profit and gross margin in the third quarter of 2015 were $86.3 million and 45.3%, respectively, compared with $74.0 million and 44.2%, respectively, in the third quarter of 2014.  Gross profit and gross margin in the first nine months of 2015 were $255.2 million and 45.2%, respectively, compared with $168.3 million and 43.7%, respectively, in the first nine months of 2014.

GAAP net income for the third quarter of 2015 was $15.9 million, or $0.37 per share (diluted), up from $7.4 million, or $0.17 per share (diluted), for the third quarter of 2014.  GAAP net income for the first nine months of 2015 was $40.7 million, or $0.94 per share (diluted), up from $22.3 million, or $0.52 per share (diluted), for the first nine months of 2014.  GAAP net income for the first nine months of 2015 included a pre-tax gain of approximately $0.6 million related to the sale of the Company's Thermal Products business.

Adjusted EBITDA (as defined below) and adjusted EBITDA margin for the third quarter of 2015 were $37.1 million and 19.5%, respectively, up from $32.0 million and 19.1%, respectively, in the third quarter of 2014.  Adjusted EBITDA and adjusted EBITDA margin for the first nine months of 2015 were $107.6 million and 19.1%, respectively, up from $58.4 million and 15.2%, respectively, in the first nine months of 2014.

Non-GAAP net income and non-GAAP net income margin for the third quarter of 2015 were $23.7 million and 12.4%, respectively, compared with $22.6 million and 13.5%, for the third quarter of 2014.  Non-GAAP net income in the third quarter of 2014 was positively affected in the amount of $7.3 million as a result of the timing of incurrence of expenses and the recognition of revenues as a result of the SPTS acquisition timing, as previously disclosed.  Non-GAAP net income and non-GAAP net income margin for the first nine months of 2015 were $67.4 million and 11.9%, respectively, compared with $41.3 million and 10.7%, for the first nine months of 2014.

Non-GAAP earnings per share (diluted) for the third quarter of 2015 was $0.55, compared with $0.53 per share (diluted), for the third quarter of 2014.  Non-GAAP earnings per share in the third quarter of 2014 were positively affected in the amount of $0.17, likewise due to the SPTS acquisition timing factors discussed above.  Non-GAAP earnings per share (diluted) for the first nine months of 2015 was $1.56, compared with $0.97 per share (diluted), for the first nine months of 2014.

A reconciliation of each of the Company's non-GAAP measures to the comparable GAAP measure is included at the end of this press release (the "Reconciliation").

As of September 30, 2015, the Company had cash, cash equivalents (including restricted cash) short-term bank deposits and marketable securities of approximately $193.2 million, and debt of $270.3 million.  In the third quarter of 2015, the Company generated cash of $7.8 million from operations and repaid $8.2 million of its term loan.

Fourth Quarter and 2015 Guidance

The Company expects revenues for the fourth quarter and full year of 2015 to be in the range of $184 million to $192 million and $748 million to $756 million, respectively, and gross margin for both the fourth quarter and full year of 2015 of approximately 45%.

Conference Call

An earnings conference call for the Company's third quarter 2015 results is scheduled for today, November 5, 2015 at 9:00 a.m. EDT.  The dial-in number for the conference call is 1-630-395-0055 or (US toll-free) 888- 946-8386 and a replay will be available on telephone number +1-203-369-0839 or (US toll-free) 866-423-2212 until November 18, 2015.  The pass code is Q3.  A live webcast of the conference call can also be heard by accessing the Company's website here http://investors.orbotech.com/phoenix.zhtml?c=71865&p=irol-EventDetails&EventId=520465.  The webcast will remain available for 12 months at: http://investors.orbotech.com/phoenix.zhtml?c=71865&p=irol-audioArchives

About Orbotech Ltd.

Orbotech Ltd. (NASDAQ: ORBK) is a global innovator of enabling technologies used in the manufacture of the world's most sophisticated consumer and industrial products throughout the electronics and adjacent industries.  The Company is a leading provider of yield enhancement and production solutions for electronics reading, writing and connecting, used by manufacturers of printed circuit boards, flat panel displays, advanced packaging, micro-electro-mechanical systems and other electronic components.  Virtually every electronic device in the world is produced using Orbotech systems.  For more information, visit http://www.orbotech.com.

Cautionary Statement Regarding Forward-Looking Statements

Except for historical information, the matters discussed in this press release are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.  These statements relate to, among other things, future prospects, developments and business strategies and involve certain risks and uncertainties.  The words "anticipate," "believe," "could," "will," "plan," "expect" and "would" and similar terms and phrases, including references to assumptions, have been used in this press release to identify forward-looking statements.  These forward-looking statements are made based on management's expectations and beliefs concerning future events affecting Orbotech and are subject to uncertainties and factors relating to Orbotech's operations and business environment, all of which are difficult to predict and many of which are beyond the Company's control.  Many factors could cause the actual results to differ materially from those projected including, without limitation, timing and extent of achieving the anticipated benefits of the acquisition of SPTS; Orbotech's ability to effectively integrate and operate SPTS's business, the timing, terms and success of any strategic or other transaction, cyclicality in the industries in which the Company operates, the Company's production capacity, timing and occurrence of product acceptance (the Company defines 'bookings' and 'backlog' as purchase arrangements with customers that are based on mutually agreed terms, which, in some cases for bookings and backlog, may still be subject to completion of written documentation and may be changed or cancelled by the customer, often without penalty), fluctuations in product mix, worldwide economic conditions generally, especially in the industries in which the Company operates, the timing and strength of product and service offerings by the Company and each of its competitors, changes in business or pricing strategies, changes in the prevailing political and regulatory framework in which the relevant parties operate or in economic or technological trends or conditions, including currency fluctuations, inflation and consumer confidence, on a global, regional or national basis, the level of consumer demand for sophisticated devices such as smartphones, tablets and other electronic devices, the timing and outcome of contract disputes with customers, particularly in Korea; the timing for a verdict in the ongoing appeal of the criminal matter, which is now expected in the first half of 2016, and ongoing investigation in Korea, the final outcome and impact of this matter, including its impact on existing or future business opportunities in Korea and elsewhere, any civil actions related to the Korean matter brought by third parties, including the Company's customers, which may result in monetary judgments or settlements, expenses associated with the Korean matter, ongoing or increased hostilities in Israel and other risks detailed in the Company's SEC reports, including the Company's Annual Report on Form 20-F for the year ended December 31, 2014, and subsequent SEC filings.  The Company assumes no obligation to update the information in this press release to reflect new information, future events or otherwise, except as required by law.

Non-GAAP Financial Measures

Non-GAAP net income, non-GAAP net income margin, non-GAAP net income per share detailed in the Reconciliation exclude charges, income or losses, as applicable, related to one or more of the following: (i) equity-based compensation expenses; (ii) certain items associated with acquisitions, including amortization of intangibles and acquisition costs; (iii) certain items associated with sale or disposition of businesses; (iv) tax impact; and/or (v) share in losses of associated company.  The Company uses the non-GAAP measures indicated in the Reconciliation, which give full year effect to the SPTS Acquisition, to supplement the Company's financial results presented on a GAAP basis.  These non-GAAP measures exclude equity based compensation expenses, amortization of intangible assets, share in losses/profits of associated companies, as well as certain financial expenses and non-recurring income items that are believed to be helpful in understanding and comparing past operating and financial performance with current results.  Management uses all of the non-GAAP measures to evaluate the Company's operating and financial performance in light of business objectives and for planning purposes.  These measures are not in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies.  Orbotech believes that these measures enhance investors' ability to review the Company's business from the same perspective as the Company's management and facilitate comparisons with results for prior periods.  In addition, these non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods.  However, the non-GAAP measures presented are subject to limitations as an analytical tool because they exclude certain recurring items (such as, equity compensation, interest expense and amortization of intangible assets) as described below and in the Reconciliation.  The presentation of this additional non-GAAP information should not be considered in isolation or as a substitute for net income; net income attributable to Orbotech Ltd. or earnings per share prepared in accordance with GAAP, and should be read only in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP.  For a quantification of the adjustments made to comparable GAAP measures, please see the Reconciliation.

The effect of equity-based compensation expenses has been excluded from the non-GAAP measures.  Although equity-based compensation is a key incentive offered to employees, and the Company believes such compensation contributed to the revenues earned during the periods presented and also believes it will contribute to the generation of future period revenues, the Company continues to evaluate its business performance excluding equity based compensation expenses.  Equity-based compensation expenses will recur in future periods.

The effects of amortization of intangible assets have also been excluded from the measures.  This item is inconsistent in amount and frequency and is significantly affected by the timing and size of acquisitions.  Investors should note that the use of intangible assets contributed to revenues earned during the periods presented and will contribute to future period revenues as well.  Amortization of intangible assets will recur in future periods and the Company may be required to record additional impairment charges in the future.  The Company believes that it is useful for investors to understand the effects of these items on total operating expenses.

Adjusted EBITDA and Credit Facility EBITDA are each also a non-GAAP financial measure.  The Company defines adjusted EBITDA as net income attributable to Orbotech Ltd., further adjusted, in addition to the items described above, to exclude taxes on income, financial expenses (income) – net and depreciation.  The Company presents adjusted EBITDA because it considers it to be an important supplemental measure and believes it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in Orbotech's industry.  The presentation of adjusted EBITDA is not based on the definition in the Credit Agreement governing the term loan incurred in connection with the SPTS acquisition.  Credit Facility EBITDA reflects additional adjustments to adjusted EBITDA permitted by the Credit Agreement as described in the Reconciliation and reflects the calculation for the twelve months ended September 30, 2015, a period that is permitted to be shown under the Credit Agreement, but is not consistent with our historical financial periods. Although the Company believes its presentation of each of adjusted EBITDA and Credit Facility EBITDA is useful, its adjusted EBITDA measure and Credit Facility EBITDA may not be comparable to similarly titled measures presented by other companies.

For more information about all of the foregoing items, see the Reconciliation, the Company's Annual Report on Form 20-F filed with the SEC for the year ended December 31, 2014 and its other SEC filings.

ORBOTECH LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

U. S. dollars  in  thousands

(Unaudited)

September 30

December 31

2015

2014

ASSETS

CURRENT ASSETS:

    Cash and cash equivalents 

$173,077

$136,367

    Restricted cash 

10,075

10,000

    Short-term bank deposits

4,034

10,000

    Accounts receivable:

      Trade

278,912

248,071

      Other

54,499

39,076

    Deferred income taxes 

6,743

8,213

    Inventories

135,214

157,030

              T o t a l  current assets

662,554

608,757

INVESTMENTS AND NON-CURRENT ASSETS:

    Marketable securities

5,979

5,890

    Funds in respect of employee rights upon retirement

8,362

9,755

    Deferred income taxes 

11,494

13,067

    Equity method investee and other recievable

9,733

8,926

    Deferred financing costs

5,939

7,470

41,507

45,108

PROPERTY, PLANT AND EQUIPMENT, net

52,601

55,580

OTHER INTANGIBLE ASSETS, net

116,311

145,082

GOODWILL

170,177

179,445

              T o t a l  assets

$1,043,150

$1,033,972

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

   Current maturities of long-term loan

$2,272

$2,636

    Accounts payable and accruals:

      Trade

58,855

64,683

      Other

85,606

81,747

Deferred income

28,773

38,008

              T o t a l  current liabilities

175,506

187,074

LONG-TERM LIABILITIES:

    Long-term  loan

265,855

293,851

    Liability for employee rights upon retirement

21,970

22,763

    Deferred income taxes

17,546

20,185

    Other tax liabilities

13,068

13,218

              T o t a l  long-term liabilities

318,439

350,017

              T o t a l  liabilities

493,945

537,091

EQUITY: 

    Share capital 

2,192

2,163

    Additional paid-in capital

303,209

293,056

    Retained earnings

344,674

303,950

    Accumulated other comprehensive income (loss)

(744)

(1,980)

649,331

597,189

    Less treasury shares, at cost

(99,539)

(99,539)

               T o t a l  Orbotech Ltd. shareholders' equity

549,792

497,650

    Non-controlling interest

(587)

(769)

               T o t a l  equity

549,205

496,881

              T o t a l  liabilities and equity

$1,043,150

$1,033,972

 

ORBOTECH LTD.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

U.S. dollars in thousands   (except per share data)

 (Unaudited)

9 months ended

3 months ended

September 30

September 30

2015

2014

2015

2014

Revenues 

$564,282

$385,255

$190,503

$167,277

Cost of revenues

309,096

216,939

104,158

93,290

Gross profit

255,186

168,316

86,345

73,987

Operating expenses: 

Research and development, net

76,258

60,606

25,439

23,035

Selling, general and administrative

89,121

63,683

30,094

23,515

Equity in earnings of Frontline

(3,976)

(4,741)

(1,754)

(1,183)

Amortization of intangible assets

23,547

10,430

7,519

8,410

Gain from the sale of the Thermal activity

(628)

SPTS acquisition costs

6,821

6,821

Total operating expenses

184,322

136,799

61,298

60,598

Operating income

70,864

31,517

25,047

13,389

Financial expenses  - net

18,406

3,814

6,138

3,880

Income before taxes on income

52,458

27,703

18,909

9,509

Taxes on income

11,137

5,079

2,769

2,088

Share in losses of equity method investee

415

315

200

102

Net income

40,906

22,309

15,940

7,319

Net income (loss) attributable to 

the non-controlling interests

182

51

21

(60)

Net income attributable to Orbotech Ltd. 

$40,724

$22,258

$15,919

$7,379

Basic earnings per share

$0.96

$0.53

$0.37

$0.18

Diluted earnings per share

$0.94

$0.52

$0.37

$0.17

Weighted average number of shares (in thousands)

used in computation of:

Basic earnings per share

42,266

41,678

42,557

41,541

Diluted earnings per share

43,237

42,776

43,491

42,735

 

ORBOTECH LTD.

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

U.S. dollars in thousands   (except per share data)

 (Unaudited)

9 months ended

3 months ended

September 30

September 30

2015

2014

2015

2014

Reported operating income on GAAP basis

$70,864

$31,517

$25,047

$13,389

Equity based compensation expenses

2,597

2,370

848

817

Amortization of intangible assets

23,547

10,430

7,519

8,410

Gain from the sale of the Thermal activity

(628)

Non-GAAP operating income

$96,380

$44,317

$33,414

$22,616

Reported net income attributable to Orbotech Ltd. on GAAP basis

$40,724

$22,258

$15,919

$7,379

Equity- based compensation expenses

2,597

2,370

848

817

Amortization of intangible assets

23,547

10,430

7,519

8,410

Gain from the sale of the Thermal activity

(628)

Tax adjustments re non-GAAP adjustments

729

(888)

(782)

(888)

SPTS acquisition costs

6,821

6,821

Share in losses of associated company

415

315

200

102

Non-GAAP net income

$67,384

$41,306

$23,704

$22,641

Non-GAAP earnings per diluted share

$1.56

$0.97

$0.55

$0.53

Shares used in earnings per diluted share calculation-in thousands

43,237

42,776

43,491

42,735

 

ORBOTECH LTD.

RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA

U.S. dollars in thousands  

 (Unaudited)

9 months ended

3 months ended

September 30

September 30

2015

2014

2015

2014

Net income attributable to Orbotech Ltd. on GAAP basis

$40,724

$22,258

$15,919

$7,379

Minority interest and equity losses 

597

366

221

42

Tax expenses

11,137

5,079

2,769

2,088

Financial expenses

18,406

3,814

6,138

3,880

Depreciation and amortization 

34,739

17,717

11,221

10,875

Gain from the sale of the Thermal activity

(628)

Equity- based compensation expenses

2,597

2,370

848

817

SPTS acquisition costs 

6,821

6,821

ADJUSTED EBITDA

$107,572

$58,425

$37,116

$31,902

 

 

ORBOTECH LTD.

RECONCILIATION OF GAAP NET INCOME TO CREDIT FACILITY EBITDA

U.S. dollars in thousands  

 (Unaudited)

12 months

September 30

2015

Net income attributable to Orbotech Ltd. on GAAP basis

$53,844

Minority interest and equity losses 

532

Tax expenses

9,477

Financial expenses

23,637

Depreciation and amortization 

47,355

Equity- based compensation expenses

3,419

Gain from the sale of the Thermal activity

(628)

Litigation expenses 

902

CREDIT FACILITY EBITDA(1)

$138,538

(1) Credit Facility EBITDA does not reflect any annualized expense reductions anticipated as a result of operational changes made as part of the SPTS Acquisition estimated by us in good faith as permitted by the Credit Agreement.  Because we are in the preliminary stages of assessing our operations after the SPTS Acquisition, this adjustment does not include any amount of cost savings, business optimization opportunities or synergies that we believe may be available.  Although we are carefully assessing the efficiency of our business, we may not identify or achieve any cost savings in the timeframe or amount we anticipate, if at all.  Accordingly, you should not place undue reliance on our ability to achieve cost savings or synergies.

ORBOTECH LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

 (Unaudited)

9 months ended

3 months ended

September 30

September 30

2015

2014

2015

2014

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

40,906

22,309

15,940

7,319

Adjustment to reconcile net income to net cash 

provided by operating activities:

Depreciation and amortization

34,739

17,717

11,221

10,875

Compensation relating to equity awards granted to 

employees and others - net

2,597

2,370

848

817

Decrease (increase) in liability for employee rights upon retirement, net

155

(2,247)

362

(983)

Long- term loans discount amortization

572

118

175

118

Deferred financing costs amortization

1,531

304

493

304

Deferred income taxes

448

2,214

(355)

2,309

Amortization of premium and accretion of discount on marketable

Securities, net

131

572

32

68

Equity in earnings of Frontline, net of dividend received 

190

(104)

(412)

354

Other

704

1,320

90

879

Loss from sales of marketable securities 

339

339

Gain from the sale of the Thermal activity 

(628)

Increase in accounts receivable:

Trade

(31,787)

(7,797)

(37,345)

(14,826)

Other

(4,099)

(2,559)

(4,668)

(83)

Increase (decrease) in accounts payable and accruals:

Trade

(5,829)

12,182

7,058

13,122

Deferred income and other

(2,209)

(3,212)

7,343

5,569

Decrease (increase) in inventories

17,310

(15,530)

7,036

(7,848)

Net cash provided by operating activities 

54,731

27,996

7,818

18,333

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property, plant and equipment

(11,356)

(8,746)

(4,237)

(2,814)

Consideration received for the sale of the Thermal activity 

10,000

Withdraw of bank deposits

5,966

24,650

4,501

12,576

Purchase of marketable securities

(154)

(15,086)

(844)

Redemption of marketable securities

26,586

17,748

Acquisition of SPTS net of cash acquired 

(375,061)

(375,061)

Investment in equity method investee 

(1,500)

(250)

Proceeds from disposal of property, plant and equipment 

15

Increase (decrease) in restricted cash 

(75)

2,904

Increase (decrease) in funds in respect of employee

rights upon retirement

445

(67)

52

5

Net cash provided by (used in) investing activities

3,326

(347,959)

3,220

(348,390)

CASH FLOWS FROM FINANCING ACTIVITIES:

Long term loan, net of $8 millions financing costs

288,918

288,918

Repayment of long-term loan 

(28,932)

(8,182)

Short term bank loan

6,000

6,000

Employee stock options exercised

7,585

7,002

1,424

1,256

Acquisition of treasury shares 

(14,593)

(1,600)

Net cash provided by (used in) financing activities

(21,347)

287,327

(6,758)

294,574

Net increase (decrease) in cash and cash equivalents

36,710

(32,636)

4,280

(35,483)

Casn and cash equivalents at beginning of period

136,367

161,155

168,797

164,002

CASH AND CASH EQUIVALENTS AT END OF PERIOD

173,077

128,519

173,077

128,519

 

Company Contact: Anat Earon-Heilborn Director of Investor Relations

Orbotech Ltd

Tel: +972-8-942 3582

anat.earon-heilborn@orbotech.com

 

Tally Kaplan Porat

Head of Corporate Marketing

Orbotech Ltd

Tel: +972-8-942 3603

Tally-Ka@orbotech.com

 

SOURCE Orbotech Ltd.