Orbotech Reports First Quarter 2017 Results
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Orbotech Reports First Quarter 2017 Results

(PRNewswire) —

2017 first quarter highlights

2017 second quarter guidance

ORBOTECH LTD. (NASDAQ: ORBK) (the "Company") today announced its consolidated financial results for the first quarter of 2017.

Commenting on the results, Asher Levy, Chief Executive Officer, said: "Our results for the first quarter of 2017 reflect a solid start to the year, and are marked by particularly strong execution in our PCB division - mainly from new product sales.  We see the current growth opportunities in our existing served industries, such as advanced smartphones, automotive applications and flex OLED screens, as well as the plans for additional panel fabrication capacity by Chinese FPD manufacturers, as being strongly supportive of our growth for the remainder of 2017.  As we have previously indicated, we anticipate that our 2017 results will be more backend loaded than previous years, and we expect to post revenue growth and ongoing profitability improvement during the year."

Revenues for the first quarter of 2017 totaled $187.6 million, compared with $190.4 million in the first quarter of 2016, and $215.0 million in the fourth quarter of 2016.

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

Revenues in the Company's other segments totaled $4.2 million in the first quarter of 2017, compared with $5.3 million in the first quarter of 2016.

Service revenues for the first quarter of 2017 were $50.9 million, compared with $49.5 million in the first quarter of 2016.

Gross profit and gross margin in the first quarter of 2017 were $87.1 million and 46.4%, respectively, compared with $85.6 million and 45.0%, respectively, in the first quarter of 2016.

GAAP net income and GAAP net income margin in the first quarter of 2017 were $14.9 million and 8.0% respectively, compared with $15.8 million, and 8.3% respectively in the first quarter of 2016.

GAAP earnings per share (diluted) for the first quarter of 2017 were $0.31, compared with $0.36, for the first quarter of 2016.

Adjusted EBITDA (as defined below) and adjusted EBITDA margin for the first quarter of 2017 were $32.5 million and 17.3%, respectively, compared with $35.3 million and 18.5%, respectively, in the first quarter of 2016.

Non-GAAP net income and non-GAAP net income margin for the first quarter of 2017 were $22.3 million and 11.9%, respectively, compared with $23.2 million and 12.2%, respectively, for the first quarter of 2016.

Non-GAAP earnings per share (diluted) for the first quarter of 2017 were $0.46, compared with $0.53 per share, for the first quarter of 2016.

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

As of March 31, 2017, the Company had cash, cash equivalents (including restricted cash), short term bank deposits and marketable securities of $222.3 million, and debt of $88.5 million.  During the first quarter of 2017, the Company utilized cash from operations of $9.2 million.  As of March 31, 2017, the actual number of ordinary shares outstanding was approximately 47.9 million.

Second Quarter 2017 Guidance

The Company expects revenues for the second quarter of 2017 to be in the range of $200 million to $210 million, and gross margin of 46.0% based on current expectations of product mix.

Conference Call

An earnings conference call for the Company's first quarter 2017 results is scheduled for today, May 3, 2017, at 9:00 a.m. EDT.  The dial-in number for the conference call is +1-646-254-3366 or (US toll-free) 877-280-1254 and a replay will be available on telephone number +1-347-366-9565 or (US toll-free) 866-932-5017 until May 17, 2017.  The pass code is 8775823 or Orbotech Q1.  A live webcast of the conference call can also be heard by accessing the Company's website at: http://edge.media-server.com/m/p/obsiwi8y.  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 leading global supplier of yield-enhancing and process-enabling solutions for the manufacture of electronics products.  The Company provides cutting-edge solutions for use in the manufacture of PCBs, FPDs and SDs, designed to enable the production of innovative, next generation electronic products and improve the cost effectiveness of existing and future electronics production processes.  The Company's core business lies in enabling electronic device manufacturers to inspect and understand PCBs and FPDs to verify their quality ('reading'); pattern the desired electronic circuitry on the relevant substrate and perform three dimensional shaping of metalized circuits on multiple surfaces ('writing'); and utilize advanced vacuum deposition and etching processes in SD and semiconductor manufacturing ('connecting').  Orbotech refers to this 'reading', 'writing' and 'connecting' as enabling the 'Language of Electronics'.  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, 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, within and among divisions, 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 its competitors, changes in business or pricing strategies, changes in the prevailing political and regulatory framework in which the relevant parties operate, including as a result of the 'Brexit' process and administration change in the United States, 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 as well as automobiles, the Company's global operations and its ability to comply with varying legal, regulatory, exchange, tax and customs regimes, the timing and outcome of tax audits, including the ongoing audit of tax years 2012-2014 in Israel, the Company's ability to achieve strategic initiatives, including related to its acquisition strategy, the Company's debt and corporate financing activities; the final timing and outcome, and impact of the criminal matter and ongoing investigation in Korea, including any 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, and ongoing or increased hostilities in Israel and the surrounding areas.  In addition, the Company expects to receive an assessment from the Israel Tax Authority in the coming months with respect to the ongoing tax audit in Israel, which assessment may be with respect to a material amount of taxable income and for a material amount of tax and, while the Company believes that it has provided adequately for any reasonably foreseeable outcomes related to the tax audit, future results may include unfavorable material adjustments to estimated tax liabilities in the period when the assessment is received or resolved or the audit is closed.  The Company is subject to the foregoing 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, 2016, 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; (v) share in losses of equity method investee and amounts associated with non-controlling interests company; and/or (vi) charges associated with the financing activities related to the retirement of the Company's credit Agreement entered into in  2014.

The Company uses the non-GAAP measures indicated in the Reconciliation 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 and other expenses and 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, financial 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 and dispositions.  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 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.

The effects of a sale or disposition of a business have also been excluded from the non-GAAP measures.  This item is inconsistent in amount and frequency.  By excluding the item from the non-GAAP measures, management is better able to evaluate the Company's ability to utilize its existing businesses and estimate the long-term value that remaining businesses will generate for the Company.  Furthermore, the Company believes that this adjustment correlates more closely with the sustainability of the Company's operating performance.

Adjusted EBITDA is 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.  Adjusted EBITDA margin is a measurement of Orbotech's adjusted EBITDA as a percentage of its revenues.  Although the Company believes its presentation of adjusted EBITDA is useful, its adjusted EBITDA measure may not be comparable to similarly named 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, 2016, and its other SEC filings.

    

 

ORBOTECH LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

U. S. dollars  in  thousands

 (Unaudited)


March 31,


December 31,


2017


2016

ASSETS








CURRENT ASSETS:




    Cash and cash equivalents 

$     201,378


$      216,292

    Restricted cash 

12,292


12,487

    Marketable securities

207



    Short-term bank deposits

801


789

    Accounts receivable - trade

353,784


326,343

    Prepaid expenses and other current assets

42,035


47,258

    Inventories

140,720


132,435

              T o t a l  current assets

751,217


735,604





INVESTMENTS AND NON-CURRENT ASSETS:




    Marketable securities

7,647


7,012

    Funds in respect of employee rights upon retirement

9,679


8,375

    Deferred income taxes 

16,566


19,840

    Equity method investee and other receivables

4,742


9,113


38,634


44,340





PROPERTY, PLANT AND EQUIPMENT, net

63,267


62,375





OTHER INTANGIBLE ASSETS, net

86,639


84,210





GOODWILL

176,804


176,374





              T o t a l  assets

$  1,116,561


$  1,102,903









LIABILITIES AND EQUITY








CURRENT LIABILITIES:




   Current maturities of long-term loan

$       16,364


$        16,364

    Accounts payable and accruals:




      Trade

70,990


72,085

      Other

103,281


114,692

    Deferred income

29,792


28,576

              T o t a l  current liabilities

220,427


231,717





LONG-TERM LIABILITIES:




    Long-term loan, net

72,134


72,002

    Liability with respect to Applied Microstructure, Inc. ("AMST")

1,471


1,471

    Liability for employee rights upon retirement

23,089


22,973

    Deferred income taxes

13,778


14,392

    Other tax liabilities

7,302


7,567

              T o t a l  long-term liabilities

117,774


118,405





              T o t a l  liabilities

338,201


350,122





EQUITY: 




    Share capital 

2,383


2,381

    Additional paid-in capital

423,068


420,185

    Retained earnings

455,079


440,159

    Accumulated other comprehensive loss

(6,057)


(9,221)


874,473


853,504

    Less treasury shares, at cost

(99,539)


(99,539)

               T o t a l  Orbotech Ltd. equity

774,934


753,965

    Non-controlling interest

3,426


(1,184)

               T o t a l  equity

778,360


752,781





              T o t a l  liabilities and equity

$  1,116,561


$  1,102,903





 


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

 (Unaudited)








Three months ended


Year ended


March 31,


December 31,


2017


2016


2016







Revenues 

$187,649


$190,427


$806,402

Cost of revenues

100,524


104,824


433,995

Gross profit

87,125


85,603


372,407







Operating expenses: 






Research and development, net

28,675


26,569


107,095

Selling, general and administrative

33,953


30,023


124,356

Equity in earnings of Frontline

(1,050)


(636)


(3,445)

Amortization of intangible assets

5,893


6,295


27,456

Total operating expenses

67,471


62,251


255,462







Operating income

19,654


23,352


116,945

Financial expenses - net

2,006


4,664


21,042







Income before taxes on income

17,648


18,688


95,903

Taxes on income

2,868


2,845


16,308

Share in losses of equity method investee



150


600







Net income

14,780


15,693


78,995

Net loss attributable to the non-controlling interests

(140)


(61)


(443)







Net income attributable to Orbotech Ltd. 

$14,920


$15,754


$79,438













Basic earnings per share

$0.31


$0.36


$1.74







Diluted earnings per share

$0.31


$0.36


$1.71







Weighted average number of shares (in thousands)






used in computation of:






Basic earnings per share

47,839


43,186


45,534

Diluted earnings per share

48,768


44,062


46,461







 

ORBOTECH LTD.

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

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

 (Unaudited)














Three months ended


Year ended


March 31,


December 31,


2017


2016


2016













Reported operating income on GAAP basis

$19,654


$23,352


$116,945

Equity-based compensation expenses

2,218


1,680


6,356

Amortization of intangible assets

5,893


6,295


27,456

Non-GAAP operating income

$27,765


$31,327


$150,757







Reported net income attributable to Orbotech Ltd. on GAAP basis

$14,920


$15,754


$79,438

Equity-based compensation expenses

2,218


1,680


6,356

Amortization of intangible assets

5,893


6,295


27,456

Tax effect of non-GAAP adjustments

(748)


(729)


(3,205)

Share in losses of equity method investee 



150


600

Charges associated with the retirement of the 2014 Credit Agreement





6,228

Non-GAAP net income

$22,283


$23,150


$116,873







GAAP earnings per diluted share

$0.31


$0.36


$1.71







Non-GAAP earnings per diluted share

$0.46


$0.53


$2.52







Shares used in earnings per diluted share computation- in thousands

48,768


44,062


46,461







 

ORBOTECH LTD.

RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA

U.S. dollars in thousands  

 (Unaudited)














Three months ended


Year ended


March 31,


December 31,


2017


2016


2016













Net income attributable to Orbotech Ltd. on GAAP basis

$14,920


$15,754


$79,438

Minority interest and equity losses

(140)


89


157

Taxes on income

2,868


2,845


16,308

Financial expenses - net

2,006


4,664


21,042

Depreciation and amortization 

10,651


10,251


44,756

Equity-based compensation expenses

2,218


1,680


6,356

ADJUSTED EBITDA

$32,523


$35,283


$168,057













 

ORBOTECH LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands


 (Unaudited)




Three months ended


Year ended




March 31,


December,




2017


2016


2016

CASH FLOWS FROM OPERATING ACTIVITIES:














Net income

$       14,780


$       15,693


$             78,995

Adjustment to reconcile net income to net cash 







provided by (used in) operating activities:







Depreciation and amortization

10,651


10,251


44,756


Compensation relating to equity awards granted to 








employees and others - net

2,218


1,680


6,356


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

(130)


247


943


Long- term loans discount amortization



300


1,866


Deferred financing costs amortization

132


798


5,692


Deferred income taxes

322


(1,214)


(2,693)


Amortization of premium and accretion of discount on marketable








Securities, net

(333)


66


145


Equity in earnings of Frontline, net of dividend received 

26


189


1,261


Other

90


150


751


Decrease (increase) in accounts receivable:








Trade

(27,441)


(4,325)


(41,607)



Other

5,469


(2,717)


(2,921)


Increase (decrease) in accounts payable and accruals:








Trade

(1,146)


1,638


6,898



Deferred income

1,216


850


(1,056)



Other

(6,912)


(5,744)


7,994


Decrease (increase)  in inventories

(8,182)


(2,130)


1,080

Net cash provided by (used in) operating activities 

(9,240)


15,732


108,460









CASH FLOWS FROM INVESTING ACTIVITIES:














Purchase of property, plant and equipment

(4,979)


(5,757)


(23,550)

Consideration received for the sale of the Thermal product business





12,000

Withdraw of (investment in) bank deposits

(12)


6,507


8,761

Purchase of marketable securities

(2,292)


(1,268)


(5,553)

Redemption of marketable securities

1,804


1,157


4,337

Investment in equity method investee 



(1,000)


(1,000)

Acquisition of AMST





(6,429)

Decrease (increase) in funds in respect of employee







rights upon retirement

(1,057)


60


249

Net cash used in investing activities*

(6,536)


(301)


(11,185)









CASH FLOWS FROM FINANCING ACTIVITIES:






Repayment of long-term loan 



(25,607)


(239,635)

Repayment of bank loan





(20,000)

Bank loan, net of $2 millions financing costs





108,031

Issuance of shares, net 





99,962

Employee stock options exercised

667


2,075


7,427

Net cash provided by (used in) financing activities

667


(23,532)


(44,215)









Net increase (decrease) in cash, cash equivalents and restricted cash* 

(15,109)


(8,101)


53,060

Cash, cash equivalents and restricted cash at beginning of period*

228,779


175,719


175,719









CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD*

$     213,670


$     167,618


$           228,779










* Reclassified 














 

Company Contact:


Rami Rozen

Tally Kaplan Porat

Director of Investor Relations

Director of Corporate Marketing

Orbotech Ltd

Orbotech Ltd

Tel: +972-8-942 3582

Tel: +972-8-942-3603

Rami.rozen@orbotech.com   

Tally-Ka@orbotech.com

 

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SOURCE ORBOTECH LTD.

Contact:
ORBOTECH LTD.
Web: http://www.orbotech.com