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Orbotech Reports Second Quarter 2015 Results

(PRNewswire) —

2015 second quarter highlights compared with 2014 second quarter

2015 third quarter guidance

ORBOTECH LTD. (NASDAQ: ORBK) today announced its consolidated financial results for the second quarter and six months ended June 30, 2015.

Commenting on the results, Asher Levy, Chief Executive Officer, said: "We reported solid results for the second quarter of 2015.  The industries we serve enjoyed positive momentum.  The level of activity in the printed circuit board industry improved in line with our expectations, and the flat panel display and semiconductor device markets continued to reflect strong underlying demand."

Mr. Levy added: "Our industry leadership positions have enabled us to capitalize successfully on these positive trends and to deliver revenue growth, profit margin enhancement and strong cash flow generation.  As we approach the first anniversary of the SPTS acquisition, we are pleased to reflect on the success of that acquisition, its contribution to our overall business and the scale and diversification benefits it has afforded Orbotech.  We look forward to benefiting from these advantages as well as cross-divisional opportunities in the future."

Revenues for the second quarter of 2015 totaled $189.0 million, compared with $113.2 million in the second quarter of 2014.  Revenues for the quarter excluding the Company's semiconductor device ("SD") business (which was acquired in August 2014) totaled $128.5 million, up 13.5% from the second quarter of 2014.

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

Revenues in the Company's other segments were $9.4 million in the second quarter of 2015, compared with $7.9 million in the second quarter of 2014.

Service revenues for the second quarter of 2015 were $54.4 million, compared with $39.9 million in the second quarter of 2014.

Revenues for the first six months of 2015 totaled $373.4 million, compared with $218.0 million in the first six months of 2014 (or $251.8 million excluding the Company's SD business, up 15.5% from the first six months of 2014).

Gross profit and gross margin in the second quarter of 2015 were $85.8 million and 45.4%, respectively, compared with $48.7 million and 43.0%, respectively, in the second quarter of 2014.  Gross profit and gross margin in the first six months of 2015 were $168.8 million and 45.2%, respectively, compared with $94.3 million and 43.3%, respectively, in the first six months of 2014.

GAAP net income for the second quarter of 2015 was $13.0 million, or $0.30 per share (diluted), up from $8.6 million, or $0.20 per share (diluted), for the second quarter of 2014.  GAAP net income for the first six months of 2015 was $24.8 million, or $0.58 per share (diluted), up from $14.9 million, or $0.35 per share (diluted), for the first six months of 2014.  GAAP net income for the second quarter and the first six months of 2015 included a pre-tax gain of approximately $0.6 million related to the sale of the Thermal Products business.

Adjusted EBITDA (as defined) and adjusted EBITDA margin for the second quarter of 2015 were $36.6 million and 19.4%, respectively, up from $14.1 million and 12.5%, respectively, in the second quarter of 2014.  Adjusted EBITDA and adjusted EBITDA margin for the first six months of 2015 were $70.5 million and 19.0%, respectively, up from $26.6 million and 12.2%, respectively, in the first six months of 2014.

Non-GAAP net income and Non-GAAP net income margin for the second quarter of 2015 were $22.9 million and 12.1%, respectively, compared with $10.5 million and 9.3%, for the second quarter of 2014.  Non-GAAP net income and Non-GAAP net income margin for the first six months of 2015 were $43.7 million and 11.7%, respectively, compared with $18.7 million and 8.6%, for the first six months of 2014.

Non-GAAP earnings per share (diluted) for the second quarter of 2015 was $0.53, compared with $0.25 per share (diluted), for the second quarter of 2014.  Non-GAAP earnings per share (diluted) for the first six months of 2015 was $1.01, compared with $0.44 per share (diluted), for the first six 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 June 30, 2015, the Company had cash, cash equivalents, short-term bank deposits and marketable securities of approximately $196.3 million, and debt of $278.5 million.  In the second quarter of 2015, the Company generated cash from operations of $25.3 million, received $10 million in cash representing the first installment of the consideration of the sale of the Thermal Products business and repaid $20 million of its term loan.

Third Quarter Guidance

The Company expects revenues for the third quarter of 2015 to be in the range of $182 million to $190 million and gross margin of approximately 45%.

Conference Call

An earnings conference call for the Company's second quarter 2015 results is scheduled for today, July 30, 2015 at 9:00 a.m. EDT.  The dial-in number for the conference call is 1-630-395-0139 or (US toll-free) 888-469-078 and a replay will be available on telephone number +1-203-369-0930 or (US toll-free) 866-430-4730 until August 17, 2015.  The pass code is Q2.  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=5196778.  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 for a verdict in the ongoing appeal of the criminal matter 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 is calculated by adding adjusted EBITDA for the year ended December 31, 2014 to adjusted EBITDA for the six months ended June 30, 2015, and subtracting adjusted EBITDA for the six months ended June 30, 2014, and then further adjusting it as permitted by the Credit Agreement.  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.

Company Contact:
Anat Earon-Heilborn
Director of Investor Relations

Orbotech Ltd

Tel: +972-8-942 3582

anat.earon-heilborn@orbotech.com

 

 

Ann Michael

Senior Corporate Marketing Communications Manager

Orbotech Ltd

Tel: +972-8-942 3148

ann.michael@orbotech.com

 

 


ORBOTECH LTD.


CONDENSED CONSOLIDATED BALANCE SHEETS


U. S. dollars  in  thousands


(Unaudited)





June 30


December 31





2015


2014



ASSETS













CURRENT ASSETS:







    Cash and cash equivalents 


$168,797


$136,367



    Restricted cash 


12,979


10,000



    Short-term bank deposits


8,535


10,000



    Accounts receivable:







      Trade


241,567


248,071



      Other


49,957


39,076



    Deferred income taxes 


7,124


8,213



    Inventories


142,250


157,030



              T o t a l  current assets


631,209


608,757









INVESTMENTS AND NON-CURRENT ASSETS:







    Marketable securities


5,966


5,890



    Funds in respect of employee rights upon retirement


10,062


9,755



    Deferred income taxes 


11,540


13,067



    Equity method investee and other receivable


9,440


8,926



    Deferred financing costs


6,432


7,470





43,440


45,108









PROPERTY, PLANT AND EQUIPMENT, net


52,055


55,580









OTHER INTANGIBLE ASSETS, net


123,830


145,082









GOODWILL


170,177


179,445










              T o t a l  assets


$1,020,711


$1,033,972

















LIABILITIES AND EQUITY













CURRENT LIABILITIES:







   Current maturities of long-term loan


$9,762


$2,636



    Accounts payable and accruals:







      Trade


51,797


64,683



      Other


76,476


81,747



    Deferred income


29,503


38,008



              T o t a l  current liabilities


167,538


187,074









LONG-TERM LIABILITIES:







    Long-term  loan


266,372


293,851



    Liability for employee rights upon retirement


23,256


22,763



    Deferred income taxes


18,328


20,185



    Other tax liabilities


12,700


13,218



              T o t a l  long-term liabilities


320,656


350,017










              T o t a l  liabilities


488,194


537,091









EQUITY: 







    Share capital 


2,187


2,163



    Additional paid-in capital


300,942


293,056



    Retained earnings


328,755


303,950



    Accumulated other comprehensive income (loss)


780


(1,980)





632,664


597,189



    Less treasury shares, at cost


(99,539)


(99,539)



               T o t a l  Orbotech Ltd. shareholders' equity


533,125


497,650



    Non-controlling interest


(608)


(769)



               T o t a l  equity


532,517


496,881










              T o t a l  liabilities and equity


$1,020,711


$1,033,972


 

ORBOTECH LTD.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

 (Unaudited)










6 months ended


3 months ended



June 30


June 30



2015


2014


2015


2014











Revenues 

$373,779


$217,978


$188,995


$113,185


Cost of revenues

204,938


123,649


103,231


64,513


Gross profit

168,841


94,329


85,764


48,672











Operating expenses: 









Research and development, net

50,819


37,571


25,040


19,110


Selling, general and administrative

59,027


40,166


30,055


20,574


Equity in earnings of Frontline

(2,222)


(3,558)


(1,351)


(2,054)


Amortization of intangible assets

16,028


2,020


7,110


1,010


Gain from the sale of the Thermal activity

(628)




(628)




Total operating expenses

123,024


76,199


60,226


38,640











Operating income

45,817


18,130


25,538


10,032


Financial expenses (income) - net

12,268


(64)


5,796


(391)











Income before taxes on income

33,549


18,194


19,742


10,423


Taxes on income

8,368


2,991


6,616


1,641


Share in losses of equity method investee

215


213


115


144











Net income

24,966


14,990


13,011


8,638


Net income (loss) attributable to 









the non-controlling interests

161


111


8


46











Net income attributable to Orbotech Ltd. 

$24,805


$14,879


$13,003


$8,592




















Basic earnings per share

$0.59


$0.36


$0.31


$0.21











Diluted earnings per share

$0.58


$0.35


$0.30


$0.20




















Weighted average number of shares (in thousands)









used in computation of:









Basic earnings per share

42,120


41,781


42,279


41,721


Diluted earnings per share

43,110


42,832


43,360


42,830


 

ORBOTECH LTD.

RECONCILIATION OF GAAP TO NON-GAAP RESULTS 

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

 (Unaudited)


















6 months ended


3 months ended


June 30


June 30


2015


2014


2015


2014

















Reported operating income on GAAP basis

$45,816


$18,130


$25,538


$10,032

Equity based compensation expenses

1,749


1,553


860


751

Amortization of intangible assets

16,028


2,020


7,110


1,010

Gain from the sale of the Thermal activity

(628)




(628)



Non-GAAP operating income

$62,965


$21,703


$32,880


$11,793









Reported net income attributable to Orbotech Ltd. on GAAP basis

$24,805


$14,879


$13,003


$8,592

Equity- based compensation expenses

1,749


1,553


860


751

Amortization of intangible assets

16,028


2,020


7,110


1,010

Gain from the sale of the Thermal activity

(628)




(628)



Tax adjustments re non-GAAP adjustments

1,511




2,460



Share in losses of associated company

215


213


115


144

Non-GAAP net income

$43,680


$18,665


$22,920


$10,497









Non-GAAP earnings per diluted share

$1.01


$0.44


$0.53


$0.25









Shares used in earnings per diluted share calculation-in thousands

43,110


42,832


43,360


42,830

 

ORBOTECH LTD.


RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA


U.S. dollars in thousands  

 (Unaudited)





















6 months ended


3 months ended



June 30


June 30



2015


2014


2015


2014




















Net income attributable to Orbotech Ltd. on GAAP basis

$24,805


$14,879


$13,003


$8,592


Minority interest and equity losses 

376


324


123


190


Taxes on income

8,368


2,991


6,616


1,641


Financial expenses, net

12,268


(64)


5,796


(391)


Depreciation and amortization 

23,518


6,842


10,858


3,371


Gain from the sale of the Thermal activity

(628)




(628)




Equity- based compensation expenses

1,749


1,553


860


737


ADJUSTED EBITDA

$70,455


$26,525


$36,628


$14,140


 

ORBOTECH LTD.

RECONCILIATION OF GAAP NET INCOME TO CREDIT FACILITY EBITDA

U.S. dollars in thousands  

 (Unaudited)











12 months ended




  June 30




2015










Net income attributable to Orbotech Ltd. on GAAP basis


$45,307


Minority interest and equity losses 


554


Tax expenses


8,796


Financial expenses


21,378


Depreciation and amortization 


47,008


Equity- based compensation expenses


3,388


SPTS acquisition costs


6,761


SPTS full 12 months contribution(1)


(5,262)


Gain from the sale of the Thermal activity


(628)


Litigation expenses


1,090


Other (2)




CREDIT FACILITY EBITDA(3)


$128,391










(1)The SPTS Acquisition was completed on August 7, 2014.  This adjustment gives full year effect to the SPTS Acquisition by reflecting SPTS's contribution to Credit Facility EBITDA for the period from July 1, 2014 to August 7, 2014, determined in accordance with the Credit Agreement.  This adjustment has been derived from SPTS's books and records, is unaudited and does not correspond to SPTS's historical accounting periods. This presentation does not reflect our pro forma results and should not used as indicative of our future results. The positive contribution of SPTS to adjusted EBITDA and net income of Orbotech in the third quarter of 2014 after August 7, 2014 was greater than should be expected in a typical quarter, due to the timing of revenues and the mid-quarter closing of the SPTS acquisition.  


(2) Reflects adjustments permitted by the Credit Agreement, including with respect to employee and other matters.


(3) 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)





6 months ended


3 months ended





June 30


June 30





2015


2014


2015


2014


CASH FLOWS FROM OPERATING ACTIVITIES:




















Net income

24,966


14,990


13,011


8,638


Adjustment to reconcile net income to net cash 










provided by operating activities:










Depreciation and amortization

23,518


6,842


10,858


3,371



Compensation relating to equity awards granted to 











employees and others - net

1,749


1,553


860


737



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

(207)


(1,264)


(383)


(374)



Long- term loans discount amortization

397




277





Deferred financing costs amortization

1,038




726





Deferred income taxes

803


(95)


(1,531)


(350)



Amortization of premium and accretion of discount on marketable











Securities, net

99


504


49


347



Equity in earnings of Frontline, net of dividend received 

602


(458)


(34)


(263)



Other

614


441


115


235



Loss from sales of marketable securities










Gain from the sale of the Thermal activity 

(628)




(628)





Decrease (increase) in accounts receivable:











Trade

5,558


7,029


7,226


(1,148)




Other

569


(2,476)


(2,524)


(3,082)



Increase (decrease) in accounts payable and accruals:











Trade

(12,887)


(940)


(15,198)


2,212




Deferred income and other

(9,552)


(8,781)


1,202


1,935



Decrease (increase) in inventories

10,274


(7,682)


11,246


(627)


Net cash provided by operating activities 

46,913


9,663


25,272


11,631













CASH FLOWS FROM INVESTING ACTIVITIES:




















Purchase of property, plant and equipment

(7,119)


(5,932)


(3,937)


(2,358)


Consideration received for the sale of the Thermal activity 

10,000




10,000




Withdraw (placement) of bank deposits

1,465


12,074


(1,511)


15,598


Purchase of marketable securities

(154)


(14,242)


(154)


(11,752)


Redemption of marketable securities



8,838




6,083


SPTS net of cash acquired









Investment in equity method investee 

(1,500)


(250)




(250)


Proceeds from disposal of property, plant and equipment 



15




6


Increase (Decrease) in restricted cash 

(2,979)




265




Increase in funds in respect of employee










rights upon retirement

393


(72)


393


(2)


Net cash provided by investing activities

106


431


5,056


7,325













CASH FLOWS FROM FINANCING ACTIVITIES:









Long term loan,net of $8 millions financing costs 









Repayment of long-term loan 

(20,750)




(20,000)




Employee stock options exercised

6,161


5,746


4,009


2,223


Acquisition of treasury shares 



(12,993)




(8,819)


Net cash (used in) financing activities

(14,589)


(7,247)


(15,991)


(6,596)













Net increase in cash and cash equivalents

32,430


2,847


14,337


12,360


Cash and cash equivalents at beginning of period

136,367


161,155


154,460


151,642













CASH AND CASH EQUIVALENTS AT END OF PERIOD

168,797


164,002


168,797


164,002


 

To view the original version on PR Newswire, visit: http://www.prnewswire.com/news-releases/orbotech-reports-second-quarter-2015-results-300121140.html

SOURCE Orbotech Ltd.

Contact:
Orbotech Ltd.
Web: http://www.orbotech.com