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Orbotech Reports First Quarter 2016 Results

(PRNewswire) —

2016 first quarter highlights

2016 second quarter guidance

ORBOTECH LTD. (NASDAQ: ORBK) (the "Company") today announced its consolidated financial results for the quarter ended March 31, 2016.

Commenting on the results, Asher Levy, Chief Executive Officer, said: "We are very pleased with our financial results for the first quarter, which mark a strong start to the year.  Industry conditions have developed generally as we anticipated at the beginning of the year.  In particular, the acceleration in technological changes is a clear positive driver for the Company, and our broad portfolio of high quality solutions enable our customers' production facilities to answer the challenges posed by this trend."

Revenues for the first quarter of 2016 totaled $190.4 million, up from $184.8 million in the first quarter, and $188.2 million in the fourth quarter, of 2015.

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

Revenues in the Company's other segments totaled $5.3 million in the first quarter of 2016, compared with $8.0 million in the first quarter of 2015.

Service revenues for the first quarter of 2016 were $49.5 million, compared with $53.4 million in the first quarter of 2015.

Gross profit and gross margin in the first quarter of 2016 were $85.6 million and 45.0%, respectively, compared with $83.1 million and 45.0%, respectively, in the first quarter of 2015.

GAAP net income for the first quarter of 2016 was $15.7 million, or $0.36 per share (diluted), up from $11.8 million, or $0.28 per share (diluted), for the first quarter of 2015.  

Adjusted EBITDA (as defined below) and adjusted EBITDA margin for the first quarter of 2016 were $35.3 million and 18.5%, respectively, up from $33.8 million and 18.3%, respectively, in the first quarter of 2015.  

Non-GAAP net income and non-GAAP net income margin for the first quarter of 2016 were $23.1 million and 12.2%, respectively, up from $20.8 million and 11.2%, for the first quarter of 2015.

Non-GAAP earnings per share (diluted) for the first quarter of 2016 were $0.53, up from $0.48 per share (diluted), for the first quarter of 2015.  

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, 2016, the Company had cash, cash equivalents (including restricted cash), short-term bank deposits and marketable securities of approximately $176.8 million, and debt of $214.0 million.  In the first quarter of 2016, the Company generated cash of $15.7 million from operations and repaid $25.6 million of its term loan.  

Second Quarter 2016 Guidance

The Company expects revenues for the second quarter of 2016 to be in the range of $190 million to $198 million, and gross margin to be in the range of 45.0% to 45.5%.

Conference Call

An earnings conference call for the Company's first quarter 2016 results is scheduled for today, May 4, 2016 at 9:00 a.m. EDT.  The dial-in number for the conference call is 1-312-470-7384 or (US toll-free) 888-469-1283 and a replay will be available on telephone number +1-203-369-1922 or (US toll-free) 866-509-3935 until May 19, 2016. The pass code is Q1.  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=5216447. 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, 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 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 as well as automobiles, the Company's global operations and its ability to comply with varying legal, regulatory, exchange, tax and customs regimes, 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, outcome and impact of the criminal matter expected in mid- to-late 2016 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, ongoing or increased hostilities in Israel and the surrounding areas, 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, 2015, 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 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 March 31, 2016. 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, 2015 and its other SEC filings.

 

ORBOTECH LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

U. S. dollars  in  thousands

 (Unaudited)


March 31


December 31


2016


2015

ASSETS




   CURRENT ASSETS:




    Cash and cash equivalents 

$156,244


$162,102

    Restricted cash 

11,374


13,617

Marketable securities

404


409

    Short-term bank deposits

3,043


9,550

    Accounts receivable:




      Trade

288,517


284,192

      Other

58,572


55,906

    Inventories

135,380


133,250

              T o t a l  current assets

653,534


659,026

INVESTMENTS AND NON-CURRENT ASSETS:




    Marketable securities

5,716


5,637

    Funds in respect of employee rights upon retirement

8,471


8,130

    Deferred income taxes 

20,636


20,147

    Equity method investee and other receivables

10,896


10,144


45,719


44,058

PROPERTY, PLANT AND EQUIPMENT, net

58,490


58,982

OTHER INTANGIBLE ASSETS, net

103,340


109,635

GOODWILL

170,177


170,177

          T o t a l  assets

$1,031,260


$1,041,878

LIABILITIES AND EQUITY




CURRENT LIABILITIES:




   Current maturities of long-term loan

$13,981


$13,937

    Accounts payable and accruals:




      Trade

66,675


65,037

      Other

90,458


94,930

    Deferred income

30,132


29,282

              T o t a l  current liabilities

201,246


203,186

LONG-TERM LIABILITIES:




    Long-term  loan, net

193,819


218,372

    Liability for employee rights upon retirement

22,183


21,535

    Deferred income taxes

16,259


16,984

    Other tax liabilities

10,582


14,045

              T o t a l  long-term liabilities

242,843


270,936

              T o t a l  liabilities

444,089


474,122

EQUITY: 




    Share capital 

2,217


2,209

    Additional paid-in capital

310,359


306,612

    Retained earnings

376,475


360,721

    Accumulated other comprehensive loss

(1,539)


(1,506)


687,512


668,036

    Less treasury shares, at cost

(99,539)


(99,539)

               T o t a l  Orbotech Ltd. shareholders' equity

587,973


568,497

    Non-controlling interest

(802)


(741)

               T o t a l  equity

587,171


567,756

              T o t a l  liabilities and equity

$1,031,260


$1,041,878

 

ORBOTECH LTD.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

 (Unaudited)


3 months ended


12 months ended


March 31


December 31


2016


2015


2015







Revenues 

$190,427


$184,784


$752,517

Cost of revenues

104,824


101,707


412,719

Gross profit

85,603


83,077


339,798

Operating expenses: 






Research and development, net

26,569


25,779


103,854

Selling, general and administrative

30,023


28,973


117,493

Equity in earnings of Frontline

(636)


(871)


(5,849)

Amortization of intangible assets

6,295


8,918


30,224

Gain from the sale of the Thermal activity





(628)

Total operating expenses

62,251


62,799


245,094

Operating income

23,352


20,278


94,704

Financial expenses - net

4,664


6,471


23,585

Income before taxes on income

18,688


13,807


71,119

Taxes on income

2,845


1,752


13,788

Share in losses of equity method investee

150


100


615

Net income

15,693


11,955


56,716

Net gain (loss) attributable to 






the non-controlling interests

(61)


153


(55)

Net income attributable to Orbotech Ltd. 

$15,754


$11,801


$56,771

 Basic earnings per share

$0.36


$0.28


$1.34

Diluted earnings per share

$0.36


$0.28


$1.31

Weighted average number of shares (in thousands)






used in computation of:






Basic earnings per share

43,186


41,961


42,412

Diluted earnings per share

44,062


42,860


43,322

 

ORBOTECH LTD.

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

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

 (Unaudited)














3 months ended


12 months ended


March 31


December 31


2016


2015


2015







Reported operating income on GAAP basis

$23,352


$20,278


$94,704

Equity based compensation expenses

1,680


889


3,816

Amortization of intangible assets

6,295


8,918


30,224

Gain from the sale of the Thermal activity





(628)

Non-GAAP operating income

$31,327


$30,085


$128,116







Reported net income attributable to Orbotech Ltd. on GAAP basis

$15,754


$11,801


$56,771

Equity- based compensation expenses

1,680


889


3,816

Amortization of intangible assets

6,295


8,918


30,224

Gain from the sale of the Thermal activity, net of tax effect





(628)

Tax adjustments re non-GAAP adjustments

(729)


(949)


(46)

Share in losses of associated company

150


100


615

Non-GAAP net income

$23,150


$20,759


$90,752







Non-GAAP earnings per diluted share

$0.53


$0.48


$2.09







Shares used in earnings per diluted share calculation-in thousands

44,062


42,860


43,322







 

ORBOTECH LTD.

RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA

U.S. dollars in thousands  

 (Unaudited)














3 months ended


12 months ended


March 31


December 31


2016


2015


2015













Net income attributable to Orbotech Ltd. on GAAP basis

$15,754


$11,801


$56,771

Minority interest and equity losses 

89


253


560

Tax expenses

2,845


1,752


13,788

Financial expenses

4,664


6,471


23,585

Depreciation and amortization 

10,251


12,660


45,282

Gain from the sale of the Thermal activity, net of tax effect





(628)

Equity- based compensation expenses

1,680


889


3,816

ADJUSTED EBITDA

$35,283


$33,826


$143,174







 

ORBOTECH LTD.

RECONCILIATION OF GAAP NET INCOME TO CREDIT FACILITY EBITDA

U.S. dollars in thousands

 (Unaudited)






12 months ended


March 31


2016





Net income attributable to Orbotech Ltd. on GAAP basis

$60,724

Minority interest and equity losses 

396

Tax expenses

14,881

Financial expenses

21,778

Depreciation and amortization 

42,873

Equity- based compensation expenses

4,607

Gain from the sale of the Thermal activity

(628)

Litigation expenses 

497

CREDIT FACILITY EBITDA

$145,128



 

ORBOTECH LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands


 (Unaudited)




3 months ended


12 months ended




March 31


December




2016


2015


2015

CASH FLOWS FROM OPERATING ACTIVITIES:














Net income

$15,693


$11,955


$56,716

Adjustment to reconcile net income to net cash 







provided by operating activities:







Depreciation and amortization

10,251


12,660


45,282


Compensation relating to equity awards granted to 








employees and others - net

1,680


889


3,816


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

247


176


(113)


Long- term loans discount amortization

300


120


897


Deferred financing costs amortization

798


312


2,010


Deferred income taxes

(1,214)


2,334


(2,024)


Amortization of premium and accretion of discount on marketable








Securities, net

66


50


145


Equity in earnings of Frontline, net of dividend received 

189


636


(540)


Other

150


499


1,014


Gain from the sale of the Thermal activity 





(628)


Decrease (increase) in accounts receivable:








Trade

(4,325)


(1,668)


(37,067)



Other

(2,717)


3,093


(5,507)


Increase (decrease) in accounts payable and accruals:








Trade

1,638


2,311


353



Deferred income

850


(846)


(7,770)



Other

(5,744)


(9,908)


13,915


Decrease (increase) in inventories

(2,130)


(972)


18,765

Net cash provided by operating activities 

15,732


21,641


89,264









CASH FLOWS FROM INVESTING ACTIVITIES:














Purchase of property, plant and equipment

(5,757)


(3,182)


(19,348)

Consideration received for the sale of the Thermal activity 





10,000

Withdraw of (investment in) bank deposits

6,507


2,976


450

Purchase of marketable securities

(1,268)




(1,099)

Redemption of marketable securities

1,157




821

Investment in equity method investee 

(1,000)


(1,500)


(1,500)

Decrease (increase) in restricted cash 

2,243


(3,244)


(3,617)

Increase in funds in respect of employee







rights upon retirement

60




510

Net cash provided by (used in) investing activities

1,942


(4,950)


(13,783)









CASH FLOWS FROM FINANCING ACTIVITIES:






Repayment of long-term loan 

(25,607)


(750)


(59,615)

Employee stock options exercised

2,075


2,152


9,869

Net cash provided by (used in) financing activities

(23,532)


1,402


(49,746)









Net increase (decrease) in cash and cash equivalents

(5,858)


18,093


25,735

Cash and cash equivalents at beginning of period

162,102


136,367


136,367









CASH AND CASH EQUIVALENTS AT END OF PERIOD

$156,244


$154,460


$162,102









 

Company Contact:


Anat Earon-Heilborn

Tally Kaplan Porat

Director of Investor Relations

Head of Corporate Marketing

Orbotech Ltd

Orbotech Ltd

Tel: +972-8-942 3582

Tel: +972-8-942 3603

anat.earon-heilborn@orbotech.com

Tally-Ka@orbotech.com

 

 

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SOURCE Orbotech Ltd.

Contact:
Orbotech Ltd.