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Orbotech Reports Fourth Quarter and Full Year 2016 Results

(PRNewswire) —

2016 fourth quarter highlights

2016 full year highlights compared with 2015 full year

2017 first quarter guidance

ORBOTECH LTD. (NASDAQ: ORBK) (the "Company") today announced its consolidated financial results for the fourth quarter and full year ended December 31, 2016.

Commenting on the results, Asher Levy, Chief Executive Officer, said: "Our fourth quarter results marked a strong finish to a very successful year for Orbotech.  In 2016, we posted record revenues on both annual and quarterly bases, as well as year over year growth and improved profitability in each of our three principal operating divisions.  We generated significant cash from operations, enhanced our balance sheet, strengthened our competitive position in all major business areas and continued to implement our growth strategy.  As we enter 2017, we feel encouraged by positive industry trends, such as growth in flexible OLED manufacturing, increased electronic content in smartphones and automobiles and progress in advanced packaging and MEMS.  We expect significant revenue contribution from new products launched during 2016.  These solutions, together with our ongoing research and development efforts, are not only an important ingredient of our future growth, but should increase our total addressable market and create new opportunities for the Company, while at the same time strengthening our position as an enabler of critical technologies for the manufacture of future electronic products and devices.  We expect our results in 2017 to be more backend loaded compared to previous years, due to timing of deliveries, and that the estimated revenues in the first quarter will be the lowest during 2017.  Overall, we expect favorable industry trends, as well as our technological leadership and longstanding relationships with key designers and manufacturers, to lead to revenue growth and ongoing profitability improvement during 2017."

Revenues for the fourth quarter of 2016 totaled $215.0 million, compared with $188.2 million in the fourth quarter of 2015, and $205.0 million in the third quarter of 2016.

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

-       Revenues from the Company's semiconductor device ("SD") business were $62.1 million (including $48.4 million in equipment sales) in the fourth quarter of 2016.  This compares to SD revenues of $70.1 million (including $57.5 million in equipment sales) in the fourth quarter of 2015.

-       Revenues from the Company's printed circuit board ("PCB") business were $77.2 million (including $48.6 million in equipment sales) in the fourth quarter of 2016.  This compares to PCB revenues of $67.9 million (including $38.3 million in equipment sales) in the fourth quarter of 2015.

-       Revenues from the Company's flat panel display ("FPD") business were $71.6 million (including $60.2 million in equipment sales) in the fourth quarter of 2016.  This compares to FPD revenues of $45.4 million (including $35.9 million in equipment sales) in the fourth quarter of 2015.

Revenues in the Company's other segments totaled $4.2 million in the fourth quarter of 2016, compared with $4.8 million in the fourth quarter of 2015.

Service revenues for the fourth quarter of 2016 were $55.6 million, compared with $53.8 million in the fourth quarter of 2015.

Revenues for the full year of 2016 totaled $806.4 million, compared with $752.5 million for the full year of 2015.

Gross profit and gross margin in the fourth quarter of 2016 were $100.7 million and 46.8%, respectively, compared with $84.6 million and 45.0%, respectively, in the fourth quarter of 2015.  Gross profit and gross margin in the full year of 2016 were $372.4 million and 46.2%, respectively, compared with $339.8 million and 45.2%, respectively, in the full year of 2015.

GAAP net income and GAAP net income margin in the fourth quarter of 2016 were $25.6 million and 11.9%, respectively, compared with $16.0 million and 8.5%, respectively, in the fourth quarter of 2015.  GAAP net income and GAAP net income margin for the full year of 2016 were $79.4 million and 9.9%, respectively, compared with $56.8 million and 7.5% in the full year of 2015.

GAAP earnings per share (diluted) for the fourth quarter of 2016 were $0.53, compared with $0.37, for the fourth quarter of 2015.  GAAP earnings per share (diluted) for the full year of 2016 were $1.71 compared with $1.31 in the full year of 2015.

Adjusted EBITDA (as defined below) and adjusted EBITDA margin for the fourth quarter of 2016 were $49.9 million and 23.2%, respectively, compared with $35.6 million and 18.9%, respectively, in the fourth quarter of 2015.  Adjusted EBITDA and adjusted EBITDA margin for the full year of 2016 were $168.1 million and 20.8%, respectively, compared with $143.2 million and 19.0% for the full year of 2015.

Financial expenses for the fourth quarter of 2016 were $5.7 million which included a currency translation and hedging loss of $4.8 million, mainly due to the strengthening of the U.S. dollar against other currencies during the quarter.  GAAP and non-GAAP earnings per share include this negative $4.8 million impact.  During the fourth quarter, the Company prepaid $20 million of its long-term debt.

Non-GAAP net income and non-GAAP net income margin for the fourth quarter of 2016 were $33.7 million and 15.7%, respectively, compared with $23.4 million and 12.4%, respectively, for the fourth quarter of 2015.  Non-GAAP net income and non-GAAP net income margin for the full year of 2016 were $116.9 and 14.5%, respectively, compared with $90.8 million and 12.1%, respectively, for the full year of 2015.

Non-GAAP earnings per share (diluted) for the fourth quarter of 2016 were $0.70, compared with $0.54 per share, for the fourth quarter of 2015.  Non-GAAP earnings per share (diluted) for the full year of 2016 were $2.52, compared with $2.09 for the full year 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 December 31, 2016, the Company had cash, cash equivalents (including restricted cash), short term bank deposits and marketable securities of $236.6 million, and debt of $88.4 million.  During the fourth quarter of 2016, the Company generated cash from operations of $49.2 million.  As of December 31, 2016, the actual number of ordinary shares outstanding was approximately 47.8 million.

Applied Microstructures acquisition

During the fourth quarter of 2016, the Company acquired the assets of Applied Microstructures, Inc. ("AMST") for $6.4 million in cash and earn-out payments of up to $10.5 million over 15 months.  The Company estimates that the earn-out will total $1.5 million and be payable in the first quarter of 2018.  AMST is part of the SD division, offering an adjacent process in MEMS, with potential expansion in encapsulation.  The Company estimates that annual revenue contribution from this purchase will be in the range of $6 million to $8 million with such annual revenues contributing higher gross margins than the average products' gross margin.

First Quarter 2017 Guidance

The Company expects revenues for the first quarter of 2017 to be in the range of $180 million to $190 million, and gross margin to be in the range of 45.5% - 46.0%.

Conference Call

An earnings conference call for the Company's fourth quarter and full year 2016 results is scheduled for today, February 8, 2017, at 9:00 a.m. EDT.  The dial-in number for the conference call is +1-646-254-3367 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 February 22, 2017.  The pass code is 6525115 or Orbotech Q4.  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/bp4qjpdv.  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 to manufacture the world's most sophisticated consumer and industrial electronic products.  Orbotech is a leading provider of yield enhancement and production solutions for electronics reading, writing and connecting, used by manufacturers of PCBs, FPDs, micro-electro-mechanical systems (MEMS), RF devices, power semiconductors and other electronic components.  Orbotech's solutions include automated optical inspection and shaping, direct imaging, laser drilling, inkjet printing, array test and repair, yield management, and etch and deposition wafer process solutions.  Today, virtually every electronic device in the world is produced using Orbotech systems.  For more information, visit http://www.orbotech.com/ and www.spts.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 in Israel (the amount of taxable income is subject to ongoing audit by the Israel tax authority and such audits often result in proposed assessments and any estimation of the potential outcome of an uncertain tax issue is a matter for judgment, which can be subjective and highly complex; however, the Company believes that it has provided adequately for any reasonably foreseeable outcomes related to the tax audit, but future results may include favorable or unfavorable material adjustments to estimated tax liabilities in the periods when the assessments are made or resolved or the audit is closed), 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 the 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, 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 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 2014 credit agreement with JPMorgan.

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, 2015, and its subsequent SEC filings.

 

ORBOTECH LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

U. S. dollars  in  thousands

 (Unaudited)


December 31


December 31


2016


2015

ASSETS








CURRENT ASSETS:




    Cash and cash equivalents 

$     216,292


$      162,102

    Restricted cash 

12,487


13,617

    Marketable securities



409

    Short-term bank deposits

789


9,550

    Accounts receivable:




      Trade

326,343


284,192

      Other

47,258


55,906

    Inventories

132,435


133,250

              T o t a l  current assets

735,604


659,026





INVESTMENTS AND NON-CURRENT ASSETS:




    Marketable securities

7,012


5,637

    Funds in respect of employee rights upon retirement

8,375


8,130

    Deferred income taxes 

19,840


20,147

    Equity method investee and other receivables

9,113


10,144


44,340


44,058





PROPERTY, PLANT AND EQUIPMENT, net

62,375


58,982





OTHER INTANGIBLE ASSETS, net

84,210


109,635





GOODWILL

176,374


170,177





              T o t a l  assets

$  1,102,903


$  1,041,878









LIABILITIES AND EQUITY








CURRENT LIABILITIES:




   Current maturities of long-term loan

$       16,364


$        13,937

    Accounts payable and accruals:




      Trade

72,085


65,037

      Other

114,692


94,930

    Deferred income

28,576


29,282

              T o t a l  current liabilities

231,717


203,186





LONG-TERM LIABILITIES:




    Long-term loan, net

72,002


218,372

    Other long-term liability

1,471



    Liability for employee rights upon retirement

22,973


21,535

    Deferred income taxes

14,392


16,984

    Other tax liabilities

7,567


14,045

              T o t a l  long-term liabilities

118,405


270,936





              T o t a l  liabilities

350,122


474,122





EQUITY: 




    Share capital 

2,381


2,209

    Additional paid-in capital

420,185


306,612

    Retained earnings

440,159


360,721

    Accumulated other comprehensive loss

(9,221)


(1,506)


853,504


668,036

    Less treasury shares, at cost

(99,539)


(99,539)

               T o t a l  Orbotech Ltd. shareholders' equity

753,965


568,497

    Non-controlling interest

(1,184)


(741)

               T o t a l  equity

752,781


567,756





              T o t a l  liabilities and equity

$  1,102,903


$  1,041,878

 

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

 (Unaudited)








Year ended


Three months ended


December 31


December 31


2016


2015


2016


2015









Revenues 

$806,402


$752,517


$215,042


$188,235

Cost of revenues

433,995


412,719


114,361


103,623

Gross profit

372,407


339,798


100,681


84,612









Operating expenses: 








Research and development, net

107,095


103,854


27,046


27,596

Selling, general and administrative

124,356


117,493


31,999


28,371

Equity in earnings of Frontline

(3,445)


(5,849)


(1,134)


(1,873)

Amortization of intangible assets

27,456


30,224


6,706


6,677

Gain from the sale of the Thermal product business



(628)





Total operating expenses

255,462


245,094


64,617


60,771









Operating income

116,945


94,704


36,064


23,841

Financial expenses - net

21,042


23,585


5,724


5,180









Income before taxes on income

95,903


71,119


30,340


18,661

Taxes on income

16,308


13,788


4,709


2,651

Share in losses of equity method investee

600


615


150


200









Net income

78,995


56,716


25,481


15,810

Net loss attributable to 








the non-controlling interests

(443)


(55)


(150)


(237)









Net income attributable to Orbotech Ltd. 

$79,438


$56,771


$25,631


$16,047

















Basic earnings per share

$1.74


$1.34


$0.54


$0.37









Diluted earnings per share

$1.71


$1.31


$0.53


$0.37

















Weighted average number of shares (in thousands)








used in computation of:








Basic earnings per share

45,534


42,412


47,645


42,852

Diluted earnings per share

46,461


43,322


48,513


43,575

     

 

ORBOTECH LTD.

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

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

 (Unaudited)


















Year ended


Three months ended


December 31


December 31


2016


2015


2016


2015

















Reported operating income on GAAP basis

$116,945


$94,704


$36,064


$23,841

Equity-based compensation expenses

6,356


3,816


2,037


1,219

Amortization of intangible assets

27,456


30,224


6,706


6,677

Gain from the sale of the Thermal product business



(628)





Non-GAAP operating income

$150,757


$128,116


$44,807


$31,737









Reported net income attributable to Orbotech Ltd. on GAAP basis

$79,438


$56,771


$25,631


$16,047

Equity-based compensation expenses

6,356


3,816


2,037


1,219

Amortization of intangible assets

27,456


30,224


6,706


6,677

Gain from the sale of the Thermal product business



(628)





Tax adjustments re non-GAAP adjustments

(3,205)


(46)


(795)


(775)

Share in losses of equity method investee 

600


615


150


200

Charges associated with the retirement of the 2014 Credit Agreement

6,228







Non-GAAP net income

$116,873


$90,752


$33,729


$23,368









GAAP earnings per diluted share

$1.71


$1.31


$0.53


$0.37









Non-GAAP earnings per diluted share

$2.52


$2.09


$0.70


$0.54









Shares used in earnings per diluted share computation- in thousands

46,461


43,322


48,513


43,575

       

 

ORBOTECH LTD.

RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA

U.S. dollars in thousands  

 (Unaudited)


















Year ended 


Three months ended


December 31


December 31


2016


2015


2016


2015

















Net income attributable to Orbotech Ltd. on GAAP basis

$79,438


$56,771


$25,631


$16,047

Minority interest and equity losses 

157


560




(37)

Taxes on income

16,308


13,788


4,709


2,651

Financial expenses

21,042


23,585


5,724


5,180

Depreciation and amortization 

44,756


45,282


11,759


10,544

Gain from the sale of the Thermal product business



(628)





Equity-based compensation expenses

6,356


3,816


2,037


1,219

ADJUSTED EBITDA

$168,057


$143,174


$49,860


$35,604

 

 

ORBOTECH LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands


 (Unaudited)






Year ended


Three months ended




December 31


December 31




2016


2015


2016


2015

CASH FLOWS FROM OPERATING ACTIVITIES:


















Net income

$       78,995


$       56,716


$            25,481


$              15,810

Adjustment to reconcile net income to net cash 









provided by operating activities:









Depreciation and amortization

44,756


45,282


11,759


10,544


Compensation relating to equity awards granted to 










employees and others - net

6,356


3,816


2,037


1,219


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

943


(113)


(588)


(268)


Long- term loans discount amortization

1,866


897




325


Deferred financing costs amortization

5,692


2,010


107


479


Deferred income taxes

(2,693)


(2,024)


81


(2,472)


Amortization of premium and accretion of discount on marketable










Securities, net

145


145


33


14


Equity in earnings of Frontline, net of dividend received 

1,261


(540)


156


(730)


Other

751


1,014


120


310


Gain from the sale of the Thermal product business



(628)






Increase in accounts receivable:










Trade

(41,607)


(37,067)


(6,292)


(5,280)



Other

(2,921)


(5,507)


(3,529)


(1,408)


Increase (decrease) in accounts payable and accruals:










Trade

6,898


353


9,632


6,182



Deferred income

(1,056)


(7,770)


734


519



Other

7,994


13,915


3,792


7,835


Decrease in inventories

1,080


18,765


5,651


1,455

Net cash provided by operating activities 

108,460


89,264


49,174


34,533











CASH FLOWS FROM INVESTING ACTIVITIES:


















Purchase of property, plant and equipment

(23,550)


(19,348)


(6,163)


(7,992)

Consideration received for the sale of the Thermal product business

12,000


10,000





Withdraw of (investment in) bank deposits

8,761


450


3,047


(5,516)

Purchase of marketable securities

(5,553)


(1,099)


(717)


(945)

Redemption of marketable securities

4,337


821


720


821

Investment in equity method investee 

(1,000)


(1,500)





Acquisition of the assets of AMST

(6,429)




(6,429)



Decrease (increase) in restricted cash 

1,130


(3,617)


(3,042)


(3,542)

Increase in funds in respect of employee









rights upon retirement

249


510


55


65

Net cash used in investing activities

(10,055)


(13,783)


(12,529)


(17,109)











CASH FLOWS FROM FINANCING ACTIVITIES:








Repayment of long-term loan 

(239,635)


(59,615)




(30,683)

Repayment of bank loan

(20,000)




(20,000)



Bank loan, net of $2 million financing costs

108,031







Issuance of shares, net 

99,962







Employee stock options exercised

7,427


9,869


2,327


2,284

Net cash used in financing activities

(44,215)


(49,746)


(17,673)


(28,399)











Net increase (decrease) in cash and cash equivalents

54,190


25,735


18,972


(10,975)

Cash and cash equivalents at beginning of period

162,102


136,367


197,320


173,077











CASH AND CASH EQUIVALENTS AT END OF PERIOD

$     216,292


$     162,102


$          216,292


$            162,102

 

Company Contact:           


Rami Rozen

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

Email Contact  

Email Contact

 

 

    

To view the original version on PR Newswire, visit: http://www.prnewswire.com/news-releases/orbotech-reports-fourth-quarter-and-full-year-2016-results-300404141.html

SOURCE Orbotech Ltd.

Contact:
Orbotech Ltd.