2014 fourth quarter highlights
- Record revenues of $197 million, up 62% from the fourth quarter 2013, or 14.6% 'organically'
- Non-GAAP EPS of $0.51 (diluted); GAAP EPS of $0.31 (diluted)
- Cash generated from operations of $23.4 million
2014 full year highlights
- Record revenues of $583 million, up 32% from 2013
- Non-GAAP EPS of $1.48 (diluted); GAAP EPS of $0.83 (diluted)
- Cash generated from operations of $51.4 million
2015 first quarter guidance
- Revenues range: $180 million to $185 million
- Gross margin: between 43% and 44%.
YAVNE, Israel, Feb. 12, 2015 ORBOTECH LTD. (NASDAQ: ORBK) today announced its consolidated financial results for the fourth quarter and full year ended December 31, 2014. These results reflect the contribution of the Company's Semiconductor Device Division for the entire fourth quarter and, for the full year, from August 7, 2014 (the acquisition date of SPTS Technologies Group Limited ("SPTS")).
Commenting on the results, Asher Levy, Chief Executive Officer, said: "2014 was a turning point for Orbotech, reflecting our uncompromising commitment to deliver on the growth strategy that we had marked out in 2013. We are pleased, as a result, to report record annual revenues, as well as solid results for the fourth quarter, concluding what has been a strong and transformational year for the Company."
Mr. Levy added: "We are very gratified by the first six months of joint operations with SPTS, which is being integrated into the Company as the Semiconductor Device Division. While we faced softness in the PCB industry, we enjoyed strong growth in our FPD business and a substantial contribution from the accretive acquisition of SPTS. 2014 was also an exceptional year of innovation, with the launching of four new flagship products in the latter part of the year: the next generation direct imaging solution for the PCB industry, the Nuvogo, as well new automated optical inspection, testing and repair solutions for the FPD industry. We enter 2015 as a significantly larger scale, more diversified and geographically balanced company, all of which reinforces our confidence in our ability to capitalize on the opportunities that lie ahead and to reinforce our position as a key enabler for the future production of consumer electronic devices."
Revenues for the fourth quarter of 2014 totaled $197.5 million. Revenues - other than from the Company's semiconductor business - totaled $140.1 million, up 14.6% from $122.2 million in the fourth quarter of 2013. Revenues for the full year of 2014 totaled $582.7 million or $472.1 million excluding the Company's semiconductor business, up 7.3% from the $440.0 million recorded in the full year of 2013. From the beginning of 2014 until its acquisition by Orbotech on August 7, 2014, SPTS generated $76.0 million in revenues, and for the full year of 2014 recorded $186.0 million in revenues, all on a U.S. GAAP basis.
In the Company's Production Solutions for Electronics Industry segment, sales of equipment to the Printed Circuit Board industry were $39.6 million in the fourth quarter of 2014, compared with $45.3 million in the fourth quarter of 2013; sales of equipment to the Flat Panel Display industry were $57.5 million in the fourth quarter of 2014, an increase of 54.6% compared with $37.2 million in the fourth quarter of 2013; and sales of equipment to the semiconductor industry were $43.0 million. Sales in the Company's other segments totaled $3.3 million in the fourth quarter of 2014, compared with $1.7 million in the fourth quarter of 2013. In addition, service revenue for the fourth quarter of 2014 was $54.1 million, up from $38.0 million in the fourth quarter of 2013.
Gross profit and gross margin in the fourth quarter of 2014 were $84.9 million and 43.0%, respectively, compared with $54.3 million and 44.4%, respectively, in the fourth quarter of 2013. Gross profit and gross margin for the full year of 2014 were $253.2 million and 43.4%, respectively, compared with $191.5 million and 43.5%, respectively, for the full year of 2013.
GAAP net income for the fourth quarter of 2014 was $13.1 million, or $0.31 per share (diluted), up from GAAP net income of $12.6 million, or $0.30 per share (diluted), for the fourth quarter of 2013. GAAP net income for the full year of 2014 was $35.4 million, or $0.83 per share (diluted), compared with GAAP net income of $40.0 million, or $0.92 per share (diluted), for the full year of 2013. GAAP net income in 2014 was negatively impacted by increased finance expenses associated with the $300 million of debt incurred to finance the acquisition of SPTS in August 2014, an increase in amortization of intangible assets and other acquisition-related expenses.
Adjusted EBITDA and adjusted EBITDA margin for the fourth quarter of 2014 were $30.1 million and 15.2%, respectively, up from $18.5 million and 15.1%, respectively, for the fourth quarter of 2013. Adjusted EBITDA and adjusted EBITDA margin for the full year of 2014 were $88.4 million and 15.2%, respectively, up from $64.0 million and 14.5%, respectively, for the full year of 2013.
Non-GAAP net income and Non-GAAP net income margin for the fourth quarter of 2014 were $21.9 million and 11.1%, respectively, compared with $14.6 million and 11.9%, for the fourth quarter of 2013, and to $22.6 million and 13.5% for the third quarter of 2014. As disclosed in the Company's third quarter earnings release, non-GAAP net income in the third quarter of 2014 was positively affected by the acquisition timing issues. The extent of that impact was approximately $7.3 million. Non-GAAP net income and Non-GAAP net income margin for the full year of 2014 were $63.2 million and 10.8%, respectively, compared with $47.5 million and 10.8%, for the full year of 2013, respectively.
Non-GAAP earnings per share (diluted) for the fourth quarter of 2014 were $0.51, compared with $0.34 per share (diluted), for the fourth quarter of 2013, and to $0.53 for the third quarter of 2014. Non-GAAP EPS in the third quarter of 2014 was positively affected by $0.17 by the acquisition timing issues as discussed above. Non-GAAP earnings per share (diluted) for the full year of 2014 were $1.48, up from $1.10 per share (diluted), for the full year of 2013.
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.
As of December 31, 2014 the Company had cash, cash equivalents, short-term bank deposits and marketable securities of approximately $162 million, and debt of approximately $300 million. The Company generated cash from operations of $23.4 million in the fourth quarter of 2014.
First Quarter Guidance
The Company expects that for the first quarter of 2015, revenues will be in the range of $180 million to $185 million and gross margin will be between 43% and 44%.
An earnings conference call for the Company's fourth quarter and full year 2014 results is scheduled for today, February 12, 2015 at 9:00 a.m. EST. The dial-in number for the conference call is 1-212-519-0824 or (US toll-free) 800-988-9689, and a replay will be available on telephone number +1-402-280-1660 or (US toll-free) 800-835-8066 until February 25, 2015. The pass code is Q4. 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-calendar. The webcast will remain available for one year here: 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. Today, virtually every electronic device is produced using Orbotech technology. For more information visit http://www.orbotech.com/. The corporate website is not incorporated herein by reference and is included as an inactive textual reference only.
Cautionary Statement Regarding Forward-Looking and Other 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, 2013, 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 from continuing operations and non-GAAP net income from continuing operations 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 and impairment of intangibles and acquisition costs; (iii) discontinued operations; (iv) restructuring charges; and/or (v) share in losses of associated company. Management uses these 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. 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. The reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures are set forth below. For a qualification of the adjustments made to comparable GAAP measures, please see the Reconciliation.
To supplement the Company's financial results presented on a GAAP basis, the Company uses the non-GAAP measures indicated in the Reconciliation, which exclude equity based compensation expenses, amortization of intangible assets, share in losses/profits of associated companies and impairment and restructuring charges, 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. However, the non-GAAP measures presented are subject to limitations as an analytical tool because they exclude certain recurring items (such as, equity compensation and amortization of intangible assets) as described below. Accordingly, these non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP. Management regularly utilizes supplemental non-GAAP financial measures internally to understand, manage and evaluate the Company's business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods.
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 is also a non-GAAP financial measure. The Company defines adjusted EBITDA as net income attributable to Orbotech Ltd., in addition to the items described above, further adjusted to exclude tax 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. Although the Company believes its presentation of adjusted EBITDA is useful, its adjusted EBITDA measure may not be comparable to similarly titled measures presented by other companies.
For more information about all of the foregoing items, see the Reconciliation and the Company's Annual Report on Form 20-F filed with the SEC for the year ended December 31, 2013, its Form 6-K filed with the SEC on July 15, 2014, and other SEC filings.