2015 second quarter highlights compared with 2014 second quarter
Revenues of $189 million, compared with $113 million
Gross profit margin of 45.4%, compared with 43.0%
Non-GAAP EPS of $0.53 (diluted), compared with $0.25
GAAP EPS of $0.30 (diluted), compared with $0.20
Cash generated from operations of $25.3 million, compared with $11.6 million
2015 third quarter guidance
Revenue range: $182 million to $190 million
Gross margin: approximately 45%.
YAVNE, ISRAEL, JULY 30, 2015 | 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 from the Company’s printed circuit board (“PCB”) business were $65.4 million, including $37.0 million in equipment sales, in the second quarter of 2015. This compares to PCB revenues of $77.2 million (including $48.5 million in equipment sales) in the second quarter of 2014.
Revenues from the Company’s flat panel display (“FPD”) business were $53.6 million, including $44.4 million in equipment sales, in the second quarter of 2015. This compares to FPD revenues of $28.1 million (including $18.4 million in equipment sales) in the second quarter of 2014.
Revenues from the Company’s SD business were $60.6 million, including $45.7 million in equipment sales, in the second quarter of 2015. This compares to SD revenues of $37.1 million (including $21.5 million in equipment sales) in the second quarter of 2014, and before the acquisition.
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%.
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.
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