/C O R R E C T I O N -- Orbotech Ltd./

In the news release, Orbotech Reports Fourth Quarter and Full Year 2017 Results, issued 14-Feb-2018 by Orbotech Ltd. over PR Newswire, we are advised by the company that the third table should include the following line twice: "Gain from the release of AMST earn out payment obligation" rather than once as originally issued inadvertently. The complete, corrected release follows:

YAVNE, Israel, Feb. 14, 2018 /PRNewswire/ --

2017 fourth quarter highlights

• Record revenues of $256.9 million
• Gross margin of 47.3%
• Cash flow from operations of $84.3 million
• GAAP EPS of $1.14 (diluted) reflecting the tax benefit resulting from a valuation allowance release; non-GAAP EPS of $0.87 (diluted)

2017 full year highlights compared with 2016 full year

• Record revenues of $900.9 million, up 11.7%, compared with $806.4 million
• Gross margin of 47.2%, up from 46.2%
• Cash flow from operations of $130 million, compared with $108 million
• GAAP EPS of $2.71 (diluted) reflecting the tax benefit resulting from a valuation allowance release, up 58% from $1.71 (diluted)
• Non-GAAP EPS of $2.91 (diluted), up 15% from $2.52 (diluted)

2018 guidance

• First quarter 2018 revenue range: $235 million to $250 million; gross margin range: 47.0%-47.5%
• First half 2018 revenue of approximately $500 million; gross margin range: 47.5%-48%
• Full year 2018 revenue growth of 12%-14%, compared to 2017

ORBOTECH LTD. (NASDAQ: ORBK) (the "Company") today announced its consolidated financial results for the fourth quarter and full year ended December 31, 2017.

Commenting on the results, Asher Levy, Chief Executive Officer, said: "We are very pleased to report strong quarterly results that concluded a record performance in 2017.  During the year, we achieved record bookings, and our backlog at the end of 2017 is double the amount at the end of 2016, which also strengthens and improves our visibility.  The positive momentum in Orbotech's served industries, and our unique positioning, enabled us to grow significantly during 2017 and to reinforce our overall competitive position.  As we enter into 2018, we expect to continue to introduce our customers to new and innovative solutions that will help them overcome some of the most difficult production challenges they face today."

Separately, this morning, the Company issued two important press releases announcing orders for solutions from the Company's flat panel display and semiconductor device divisions.

The first press release relates to a repeat order from LG Display for multiple Automated Optical Inspection (AOI) solutions, which will be deployed in LG's OLED Gen 6 fab for flexible mobile device display production.  This is testimony to the quality of Orbotech's FPD solutions.  Delivery of these solutions is expected to be split between the first and the second quarters of 2018.

The second press release relates to $37 million in purchase orders received by Orbotech's SD division for multiple etch and deposition systems from two GaAs foundry customers.  These systems will be used to manufacture radio frequency (RF) devices for 4G and emerging 5G wireless infrastructure and mobile device markets.  Delivery of the systems is expected to be split between the first and the second quarters of 2018.

For more specific details about each of these significant orders, please see the separate press releases.

Revenues for the fourth quarter of 2017 totaled $256.9 million, compared with $215.0 million in the fourth quarter of 2016, and $245.7 million in the third quarter of 2017.

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

• Revenues from the Company's printed circuit board ("PCB") business were $90.4 million (including $55.0 million in equipment sales) in the fourth quarter of 2017.  This compares to PCB revenues of $77.2 million (including $48.6 million in equipment sales) in the fourth quarter of 2016.
• Revenues from the Company's flat panel display ("FPD") business were $72.1 million (including $60.7 million in equipment sales) in the fourth quarter of 2017.  This compares to FPD revenues of $71.6 million (including $60.2 million in equipment sales) in the fourth quarter of 2016.
• Revenues from the Company's semiconductor device ("SD") business were $90.3 million (including $77.8 million in equipment sales) in the fourth quarter of 2017.  This compares to SD revenues of $62.1 million (including $48.4 million in equipment sales) in the fourth quarter of 2016.

Revenues in the Company's other segments totaled $4.0 million in the fourth quarter of 2017, compared with $4.2 million in the fourth quarter of 2016.

Service revenues for the fourth quarter of 2017 were $61.0 million, compared with $55.6 million in the fourth quarter of 2016.

Revenues for the full year of 2017 totaled $900.9 million, compared with $806.4 million for the full year of 2016.

Gross profit and gross margin in the fourth quarter of 2017 were $121.6 million and 47.3%, respectively, compared with $100.7 million and 46.8%, respectively, in the fourth quarter of 2016.  Gross profit and gross margin in the full year of 2017 were $425.3 million and 47.2%, respectively, compared with $372.4 million and 46.2%, respectively, in the full year of 2016.

GAAP net income and GAAP net income margin in the fourth quarter of 2017 were $55.9 million and 21.8%, respectively, compared with $25.6 million and 11.9%, respectively, in the fourth quarter of 2016.  GAAP net income and GAAP net income margin for the full year of 2017 were $132.4 million and 14.7%, respectively, compared with $79.4 million and 9.9% in the full year of 2016.  The GAAP results reflect a net benefit of approximately $16 million consisting of the impact of increase in deferred tax assets mainly for a valuation allowance releases and decrease in deferred tax liabilities offset by an increase in the Company's tax provisions.  The valuation allowance release of $18.8 million occurred in the fourth quarter and the most significant component related to the Company's carryforward losses in the United States.  In view of the strong business conditions, the Company believes it is more likely than not that it will be able to use these carryforward losses in the United States and therefore released the applicable valuation allowance.

GAAP earnings per share (diluted) for the fourth quarter of 2017 were $1.14, compared with $0.53, for the fourth quarter of 2016.  GAAP earnings per share (diluted) for the full year of 2017 were $2.71 compared with $1.71 in the full year of 2016.

Adjusted EBITDA (as defined below) and adjusted EBITDA margin for the fourth quarter of 2017 were $55.6 million and 21.6%, respectively, compared with $49.9 million and 23.2%, respectively, in the fourth quarter of 2016.  Adjusted EBITDA and adjusted EBITDA margin for the full year of 2017 were $190.0 million and 21.1%, respectively, compared with $168.1 million and 20.8% for the full year of 2016.

Non-GAAP net income and non-GAAP net income margin for the fourth quarter of 2017 were $42.5 million and 16.5%, respectively, compared with $33.7 million and 15.7%, respectively, for the fourth quarter of 2016.  Non-GAAP net income and non-GAAP net income margin for the full year of 2017 were $142.4 and 15.8%, respectively, compared with $116.9 million and 14.5%, respectively, for the full year of 2016.  Non-GAAP earnings per share (diluted) for the fourth quarter of 2017 were $0.87, compared with $0.70 per share, for the fourth quarter of 2016.  Non-GAAP earnings per share (diluted) for the full year of 2017 were $2.91, compared with $2.52 for the full year of 2016.

All of the Company's non-GAAP information has been adjusted to remove the impact attributable to a tax benefit resulting mainly from the valuation allowance release described above.  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, 2017, the Company had cash, cash equivalents, short term bank deposits and marketable securities of $327.8 million, and debt of $72.5 million.  During the fourth quarter of 2017, the Company generated cash from operations of $84.3 million.  As of December 31, 2017, the actual number of ordinary shares outstanding was approximately 48.4 million.

2018 Guidance

The Company expects first quarter 2018 revenue to be in the range of $235 million to $250 million and gross margin to be in the range of 47.0%-47.5%, based on current expectations of product mix.  The Company expects first half 2018 revenues to be approximately $500 million.  The Company expects gross margin in the range of 47.5%-48% for the first half of 2018, based on current expectations of product mix.  The Company expects full year 2018 revenue growth of approximately 12%-14%, compared to 2017.

Conference Call

An earnings conference call for the Company's fourth quarter and full year 2017 results is scheduled for today, February 14, 2018, at 8:30 a.m. EDT.  The dial-in number for the conference call is +1 323-701-0225 or (US toll-free) 888-394-8218 and a replay will be available on telephone number +1 719-457-0820 or (US toll-free) 888-203-1112 until February 28, 2018.  The pass code is 4004533.  A live webcast of the conference call can also be heard by accessing the Company's website at: https://edge.media-server.com/m6/p/x4x4897o.  The webcast will remain available for 12 months at: https://investors.orbotech.com/webcast-archives.

About Orbotech Ltd.

Orbotech Ltd. (NASDAQ: ORBK) is a leading global supplier of yield-enhancing and process-enabling solutions for the manufacture of electronics products.  Orbotech provides cutting-edge solutions for use in the manufacture of printed circuit boards (PCBs), flat panel displays (FPDs), and semiconductor devices (SDs), designed to enable the production of innovative, next-generation electronic products and improve the cost effectiveness of existing and future electronics production processes.  Orbotech's core business lies in enabling electronic device manufacturers to inspect and understand PCBs and FPDs and to verify their quality ('reading'); pattern the desired electronic circuitry on the relevant substrate and perform three-dimensional shaping of metalized circuits on multiple surfaces ('writing'); and utilize advanced vacuum deposition and etching processes in SD and semiconductor manufacturing ('connecting').  Orbotech refers to this 'reading', 'writing' and 'connecting' as enabling the 'Language of Electronics'.  For more information, visit www.orbotech.com and www.spts.com

Israeli Tax Matters, Audit Committee Review and Cautionary Statement Regarding Forward-Looking Statements

As previously reported, in May 2017, the Company received a best judgment tax assessment from the Israel Tax Authority (the "ITA") with respect to an audit of the Company for the fiscal years 2012-2014 (the "Assessment"), for an aggregate amount of tax against the Company, after offsetting all accumulated net operating losses for tax purposes ("NOL"s) available through the end of 2014, of approximately NIS 207 million (currently approximately $59 million), which amount includes related interest and linkage differentials to the Israeli consumer price index (as of date of the Assessment).  All amounts related to the Assessment are given after application of the Company's NOLs.  Approximately 80% of the amount of the Assessment, assuming that all NOLs are set off against the other matters included in the Assessment, relates to the following two matters: (i) the use of tax exempt income derived from the Company's approved and benefited enterprises under the Law for the Encouragement of Capital Investment, 1959, in particular in its investments in, or acquisitions of, foreign subsidiaries; and (ii) the purchase of shares of the Company by its foreign subsidiaries during the audit period.  The Company has not taken any reserves or provisions related to these two matters because it reasonably believes its positions are more likely than not correct as a legal matter.  The Company intends vigorously to contest the ITA's position on both of these matters and has not, as of December 31, 2017, established, and does not anticipate establishing, a provision related to these matters.  The other significant item in the Assessment relates to the Company's transfer pricing with respect to certain intercompany transactions in the Far East.  As of December 31, 2017, the Company's tax provisions with respect to the tax audit period cover a majority of the remaining 20% of the Assessment.  In light of the Assessment and the ongoing criminal investigation in Israel, the Audit Committee of the Board of Directors of the Company (the "Audit Committee"), with the assistance of outside advisors, reviewed the Company's tax returns in Israel for certain periods since fiscal year 2009.  The Audit Committee did not identify any fraudulent or criminal activity in the course of its review.  In addition, the Audit Committee and its outside advisors had the full cooperation of management and the Audit Committee did not identify any 'tone at the top' issues or any significant issues in the Company's control environment.

The evaluation of tax positions involves significant judgment.  If the Company's judgment with respect to its tax positions proves to be inaccurate, it may be required to increase its provisions or take a charge in future periods.  The amount of the increase and/or the charge against earnings could be material.  There is an ongoing criminal investigation in Israel against the Company, certain of its employees and its tax consultant related to tax positions taken by the Company in the tax audit period as well as in prior periods.  The Company does not have any insight into the scope or time period of the criminal investigation or the timing of any prosecutorial action related to the investigation which may occur in the coming days, weeks, months or years.  Although the Company cannot predict the timing of any prosecutorial action, the Company expects to be summoned to the Israeli prosecutor's office for a hearing, at which it will have the opportunity to present its positions, prior to any indictments of the Company and/or certain of its employees and/or payment of monetary amounts in lieu of such indictments.  The Company has not conducted its own investigation into any matters that may be the subject of such investigation and will only do so once the criminal investigation has been completed.  The Company intends vigorously to contest the Assessment in accordance with Israeli law as well as defend itself and its employees in the criminal matter, but it cannot assure investors as to the outcome or timing of completion of either process, including the amount of tax ultimately payable related to fiscal years 2012-2014 and prior fiscal years, or any additional taxes, penalties, criminal sanctions, indictments, fines and other amounts that may be imposed as a result of the Assessment and criminal investigation, which may be material in amount or in adverse impact on the Company's results of operations, financial position and reputation.

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, the risk that the Company may not achieve its revenue and margin expectations within and for 2018 (including, without limitation, due to shifting move-in dates); cyclicality in the industries in which the Company operates, the Company's supply chain management and production capacity, order cancelation often without penalty; 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 political uncertainty 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 Assessment process in Israel and related criminal investigation (see above), 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 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, and ongoing or increased hostilities in Israel and the surrounding areas.

The foregoing information should be read in connection with the Company's Annual Report on Form 20-F for the year ended December 31, 2016, and subsequent SEC filings.  The Company is subject to the foregoing and other risks detailed in those reports.  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 release of earn outs, amortization of intangible assets and acquisition costs; (iii) tax impact including tax effect of Non-GAAP adjustments and tax benefit; (iv) share in losses of equity method investee and amounts associated with non-controlling interests company; (v) release of valuation allowance 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.

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, 2016, and its subsequent SEC filings.

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SOURCE Orbotech Ltd.