Orbotech Announces Second Quarter 2011 Results and Updates Earnings Per Share Guidance

Orbotech LTD. (NASDAQ/GSM SYMBOL: ORBK) today announced its consolidated financial results for the second quarter and sixth months ended June 30, 2011.

Commenting on the second quarter, Rani Cohen, President and Chief Executive Officer, said: "We recorded a strong quarter, with revenue results on track and improved margins. Demand in the primary industries that we serve remains healthy; and we are pursuing significant additional opportunities within the electronic component manufacturing and other adjacent industries. We have already begun to deploy some of these solutions to touch screen manufacturers. Overall, we are encouraged by the current positive business environment in the electronics industry and believe that we will post a strong second half of 2011.”

The Company’s printed circuit board ("PCB”) business continues to benefit from strong consumer demand for complex and sophisticated mobile electronic devices such as smart phones, tablets and ultra-thin laptop computers. The growing intricacy of these devices and their embedded components has led to increased demand for Orbotech’s sophisticated manufacturing solutions, especially its laser direct imaging tool. In early July, the Company received acceptance for its new Emerald UV laser drilling system and will recognize initial revenues from this product in the third quarter of 2011.

During the second quarter, the Company delivered its leading flat panel display ("FPD”) solutions to several major manufacturers in China and received new orders for applications for mobile devices, as well as preliminary indications of new mobile-related investments. The Company is also seeing the emergence of a growing opportunity for sales based on its existing installed base, as manufacturers upgrade existing plants that have older applications with newer, more demanding applications, such as those required for mobile devices.

Revenues for the second quarter of 2011 totaled $153.4 million, compared to $134.2 million in the first quarter of 2011 and $144.9 million in the second quarter of 2010. GAAP net income for the second quarter of 2011 was $18.9 million, or $0.48 per share (diluted), compared to GAAP net income of $11.2 million, or $0.31 per share (diluted) for the first quarter of 2011 and GAAP net income of $12.4 million, or $0.35 per share (diluted), in the second quarter of 2010. GAAP net income from continuing operations for the second quarter of 2011 was $17.6 million, or $0.45 per share (diluted), compared to GAAP net income from continuing operations of $11.1 million, or $0.30 per share (diluted) for the first quarter of 2011 and GAAP net income from continuing operations of $14.1 million, or $0.39 per share (diluted), in the second quarter of 2010.

Revenues for the first six months of 2011 totaled $287.6 million, compared to $244.9 million recorded in the first six months of 2010. GAAP net income for the first six months of 2011 was $30.1 million, or $0.80 per share (diluted), compared to a GAAP net income of $14.0 million, or $0.39 per share (diluted), in the first six months of 2010. GAAP net income from continuing operations for the first six months of 2011 was $28.7 million, or $0.76 per share (diluted), compared to GAAP net income from continuing operations of $17.6 million, or $0.49 per share (diluted) for the first six months of 2010.

Non-GAAP net income from continuing operations for the second quarter of 2011 was $21.8 million, or $0.56 per share (diluted), compared to non-GAAP net income from continuing operations of $18.8 million, or $0.52 per share (diluted), in the second quarter of 2010. Non-GAAP net income for the first six months of 2011 was $37.0 million, or $0.98 per share (diluted), compared to non-GAAP net income of $27.3 million, or $0.76 per share (diluted), in the first six months of 2010. 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.

Sales of equipment to the PCB industry were $58.8 million in the second quarter of 2011, compared to $57.1 million in the first quarter of 2011, and $41.5 million in the second quarter of 2010. Sales of equipment to the FPD industry were $56.6 million in the second quarter of 2011, compared to $43.2 million in the first quarter of 2011, and $72.5 million in the second quarter of last year. Sales of character recognition products were $1.6 million in the second quarter of 2011, compared to $1.4 million in the first quarter of 2011, and $1.6 million recorded in the second quarter of 2010. In addition, service revenue for the second quarter of 2011 reached a record $36.4 million, compared to $32.5 million in the first quarter of 2011, and $29.4 million in the second quarter of 2010.

The Company completed the quarter with cash, cash equivalents, short-term bank deposits and marketable securities of approximately $296.5 million; and debt of $112.0 million, compared with cash, cash equivalents, short-term bank deposits and marketable securities of approximately $195.1 million; and debt of $120.0 million at the end of the first quarter of 2011. The Company generated cash of $22.4 million from continuing operations in the second quarter of 2011; as well as approximately $90.7 million net from the issuance and sale of 7,705,000 Ordinary Shares in the public offering which was launched on May 18, and consummated on May 31, 2011. The weighted average number of Ordinary Shares used in the computation of the Company’s earnings per share for each period is included in the financial statements included as part of this press release. As at June 30, 2011, the number of Ordinary Shares outstanding was approximately 43.1 million. The estimated average number of Ordinary Shares anticipated for 2011 for purposes of the Company’s 2011 per share guidance is 41.2 million after taking into account the public offering completed during the second quarter. With the completion of this public offering, the Company has accomplished its capital raising goals for the foreseeable future.

The Company has completed the disposal of its discontinued operations and does not anticipate future material income or other adjustments related to such business.

An earnings conference call for the Company’s second quarter 2011 results is scheduled for Monday, August 1, 2011, at 9:00 a.m. EDT. The dial-in number for the conference call is 212-287-1850, and a replay will be available on telephone number 203-369-3959 until August 14, 2011. The pass code is Q2. A live web cast of the conference call and a replay can also be heard by accessing the investor relations section on the Company’s website at www.orbotech.com.

About Orbotech Ltd.

Orbotech Ltd. (NASDAQ/GSM: ORBK) has been at the cutting edge of the electronics industry supply chain, as an innovator of enabling technologies used in the manufacture of the world’s most sophisticated consumer and industrial products, for over 30 years. The Company is a leading provider of yield-enhancing and production solutions, primarily for manufacturers of printed circuit boards and flat panel displays; and today, virtually every electronic device is produced using Orbotech technology. The Company also applies its core expertise and resources in other advanced technology areas, including character recognition for check and forms processing and solar photovoltaic manufacturing. Headquartered in Israel and operating from multiple locations internationally, Orbotech’s highly talented and inter-disciplinary professionals design, manufacture, sell and service the Company’s end-to-end portfolio of solutions for the benefit of customers the world over. For more information visit www.orbotech.com.

Cautionary Statement Regarding Forward-Looking Statements and Non-GAAP Financial Measures

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 its 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, 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, the impact of the recent events in Japan 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, 2010. 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 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/or (iii) our discontinued operations. 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. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these 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, in-process research and development charges 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 do not include certain recurring items as described below and because they do not reflect certain cash expenditures that are required to operate the Company’s business, such as interest expense and taxes. 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. Non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects.

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. For more information about these items, see the Reconciliation and the Company’s Annual Report on Form 20-F filed with the SEC for the year ended December 31, 2010.