Orbotech Reports First Quarter 2017 Results

YAVNE, Israel, May 3, 2017 /PRNewswire/ --

2017 first quarter highlights

• Revenues of $187.6 million
• Gross margin of 46.4%
• GAAP EPS of $0.31 (diluted); non-GAAP EPS of $0.46 (diluted)

2017 second quarter guidance

• Revenue range: $200 million to $210 million
• Gross margin of 46.0% based on current expectations of product mix

ORBOTECH LTD. (NASDAQ: ORBK) (the "Company") today announced its consolidated financial results for the first quarter of 2017.

Commenting on the results, Asher Levy, Chief Executive Officer, said: "Our results for the first quarter of 2017 reflect a solid start to the year, and are marked by particularly strong execution in our PCB division - mainly from new product sales.  We see the current growth opportunities in our existing served industries, such as advanced smartphones, automotive applications and flex OLED screens, as well as the plans for additional panel fabrication capacity by Chinese FPD manufacturers, as being strongly supportive of our growth for the remainder of 2017.  As we have previously indicated, we anticipate that our 2017 results will be more backend loaded than previous years, and we expect to post revenue growth and ongoing profitability improvement during the year."

Revenues for the first quarter of 2017 totaled $187.6 million, compared with $190.4 million in the first quarter of 2016, and $215.0 million in the fourth quarter of 2016.

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

• Revenues from the Company's semiconductor device ("SD") business were $52.5 million (including $41.5 million in equipment sales) in the first quarter of 2017.  This compares to SD revenues of $72.5 million (including $62.4 million in equipment sales) in the first quarter of 2016.
• Revenues from the Company's printed circuit board ("PCB") business were $77.5 million (including $49.8 million in equipment sales) in the first quarter of 2017.  This compares to PCB revenues of $68.0 million (including $39.9 million in equipment sales) in the first quarter of 2016.
• Revenues from the Company's flat panel display ("FPD") business were $53.4 million (including $43.0 million in equipment sales) in the first quarter of 2017.  This compares to FPD revenues of $44.7 million (including $35.6 million in equipment sales) in the first quarter of 2016.

Revenues in the Company's other segments totaled $4.2 million in the first quarter of 2017, compared with $5.3 million in the first quarter of 2016.

Service revenues for the first quarter of 2017 were $50.9 million, compared with $49.5 million in the first quarter of 2016.

Gross profit and gross margin in the first quarter of 2017 were $87.1 million and 46.4%, respectively, compared with $85.6 million and 45.0%, respectively, in the first quarter of 2016.

GAAP net income and GAAP net income margin in the first quarter of 2017 were $14.9 million and 8.0% respectively, compared with $15.8 million, and 8.3% respectively in the first quarter of 2016.

GAAP earnings per share (diluted) for the first quarter of 2017 were $0.31, compared with $0.36, for the first quarter of 2016.

Adjusted EBITDA (as defined below) and adjusted EBITDA margin for the first quarter of 2017 were $32.5 million and 17.3%, respectively, compared with $35.3 million and 18.5%, respectively, in the first quarter of 2016.

Non-GAAP net income and non-GAAP net income margin for the first quarter of 2017 were $22.3 million and 11.9%, respectively, compared with $23.2 million and 12.2%, respectively, for the first quarter of 2016.

Non-GAAP earnings per share (diluted) for the first quarter of 2017 were $0.46, compared with $0.53 per share, for the first quarter of 2016.

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 March 31, 2017, the Company had cash, cash equivalents (including restricted cash), short term bank deposits and marketable securities of $222.3 million, and debt of $88.5 million.  During the first quarter of 2017, the Company utilized cash from operations of $9.2 million.  As of March 31, 2017, the actual number of ordinary shares outstanding was approximately 47.9 million.

Second Quarter 2017 Guidance

The Company expects revenues for the second quarter of 2017 to be in the range of $200 million to $210 million, and gross margin of 46.0% based on current expectations of product mix.

Conference Call

An earnings conference call for the Company's first quarter 2017 results is scheduled for today, May 3, 2017, at 9:00 a.m. EDT.  The dial-in number for the conference call is +1-646-254-3366 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 May 17, 2017.  The pass code is 8775823 or Orbotech Q1.  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/obsiwi8y.  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 leading global supplier of yield-enhancing and process-enabling solutions for the manufacture of electronics products.  The Company provides cutting-edge solutions for use in the manufacture of PCBs, FPDs and SDs, designed to enable the production of innovative, next generation electronic products and improve the cost effectiveness of existing and future electronics production processes.  The Company's core business lies in enabling electronic device manufacturers to inspect and understand PCBs and FPDs 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 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, 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 of tax years 2012-2014 in Israel, 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.  In addition, the Company expects to receive an assessment from the Israel Tax Authority in the coming months with respect to the ongoing tax audit in Israel, which assessment may be with respect to a material amount of taxable income and for a material amount of tax and, while the Company believes that it has provided adequately for any reasonably foreseeable outcomes related to the tax audit, future results may include unfavorable material adjustments to estimated tax liabilities in the period when the assessment is received or resolved or the audit is closed.  The Company is subject to the foregoing 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, 2016, 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; (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 credit Agreement entered into in  2014.

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, 2016, and its other SEC filings.

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SOURCE ORBOTECH LTD.