May 8, 2018

ESI Announces Fourth Quarter and Full Year Fiscal 2018 Results

PORTLAND, Ore., May 08, 2018 (GLOBE NEWSWIRE) -- Electro Scientific Industries, Inc. (NASDAQ:ESIO), an innovator of laser-based manufacturing solutions for the microtechnology industry, today announced results for its fiscal 2018 fourth quarter and year ended March 31, 2018. Financial measures are provided on both a GAAP and a non-GAAP basis. Non-GAAP results exclude the impact of purchase accounting, equity compensation, restructuring, and other items shown in the non-GAAP reconciliation table.

Fourth Quarter and Fiscal 2018 Financial and Operational Highlights

  • Fourth quarter orders of $111.8 million, reflecting 36% year over year growth. Fiscal 2018 orders of $451.4 million, up 144% from fiscal 2017.
     
  • Fourth quarter and fiscal 2018 revenue of $113.4 million and $367.9 million, respectively; each more than doubled the revenue in fiscal 2017
     
  • Backlog of $148.4 million, primarily expected to ship in the first half of fiscal 2019
     
  • Fiscal 2018 GAAP operating margin of 20.6%. Non-GAAP operating margin was 27.4%.
     
  • Fiscal 2018 GAAP EPS of $3.27 and non-GAAP EPS of $2.78. For the fourth quarter GAAP EPS was $2.10 and non-GAAP EPS was $1.02, exceeding one dollar for the first time in recent history.
     
  • Fiscal 2018 operating cash flow of $67.4 million, leading to total cash and investments balance of $125.0 million

Fourth Quarter Results

Fourth quarter revenue was $113.4 million, compared to $49.9 million in the fourth quarter of last fiscal year and $110.8 million last quarter. GAAP net income was $75.1 million or $2.10 per diluted share, compared to a net loss of $17.9 million or $0.54 per share last year, as the Company’s strong financial performance over the last twelve months triggered the reversal of our tax valuation allowance, resulting in a fourth quarter tax credit of approximately $41 million. On a non-GAAP basis net income was $36.5 million or $1.02 per diluted share, compared to $2.9 million or $0.09 per diluted share last year and net income of $35.6 million or $0.99 per diluted share last quarter.

Michael Burger, ESI's president and CEO, stated, “We delivered another quarter of exceptional financial results, which closed out a defining and transformative year for ESI. Our team executed well and capitalized on strong market conditions, positioning us for future success."

Orders in the fourth quarter were $111.8 million, compared to $82.3 million one year ago. Burger continued, “Overall, our markets enabled strong bookings in the fourth quarter, primarily as a result of demand for flex circuit drilling. Demand for our semiconductor and component test products remained strong and total book to bill was 0.99, even as we delivered our highest quarterly revenues in recent history."

GAAP gross margin was 48.3%, compared to 36.5% in the fourth quarter of last year. Operating expense was $20.0 million, down from $36.3 million last year. Operating income was $34.7 million, or 30.6% of sales, compared to a loss of $18.1 million in the year-ago quarter.

Non-GAAP gross margin was 49.2%, up from 45.7% one year ago, on significantly higher revenues. Non-GAAP operating expenses decreased year over year from $20.1 million to $18.8 million as a result of the completion of our restructuring activities, and non-GAAP operating income was $37.0 million, or 32.6% of sales, up from $2.7 million, or 5.4% of sales, in last year's fourth quarter.

First Quarter 2019 Outlook

Based on current market and backlog conditions, revenues for the first quarter of fiscal 2019 are expected to be between $97 and $111 million. Non-GAAP earnings per diluted share is expected to be $0.75 to $0.95.

Burger concluded, "We enter our fiscal 2019 with a product portfolio that is retaining or growing market share. In this coming fiscal year we expect to introduce significant new products that will expand our addressable market, extend our competitive advantage, generate incremental revenue, and increase our exposure to secular growth drivers. Our markets will naturally cycle, and our visibility into the timing of those cycles remains limited. That said, the long-term technology trends and drivers indicate solid growth across our markets, and our new products should enable us to retain or grow share. Through the cycles our technology advantages and lower fixed cost base should allow us to generate solid earnings in all market conditions."

The company will hold a conference call today at 5:00 p.m. ET. The session will include a review of the financial results, operational performance and business outlook, and also a question and answer period.

The conference call can be accessed by calling 888-419-5570 (domestic participants) or 617-896-9871 (international participants). The conference ID number is 48069661. A live audio webcast can be accessed at www.esi.com. The webcast will be available on ESI’s website for one year.

Discussion of Non-GAAP Financial Measures

In this press release, we have presented financial measures which have not been determined in accordance with generally accepted accounting principles (GAAP) and are therefore non-GAAP financial measures. Non-GAAP, or adjusted, financial measures exclude the impact of purchase accounting, equity compensation, restructuring, reversal of tax valuation allowance, inventory and goodwill write-downs, and other items. We believe that this presentation of non-GAAP financial measures allows investors to assess the company’s operating performance by comparing it to prior periods on a more consistent basis. We have included a reconciliation of various non-GAAP financial measures to those measures reported in accordance with GAAP. Because our calculation of non-GAAP financial measures may differ from similar measures used by other companies, investors should be careful when comparing our non-GAAP financial measures to those of other companies.

About ESI

ESI’s integrated solutions allow industrial designers and process engineers to control the power of laser light to transform materials in ways that differentiate their consumer electronics, wearable devices, semiconductor circuits and high-precision components for market advantage. ESI’s laser-based manufacturing solutions feature the micro-machining industry’s highest precision and speed, and target the lowest total cost of ownership. ESI is headquartered in Portland, Oregon, with global operations and subsidiaries in Asia, Europe and North America. More information is available at www.esi.com.

Forward-Looking Statements

The statements contained in this press release that are not statements of historical fact, including statements regarding expected shipment of backlog, our positioning for future growth and success, our expected financial results for the fiscal 2019 first quarter, including revenue and non-GAAP earnings per diluted share, our expectations regarding market share of our product portfolio, the introduction of new products, and their ability to expand our addressable market, retain or grow share, extend our competitive advantage, generate incremental revenue, reduce cyclicality and increase our exposure to secular growth drivers, our belief that our markets will naturally cycle, and our expectations regarding the effect of long-term technology trends and drivers and our ability to generate solid earnings in all market conditions, and other statements containing the words “believes”, “expects”, “anticipates,” “continue,” “will,” “may” and similar words, constitute forward-looking statements that are subject to a number of risks and uncertainties. These forward-looking statements are based on information available to us on the date of this release and we undertake no obligation to update these forward-looking statements for any reason. Actual results may differ materially from those in the forward-looking statements. Risks and uncertainties that may affect the forward-looking statements include: the risk that anticipated growth opportunities may be smaller than anticipated or may not be realized; risks related to the relative strength and volatility of the electronics industry; the health of the financial markets and availability of credit for end customers and related effect on the global economy; the volatility associated with the industries we serve which includes the relative level of capacity and demand, and financial strength of the manufacturers; the risk that customer orders may be reduced, canceled or delayed; our ability to respond promptly to customer requirements; the risk that we may not be able to ship products on the schedule required by customers, whether as a result of production delays, supply delays, or otherwise; our ability to develop, manufacture and successfully deliver new products and enhancements; the risk that customer acceptance of new or customized products may be delayed; the risk that large orders and related revenues may not be repeated; our need to continue investing in research and development; our ability to hire and retain key employees; our ability to create and sustain intellectual property protection around its products; the risk that competing or alternative technologies could reduce demand for our products; the risk that we may not be successful in penetrating new or adjacent markets; the risk that the incorporation of Visicon's vision technology does not give us a competitive advantage; the risk that our new products may not gain acceptance in the marketplace; the risk that new products may not be introduced to the market in the anticipated time frame or at all; risks associated with our restructuring efforts; foreign currency fluctuations; the risk that duties or tariffs could be imposed or increased on goods imported or exported by us; the risk that changes to policies regarding immigration and visits to the United States could negatively impact our ability to hire or retain and train qualified personnel or our ability to operate internationally on an integrated basis; the company’s ability to utilize recorded deferred tax assets; taxes, interest or penalties resulting from tax audits; and changes in tax laws or the interpretation of such tax laws.

 
Electro Scientific Industries, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)
 
  Fiscal quarter ended   Fiscal year ended
(In thousands, except per share data) Mar 31, 2018   Dec 30, 2017   Apr 1, 2017   Mar 31, 2018   Apr 1, 2017
Net sales:                  
Systems $ 103,522     $ 99,418     $ 40,029     $ 325,349     $ 125,098  
Services 9,871     11,422     9,889     42,535     35,925  
Total net sales 113,393     110,840     49,918     367,884     161,023  
Cost of sales:                  
Systems 53,247     52,502     27,499     185,354     81,350  
Services 5,424     5,182     4,189     21,700     18,207  
Total cost of sales 58,671     57,684     31,688     207,054     99,557  
Gross profit 54,722     53,156     18,230     160,830     61,466  
Gross margin 48.3 %   48.0 %   36.5 %   43.7 %   38.2 %
Operating expenses:                  
Selling, general and administration 11,128     11,040     13,781     46,624     52,698  
Research, development and engineering 9,038     8,165     8,461     34,411     31,719  
Restructuring costs (144 )   706     6,614     3,935     6,935  
Acquisition and integration costs                 366  
Impairment of goodwill         7,445         7,445  
Net operating expenses 20,022     19,911     36,301     84,970     99,163  
Operating income (loss) 34,700     33,245     (18,071 )   75,860     (37,697 )
Non-operating (expense) income:                  
Interest and other (expense) income, net (283 )   789     103     93     265  
Total non-operating (expense) income (283 )   789     103     93     265  
Income (loss) before income taxes 34,417     34,034     (17,968 )   75,953     (37,432 )
(Benefit from) provision for income taxes (40,671 )   61     (45 )   (40,270 )   (23 )
Net income (loss) $ 75,088     $ 33,973     $ (17,923 )   $ 116,223     $ (37,409 )
Net income (loss) per share—basic $ 2.19     $ 0.99     $ (0.54 )   $ 3.42     $ (1.15 )
Net income (loss) per share—diluted $ 2.10     $ 0.94     $ (0.54 )   $ 3.27     $ (1.15 )

 

 
Electro Scientific Industries, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)
           
(In thousands) Mar 31, 2018   Dec 30, 2017   Apr 1, 2017
Assets          
Current assets:          
Cash and cash equivalents $ 76,792     $ 62,251     $ 56,642  
Short-term investments 47,121     36,824     5,743  
Trade receivables, net 63,044     75,674     40,494  
Inventories, net 87,686     74,502     58,942  
Shipped systems pending acceptance 4,734     5,780     5,713  
Other current assets 5,493     5,116     6,180  
Total current assets 284,870     260,147     173,714  
Non-current assets:          
Property, plant and equipment, net 22,025     19,732     21,619  
Deferred income taxes, net 43,518         890  
Goodwill 2,626     2,626     3,027  
Acquired intangible assets, net 5,169     5,525     6,564  
Other assets(1) 14,780     18,274     18,931  
Total assets $ 372,988     $ 306,304     $ 224,745  
LIABILITIES AND SHAREHOLDERS' EQUITY          
Current liabilities:          
Accounts payable $ 37,354     $ 38,577     $ 21,213  
Accrued liabilities 34,533     40,391     22,186  
Deferred revenue 9,818     11,982     14,712  
Total current liabilities 81,705     90,950     58,111  
Non-current liabilities:          
Long-term debt 12,766     12,875     13,489  
Income taxes payable 1,901     1,587     1,036  
Other liabilities 10,258     10,085     7,578  
Total liabilities 106,630     115,497     80,214  
Shareholders’ equity:          
Preferred and common stock 210,995     211,330     207,152  
Retained earnings (accumulated deficit) 54,816     (20,273 )   (61,407 )
Accumulated other comprehensive income (loss) 547     (250 )   (1,214 )
Total shareholders’ equity 266,358     190,807     144,531  
Total liabilities and shareholders’ equity $ 372,988     $ 306,304     $ 224,745  
End of period shares outstanding 34,387     34,309     33,260  

(1) Included in Other assets is long-term restricted cash of $1.1 million each on March 31, 2018, December 30, 2017 and April 1, 2017.

 
Electro Scientific Industries, Inc.

Analysis of Key Metrics

(Unaudited)
 
  Fiscal quarter ended   Fiscal year ended
(Dollars and shares in thousands) Mar 31, 2018   Dec 30, 2017   Apr 1, 2017   Mar 31, 2018   Apr 1, 2017
Sales detail:                  
Printed Circuit Board $ 76,772     $ 83,799     $ 28,339     $ 256,430     $ 88,771  
Component Test 9,459     7,473     7,382     32,790     22,381  
Semiconductor 24,055     12,351     8,036     55,171     29,557  
Industrial Machining 3,107     7,217     6,161     23,493     20,314  
Net Sales $ 113,393     $ 110,840     $ 49,918     $ 367,884     $ 161,023  
                   
As % of net sales                  
GAAP                  
Gross profit 48.3 %   48.0 %   36.5 %   43.7 %   38.2 %
Selling, service and administration expense 10 %   10 %   28 %   13 %   33 %
Research, development and engineering expense 8 %   7 %   17 %   9 %   20 %
Net operating expenses 18 %   18 %   73 %   23 %   62 %
Operating income (loss) 31 %   30 %   (36 %)   21 %   (23 %)
Non-GAAP                  
Gross profit 49.2 %   48.9 %   45.7 %   48.1 %   42.3 %
Net operating expenses 17 %   17 %   40 %   21 %   48 %
Operating income (loss) 33 %   32 %   5 %   27 %   (6 %)
                   
GAAP - Effective tax rate % (118.2 %)   0.2 %   0.3 %   (53.0 %)   0.1 %
Weighted average shares outstanding                  
Basic 34,350     34,224     33,065     33,967     32,551  
Diluted GAAP 35,830     36,010     33,065     35,571     32,551  
Diluted Non-GAAP 35,830     36,010     33,822     35,571     32,551  
End of period employees 615     595     683     615     683  
                   
Reconciliation of Cash and Investments                  
          Mar 31, 2018   Dec 30, 2017   Apr 1, 2017
Cash         27,043     33,565     29,302  
Cash equivalents         49,749     28,686     27,340  
Restricted cash         1,093     1,087     1,090  
Cash, cash equivalents, and restricted cash at end of period       77,885     63,338     57,732  
Short-term investments         47,121     36,824     5,743  
Cash, restricted cash and current investments       125,006     100,162     63,475  

 

 
Electro Scientific Industries, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)
 
  Fiscal quarter ended   Fiscal year ended
(In thousands, except per share data) Mar 31, 2018   Dec 30, 2017   Apr 1, 2017   Mar 31, 2018   Apr 1, 2017
Gross profit per GAAP $ 54,722     $ 53,156     $ 18,230     $ 160,830     $ 61,466  
Purchase accounting 242     242     447     977     1,133  
Equity compensation 69     64     105     277     503  
Charges for other asset and inventory impairment 277         1,696     13,554     2,642  
Charges from VAT audit 521     777         1,298      
Charges for impairment of intangibles         2,349         2,349  
Non-GAAP gross profit $ 55,831     $ 54,239     $ 22,827     $ 176,936     $ 68,093  
                   
Operating expenses per GAAP $ 20,022     $ 19,911     $ 36,301     $ 84,970     $ 99,163  
Purchase accounting (114 )   (116 )   (414 )   (566 )   (1,077 )
Equity compensation (1,223 )   (649 )   (1,707 )   (4,336 )   (5,934 )
Impairment of assets                 (46 )
Acquisition and integration costs                 (366 )
Restructuring costs 144     (706 )   (6,614 )   (3,935 )   (6,986 )
Impairment of goodwill         (7,445 )       (7,445 )
Non-GAAP operating expenses $ 18,829     $ 18,440     $ 20,121     $ 76,133     $ 77,309  
                   
Operating income (loss) per GAAP $ 34,700     $ 33,245     $ (18,071 )   $ 75,860     $ (37,697 )
Non-GAAP adjustments to gross profit 1,109     1,083     4,597     16,106     6,627  
Non-GAAP adjustments to operating expenses 1,193     1,471     16,180     8,837     21,854  
Non-GAAP operating income (loss) $ 37,002     $ 35,799     $ 2,706     $ 100,803     $ (9,216 )
                   
Non-operating (expense) income, net per GAAP $ (283 )   $ 789     $ 103     $ 93     $ 265  
Expense (income), on charges from VAT audit, Gain on asset sale, net of other non-operating expense (income) 336     (687 )       (351 )    
Acquisition-related adjustments                 (190 )
Non-GAAP non-operating income (expense) $ 53     $ 102     $ 103     $ (258 )   $ 75  
Non-GAAP income (expense) before income taxes $ 37,055     $ 35,901     $ 2,809     $ 100,545     $ (9,141 )
                   
Net income (loss) per GAAP $ 75,088     $ 33,973     $ (17,923 )   $ 116,223     $ (37,409 )
Non-GAAP adjustments to gross profit 1,109     1,083     4,597     16,106     6,627  
Non-GAAP adjustments to operating expenses 1,193     1,471     16,180     8,837     21,854  
Non-GAAP adjustments to non-operating income (expense) 336     (687 )       (351 )   (190 )
Income tax effect of other non-GAAP adjustments (a) (41,225 )   (235 )   32     (41,967 )   (252 )
Non-GAAP net income (loss) $ 36,501     $ 35,605     $ 2,886     $ 98,848     $ (9,370 )
Basic Non-GAAP net income (loss) per share $ 1.06     $ 1.04     $ 0.09     $ 2.91     $ (0.29 )
Diluted Non-GAAP net income (loss) per share $ 1.02     $ 0.99     $ 0.09     $ 2.78     $ (0.29 )

(a) The income tax effect of other non-GAAP adjustments in the fourth quarter of 2018 and fiscal 2018 was primarily due to  release of tax valuation allowance/

 
Electro Scientific Industries, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)
 
  Fiscal quarter ended   Fiscal year ended
(In thousands) Mar 31, 2018   Dec 30, 2017   Apr 1, 2017   Mar 31, 2018   Apr 1, 2017
Net income (loss) $ 75,088     $ 33,973     $ (17,923 )   $ 116,223     $ (37,409 )
Non-cash adjustments and changes in operating activities (48,457 )   (18,872 )   16,789     (48,795 )   36,576  
Net cash provided by (used in) operating activities 26,631     15,101     (1,134 )   67,428     (833 )
Net cash (used in) provided by investing activities (10,993 )   (2,974 )   (203 )   (47,353 )   2,614  
Net cash (used in) provided by financing activities (1,739 )   1,838     13,923     (1,132 )   14,165  
Effect of exchange rate changes on cash 648     302     255     1,210     (627 )
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 14,547     14,267     12,841     20,153     15,319  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD 63,338     49,071     44,891     57,732     42,413  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD $ 77,885     $ 63,338     $ 57,732     $ 77,885     $ 57,732  

 

 
Electro Scientific Industries, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures - Projected

(Unaudited)
 
  Fiscal quarter ending
Jun 30, 2018
Non-GAAP diluted earnings per share $0.75 - $0.95
Purchase accounting (0.01)
Equity compensation (0.04)
Income tax (0.09) - (0.12)
GAAP diluted EPS $0.61 - $0.78

Brian Smith                                                                                                                              
ESI
503-672-5760
smithb@esi.com                                                                                                                             

Primary Logo

 

Source: Electro Scientific Industries, Inc.