Electro Scientific Industries, Inc.
Feb 2, 2016

ESI Announces Third Quarter Fiscal 2016 Results

PORTLAND, Ore., Feb. 02, 2016 (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 2016 third quarter ended January 2, 2016, which comprised fourteen weeks, compared to thirteen weeks in the prior and year-ago quarters. Financial measures are provided on both a GAAP and a non-GAAP basis, which excludes the impact of purchase accounting, equity compensation, restructuring, inventory write-down and other items.

Third quarter revenue was $43.3 million, compared to $46.5 million in the second quarter of 2016 and $43.7 million in the third quarter of last fiscal year. GAAP net loss was $4.6 million or $0.15 per share. Non-GAAP net income was $0.4 million or $0.01 per diluted share.

"In the third quarter we continued to deliver on our turnaround plan as we grew our orders, increased gross margin, reduced adjusted operating expenses, and generated positive non-GAAP earnings. For the third consecutive quarter we generated positive cash from operations and grew our cash balance," stated Ed Grady, president and CEO of ESI. "Further, the company took another step forward in our market expansion strategy as we announced nViantTM, a laser system designed for via drilling in High-Density Interconnect circuit boards."

Bookings in the third quarter were $52.6 million, compared to $51.5 million in the prior quarter and $40.6 million last year. Grady continued, "Flex via drilling had another strong quarter, with growth coming from our new GemStoneTM system. Micromachining also saw solid demand, with a follow-on order for our Lumen series system. Perhaps most important strategically, we were selected as plan of record and received our first order for the CornerStoneTM Series 2 laser drilling system from a large semiconductor manufacturer. We believe this selection positions us well in the high-performance IC Package via drilling market with industry leading cost of ownership and capability."

GAAP gross margin was 40.9%. Non-GAAP gross margin was 44.9% compared to 40.6% in the prior quarter. Operating expenses on a GAAP basis were $22.2 million, up slightly from $21.4 million in the prior quarter. On a non-GAAP basis operating expenses decreased to $19.0 million from $19.6 million last quarter. Non-GAAP operating income was $0.5 million compared to a loss of $0.8 million in the second quarter. Grady added, "We are pleased with our sequential improvement in gross margin and lower operating expenses as our lean programs and cost management efforts continue to show results."

Balance Sheet and Cash Flow

At quarter end, cash and investments grew to $62.8 million, from $60.2 million last quarter. The company generated $3.5 million in cash from operations. Inventories increased by $2.8 million, total trade receivables decreased by $12.6 million, and accounts payable decreased by $3.0 million.

Fourth Quarter 2016 Outlook

Based on current market conditions, revenues for the fourth quarter of fiscal 2016 are expected to be between $47 million and $53 million. Non-GAAP earnings per diluted share is expected to be $0.03 to $0.08.

Grady concluded, "With the introduction of GemStone, CornerStone, and now nViant, ESI has more than tripled its addressable market in PCB laser processing. In addition, the trend in these markets is transitioning towards requiring the level of precision, accuracy, and speed that are the strengths of ESI. With these new products we believe there is significant opportunity to grow our share of this large market. Market penetration, leading to revenue and earnings growth, remains our top priority. While economic and market forces could impact capacity buys and the timing of new product adoption, ESI's turnaround and success story continues to progress."

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 888-339-2688 (domestic participants) or 617-847-3007 (international participants). The conference ID number is 62533773. A live audio webcast can be accessed at www.esi.com. Upon completion of the call, an audio replay will be accessible through February 12, 2016, at 888-286-8010 (domestic participants) or 617-801-6888 (international participants), passcode 33654635. 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, inventory write-down and other items. We believe that this presentation of non-GAAP financial measures allows investors to better 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, Ore., with global operations from the Pacific Northwest to the Pacific Rim. More information is available at www.esi.com.

Forward-Looking Statements

This press release includes forward-looking statements about the markets we serve, growth, products, revenue, and earnings per share. These forward-looking statements are based on information available to us on the date of this release and we assume 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—which is dependent on many factors, including component prices, global and regional economic strength and political stability, timing of consumer product introductions and overall demand for electronic devices (such as semiconductors, printed circuit boards, displays, LEDs, capacitors and other components) used in wireless telecommunications equipment, computers and consumer and automotive electronics; 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 canceled or delayed; the ability of the company to respond promptly to customer requirements; the risk that the company may not be able to ship products on the schedule required by customers, whether as a result of production delays, supply delays, or otherwise; the ability of the company 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; the company's need to continue investing in research and development; the company's ability to hire and retain key employees; the company's 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 we do not successfully integrate Topwin Optoelectronics; 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; the risk that our cost-reduction program will not result in the anticipated level of savings; foreign currency fluctuations; the risk that efficiencies realized from our site consolidation are not as large as expected; 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.
Third Quarter Fiscal 2016 Results
(In thousands, except per share data)
(Unaudited)
                   
Operating Results:                  
  Fiscal quarter ended   Three fiscal quarters ended
  Jan 2, 2016   Sep 26, 2015   Dec 27, 2014   Jan 2, 2016   Dec 27, 2014
Net sales:                  
Systems $ 31,282     $ 35,570     $ 31,750     $ 98,914     $ 85,447  
Services 12,060     10,902     11,911     33,991     36,100  
Total net sales 43,342     46,472     43,661     132,905     121,547  
Cost of sales:                  
Systems 20,292     22,345     22,031     63,922     59,707  
Services 5,329     5,706     6,917     17,464     20,074  
Total cost of sales 25,621     28,051     28,948     81,386     79,781  
Gross profit 17,721     18,421     14,713     51,519     41,766  
  40.9 %   39.6 %   33.7 %   38.8 %   34.4 %
Operating expenses:                  
Selling, general and administrative 12,468     12,534     12,332     37,619     36,384  
Research, development and engineering 7,778     8,283     8,384     24,706     25,953  
Acquisition and integration costs     40         194      
Restructuring costs 1,944     591         2,597      
Net operating expenses 22,190     21,448     20,716     65,116     62,337  
Operating loss (4,469 )   (3,027 )   (6,003 )   (13,597 )   (20,571 )
Non-operating income (expense):                  
Interest and other income (expense), net 67     6     64     68     (134 )
Total non-operating income (expense) 67     6     64     68     (134 )
Loss before income taxes (4,402 )   (3,021 )   (5,939 )   (13,529 )   (20,705 )
Provision for income taxes 184     239     437     681     165  
Net loss $ (4,586 )   $ (3,260 )   $ (6,376 )   $ (14,210 )   $ (20,870 )
Net loss per share—basic $ (0.15 )   $ (0.10 )   $ (0.21 )   $ (0.45 )   $ (0.68 )
Net loss per share—diluted $ (0.15 )   $ (0.10 )   $ (0.21 )   $ (0.45 )   $ (0.68 )


   *Certain reclassifications have been made to amounts reported in prior periods to conform to current period presentation, as previously disclosed on our Forms 10-K and 10-Q





 

Electro Scientific Industries, Inc.
Third Quarter Fiscal 2016 Results
(Amounts in thousands)
(Unaudited)
       
Financial Position As Of:      
  Jan 2, 2016   Sep 26, 2015   Mar 28, 2015
Assets          
Current assets:          
Cash and cash equivalents $ 42,071     $ 43,642     $ 50,994  
Short-term investments 20,771     16,607     6,612  
Trade receivables, net 37,012     49,097     42,295  
Inventories 60,881     58,035     56,637  
Shipped systems pending acceptance 1,470     2,499     2,516  
Deferred income taxes, net 134     135     178  
Other current assets 4,371     3,475     6,090  
Total current assets 166,710     173,490     165,322  
Non-current assets:          
Non-current investments          
Property, plant and equipment, net 23,507     24,650     25,858  
Non-current deferred income taxes, net 98     85     174  
Goodwill 7,445     7,445     7,717  
Acquired intangible assets, net 7,909     8,230     8,958  
Trade receivable 288     794     3,656  
Other assets 10,776     10,464     9,555  
Total assets $ 216,733     $ 225,158     $ 221,240  
Liabilities and shareholders' equity          
Current liabilities:          
Accounts payable $ 16,344     $ 19,347     $ 9,514  
Accrued liabilities 20,980     18,913     18,666  
Deferred income tax liability, net 174     174     173  
Deferred revenue 7,708     12,662     12,376  
Total current liabilities 45,206     51,096     40,729  
Income taxes payable 1,384     1,278     1,176  
Deferred income tax liability, net 232     407     443  
Other liabilities 3,166     2,585     1,571  
Shareholders' equity:          
Preferred and common stock 193,547     191,948     189,134  
Accumulated deficit (25,950 )   (21,366 )   (11,741 )
Accumulated other comprehensive loss (852 )   (790 )   (72 )
Total shareholders' equity 166,745     169,792     177,321  
Total liabilities and shareholders' equity $ 216,733     $ 225,158     $ 221,240  
End of period shares outstanding 31,537     31,448     30,704  


   *Certain reclassifications have been made to amounts reported in prior periods to conform to current period presentation, as previously disclosed on our Forms 10-K and 10-Q





 

Electro Scientific Industries, Inc.
Analysis of Third Quarter Fiscal 2016 Results 
(Dollars and shares in thousands)
(Unaudited)
       
  Fiscal quarter ended   Three fiscal quarters ended
  Jan 2, 2016   Sep 26, 2015   Dec 27, 2014   Jan 2, 2016   Dec 27, 2014
Sales detail:                  
Component Processing                  
Interconnect Products (IP) $ 22,824     $ 21,500     $ 16,213     $ 64,969     $ 48,531  
Component Test Products (CTP) 3,303     4,491     4,164     14,292     13,986  
Semiconductor Products (SP) 11,384     6,763     11,453     29,288     31,969  
  37,511     32,754     31,830     108,549     94,486  
Micromachining                  
Micromachining Products (MP) 5,831     13,718     11,831     24,356     27,061  
Net Sales $ 43,342     $ 46,472     $ 43,661     $ 132,905     $ 121,547  
                   
Gross margin %   41 %     40 %     34 %     39 %     34 %
Selling, general and administrative expense %   29 %     27 %     28 %     28 %     30 %
Research, development and engineering expense %   18 %     18 %     19 %     19 %     21 %
Operating loss %   (10 %)     (7 %)     (14 %)     (10 %)     (17 %)
Effective tax rate %   (4 %)     (8 %)     (7 %)     (5 %)     (1 %)
Weighted average shares outstanding - basic   31,495       31,384       30,617       31,355       30,507  
Weighted average shares outstanding - diluted   31,713       31,384       30,617       31,355       30,507  
End of period employees   647       677       652       647       652  





 

Electro Scientific Industries, Inc.
Third Quarter Fiscal 2016 Results
(In thousands, except per share data)
(Unaudited)
             
Reconciliation of GAAP to Non-GAAP Financial Measures:            
  Fiscal quarter ended   Three fiscal quarters ended
  Jan 2, 2016   Sep 26, 2015   Dec 27, 2014   Jan 2, 2016   Dec 27, 2014
                   
Gross profit per GAAP $ 17,721     $ 18,421     $ 14,713     $ 51,519     $ 41,766  
Purchase accounting 271     325     163     862     836  
Equity compensation 103     114     154     346     474  
Charges for inventory write-off of discontinued product 1,356             1,356      
Non-GAAP gross profit $ 19,451     $ 18,860     $ 15,030     $ 54,083     $ 43,076  
Non-GAAP gross margin 44.9 %   40.6 %   34.4 %   40.7 %   35.4 %
                   
Operating expenses per GAAP $ 22,190     $ 21,448     $ 20,716     $ 65,116     $ 62,337  
Purchase accounting (264 )   (248 )   (90 )   (967 )   (270 )
Equity compensation (1,020 )   (952 )   (885 )   (2,905 )   (2,928 )
Acquisition and integration costs     (40 )   (311 )   (194 )   (311 )
Restructuring costs (1,944 )   (591 )       (2,597 )    
Non-GAAP operating expenses $ 18,962     $ 19,617     $ 19,430     $ 58,453     $ 58,828  
% of Net sales 44 %   42 %   45 %   44 %   48 %
                   
Operating loss per GAAP $ (4,469 )   $ (3,027 )   $ (6,003 )   $ (13,597 )   $ (20,571 )
Non-GAAP adjustments to gross profit 1,730     439     317     2,564     1,310  
                             
Non-GAAP adjustments to operating expenses 3,228     1,831     1,286     6,663     3,509  
Non-GAAP operating income (loss) $ 489     $ (757 )   $ (4,400 )   $ (4,370 )   $ (15,752 )
% of Net sales 1 %   (2 %)   (10 %)   (3 %)   (13 %)
                   
Non-operating income (expense), net per GAAP $ 67     $ 6     $ 64     $ 68     $ (134 )
Non-GAAP non-operating income (expense) $ 67     $ 6     $ 64     $ 68     $ (134 )
                   
Net loss per GAAP $ (4,586 )   $ (3,260 )   $ (6,376 )   $ (14,210 )   $ (20,870 )
Non-GAAP adjustments to gross profit 1,730     439     317     2,564     1,310  
                             
Non-GAAP adjustments to operating expenses 3,228     1,831     1,286     6,663     3,509  
Income tax effect of other non-GAAP adjustments 26     (53 )   93     (126 )   (830 )
Non-GAAP net income (loss) $ 398     $ (1,043 )   $ (4,680 )   $ (5,109 )   $ (16,881 )
% of Net sales 1 %   (2 %)   (11 %)   (4 %)   (14 %)
Basic Non-GAAP net income (loss) per share $ 0.01     $ (0.03 )   $ (0.15 )   $ (0.16 )   $ (0.55 )
Diluted Non-GAAP net income (loss) per share $ 0.01     $ (0.03 )   $ (0.15 )   $ (0.16 )   $ (0.55 )





 

Electro Scientific Industries, Inc.
Third Quarter Fiscal 2016 Results
(Amounts in thousands)
(Unaudited)
                 
Consolidated Condensed Statements of Cash Flows:                
  Fiscal quarter ended   Three fiscal quarters ended
  Jan 2, 2016   Sep 26, 2015   Dec 27, 2014   Jan 2, 2016   Dec 27, 2014
Net loss $ (4,586 )   $ (3,260 )   $ (6,376 )   $ (14,210 )   $ (20,870 )
Non-cash adjustments and changes in operating activities 8,089     5,428     (7,043 )   22,208     4,349  
Net cash provided by (used in) operating activities 3,503     2,168     (13,419 )   7,998     (16,521 )
Net cash (used in) provided by investing activities (5,234 )   (12,264 )   7,613     (17,029 )   28,420  
Net cash provided by (used in) financing activities 277     264     (2,613 )   411     (9,165 )
Effect of exchange rate changes on cash (117 )   (357 )   (770 )   (303 )   (1,129 )
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,571 )   (10,189 )   (9,189 )   (8,923 )   1,605  
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 43,642     53,831     79,255     50,994     68,461  
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 42,071     $ 43,642     $ 70,066     $ 42,071     $ 70,066  





 

Reconciliation of GAAP to Non-GAAP Financial Measures - Projected     Fiscal quarter ending
April 02, 2016
     
Non-GAAP diluted earnings per share   $ 0.03 - $0.08
Purchase accounting      (0.02 )
Equity compensation      (0.04 )
Other items          
GAAP diluted EPS   $(0.03) - $0.02

 

Brian Smith

ESI

503-672-5760

smithb@esi.com

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Source: Electro Scientific Industries, Inc.

 

 

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