Electro Scientific Industries, Inc.
May 10, 2016

ESI Announces Fourth Quarter Fiscal 2016 Results

PORTLAND, Ore., May 10, 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 fourth quarter and year ended April 2, 2016. The fourth quarter comprised thirteen weeks, compared to fourteen weeks in the prior quarter and thirteen weeks in the year-ago quarter. Financial measures are provided on both a GAAP and a non-GAAP basis, which excludes the impact of purchase accounting, equity compensation, and other items.

Fourth quarter revenue was $51.5 million, compared to $43.3 million in the third quarter of 2016 and $37.6 million in the fourth quarter of last fiscal year. GAAP net income was $2.0 million or $0.06 per diluted share. Non-GAAP net income was $3.4 million or $0.11 per diluted share.

"Revenue grew 19% sequentially and 37% over the same quarter last year," stated Ed Grady, president and CEO of ESI. "Revenue growth combined with diligent expense management led to a quarter of solid profitability. Further, we continued to advance our strategy by introducing Garnet™, a new large format micromachining platform, and receiving commitments for placement of our new nViant™ system at multiple customers."

Bookings in the fourth quarter were $55.6 million, compared to $52.6 million in the prior quarter and $40.0 million last year. Grady continued, "Our GemStone™ flex via drilling system continues to win in the market, as we received our highest bookings to date. This more than offset low micromachining demand based on timing of project design wins and lower service contract bookings."

On a GAAP basis gross margin was 41.1%, compared with 40.9% in the third quarter. Operating expenses were $20.1 million, down from $22.2 million in the prior quarter. Operating income was $1.1 million, up from a loss of $4.5 million in the third quarter.

On a non-GAAP basis gross margin was 42.7% compared to 44.9% in the prior quarter. Non-GAAP operating expenses decreased slightly to $18.7 million from $19.0 million last quarter. Non-GAAP operating income was $3.3 million, or 6.4% of sales, compared to $0.5 million in the third quarter.

Full Year Fiscal 2016 Results

Fiscal 2016 revenue was $184 million, up 16% compared to $159 million in fiscal 2015. On a GAAP basis, fiscal 2016 net loss was $12.3 million or $0.39 per share, compared to net loss of $43.8 million or $1.43 per share in the prior year. On a non-GAAP basis, net loss was $1.7 million or $0.05 per share, compared to net loss of $23.4 million or $0.76 per share in 2015. Grady continued, "We began to see the impact of our turnaround strategy in fiscal 2016 as we grew revenues for the first time in four years, achieved our goal of reaching breakeven during the year, generated positive cash from operations, and advanced our strategy by introducing several new products that we believe will serve as a platform for long-term growth."

Balance Sheet and Cash Flow

At quarter end, total cash and investments were $60 million. The company used $3.3 million of cash in operations during the quarter. For the fiscal year the company generated $4.7 million of operating cash. During the quarter, inventories decreased $0.4 million, and trade receivables increased by $5.7 million.

First Quarter 2017 Outlook

Based on current market conditions, revenues for the first quarter of fiscal 2017 are expected to be between $48 and $53 million. Non-GAAP earnings per diluted share is expected to be $0.04 to $0.09.

Grady concluded, "This quarter we continued to make progress on expanding our technology and product portfolio and growing our served market. For fiscal 2017 our focus is on driving the adoption of our new products and penetrating new markets and customers.  We are starting the year with strong backlog and exciting new products, and we believe our long term growth strategy is on track. However, our quarterly results are not expected to be linear as slowing economic and market growth, capacity utilization, and timing of new product adoption may impact our results quarter to quarter over the next year."

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 79476157. 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, inventory write-down 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 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; foreign currency fluctuations; 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.
Fourth Quarter and Fiscal 2016 Results
(In thousands, except per share data)
(Unaudited)
          
Operating Results:         
 Fiscal quarter ended Fiscal year ended
 Apr 2, 2016 Jan 2, 2016 Mar 28, 2015 Apr 2, 2016 Mar 28, 2015
Net sales:         
Systems44,043  31,282  26,156  142,957  111,603 
Service7,443  12,060  11,415   41,434  47,515 
Total Net Sales51,486  43,342  37,571  184,391  159,118 
Cost of sales:         
Systems25,247  20,292  18,488  89,169  78,195 
Service5,055  5,329  6,168  22,519  26,242 
Total cost of sales30,302  25,621  24,656  111,688  104,437 
Gross profit21,184  17,721  12,915  72,703  54,681 
 41.1% 40.9% 34.4% 39.4% 34.4 %
Operating expenses:         
Selling, service and administration12,134  12,468  12,451  49,753  48,525 
Research, development and engineering7,694   7,778  9,214  32,400  35,166 
Restructuring costs227  1,944  2,069  2,824  2,069 
Acquisition and integration costs     465  194  776 
Impairment of goodwill    7,889    7,889 
Net operating expenses20,055  22,190  32,088  85,171  94,425 
Operating income (loss)1,129  (4,469) (19,173) (12,468)  (39,744)
Non-operating income (expense):         
Loss and other-than-temporary impairment of cost method investment    (4,263)   (4,263)
Interest and other income, net127  67  564  195  430 
Total non-operating income (expense)127  67  (3,699) 195  (3,833)
Income (loss) before income taxes1,256  (4,402) (22,872) (12,273) (43,577)
(Benefit from) provision for income taxes(697) 184  69  (16) 234 
Net income (loss)$1,953  $(4,586) $(22,941) $(12,257) $(43,811)
Net income (loss) per share—basic$0.06  $(0.15) $(0.75) $(0.39) $(1.43)
Net income (loss) per share—diluted$0.06  $(0.15) $(0.75) $(0.39) $(1.43)
                    


Electro Scientific Industries, Inc.
Fourth Quarter and Fiscal 2016 Results
(Amounts in thousands)
(Unaudited)
      
Financial Position as of:     
 Apr 2, 2016 Jan 2, 2016 Mar 28, 2015
ASSETS     
Current assets:     
Cash and cash equivalents$42,413  $42,071  $50,994 
Short-term investments15,252  20,771  6,612 
Trade receivables, net42,770  37,012  42,295 
Inventories60,470  60,881  56,637 
Shipped systems pending acceptance1,181  1,470  2,516 
Deferred income taxes, net   134  178 
Other current assets5,340  4,371  6,090 
Total current assets167,426  166,710  165,322 
Non-current assets:     
Property, plant and equipment, net24,543  23,507  25,858 
Non-current deferred income taxes, net914  98  174 
Goodwill7,445  7,445   7,717 
Acquired intangible assets, net7,146  7,909  8,958 
Other assets12,626  11,064  13,211 
Total assets$220,100  $216,733  $221,240 
LIABILITIES AND SHAREHOLDERS' EQUITY     
Current liabilities:     
Accounts payable$16,061  $16,344  $9,514 
Accrued liabilities18,334  20,980  18,666 
Deferred income tax liability, net  174  173 
Deferred revenue6,373  7,708   12,376 
Total current liabilities40,768  45,206  40,729 
Non-current liabilities:     
Income taxes payable1,266  1,384  1,176 
Deferred income tax liability, net234  232  443 
Other liabilities7,801  3,166  1,571 
Total liabilities50,069  49,988  43,919 
Shareholders' equity:     
Preferred and common stock195,024  193,547  189,134 
(Accumulated deficit) retained earnings(23,998) (25,950) (11,741)
Accumulated other comprehensive (loss) income(995) (852) (72)
Total shareholders' equity170,031  166,745  177,321 
Total liabilities and shareholders' equity$220,100  $216,733  $221,240 
End of period shares outstanding31,613  31,537  30,704 
         

 

Electro Scientific Industries, Inc.
Analysis of Fourth Quarter and Fiscal 2016 Results
(Dollars and shares in thousands)
(Unaudited)
 
 Fiscal quarter ended Fiscal year ended
 Apr 2, 2016 Jan 2, 2016 Mar 28, 2015 Apr 2, 2016  Mar 28, 2015
Sales detail:              
Component Processing               
Interconnect Products (IP)$29,152  $22,824  $ 18,382  $94,121  $66,913 
Component Products (CP) 5,609   3,303   5,113   19,901   19,099 
Semiconductor Products (SP) 8,974   11,384   6,617   38,262   38,586 
Total Component Processing$43,735  $ 37,511  $30,112  $152,284  $124,598 
Micromachining                   
Micromachining Products (MP) 7,751   5,831    7,459    32,107   34,520 
Net Sales$51,486  $43,342  $37,571  $184,391  $159,118 
                     
Gross margin % 41.1%  40.9%   34.4%  39.4%  34.4%
Selling, service and administration expense % 24%  29%  33%  27%  30%
Research, development and engineering expense % 15%  18%  25%  18%  22%
Operating income/(loss) % 2%  (10%)  (51%)  (7%)  (25%)
Effective tax rate % (55.5%)  (4%)  %   0.1%  (0.5%)
Weighted average shares outstanding - basic 31,580   31,495   30,923   31,411   30,611 
Weighted average shares outstanding - diluted 32,393   31,713   30,923   31,411   30,611 
End of period employees 651   647   695   651   695 
                    

 

Electro Scientific Industries, Inc.
Fourth Quarter and Fiscal 2016 Results
(In thousands, except per share data)
(Unaudited)
 
Reconciliation of GAAP to Non-GAAP Financial Measures:      
 Fiscal quarter ended Fiscal year ended
 Apr 2, 2016 Jan 2, 2016 Mar 28, 2015 Apr 2, 2016 Mar 28, 2015
Gross profit per GAAP$21,184  $17,721  $12,915  $72,703  $54,681 
Purchase accounting 278   271   298   1,140   1,134 
Equity compensation 99   103   112   445   586 
Charges for inventory write-off of discontinued product    1,356   952   1,356   952 
Charges for intangible write-off of discontinued product 435          435    
Non-GAAP gross profit$21,996  $19,451  $14,277  $76,079  $57,353 
Non-GAAP gross margin 42.7%  44.9%  38.0%   41.3%   36.0%
                    
Operating expenses per GAAP$20,055  $22,190  $ 32,088  $85,171  $94,425 
Purchase accounting (262)   (264)  (90)  (1,229)  (360)
Equity compensation (882)  (1,020)  (946)  (3,787)  (3,874)
Acquisition and integration costs        (465)  (194)  (776)
Restructuring costs (227)   (1,944)  (2,069)  (2,824)  (2,069)
Impairment of goodwill       (7,889)     (7,889)
Non-GAAP operating expenses$18,684  $18,962  $20,629  $77,137  $79,457 
% of Net sales 36%  44%  55%   42%   50%
                    
Operating income (loss) per GAAP$1,129  $(4,469) $(19,173) $(12,468) $(39,744)
Non-GAAP adjustments to gross profit 812    1,730   1,362   3,376   2,672 
Non-GAAP adjustments to operating expenses  1,371   3,228   11,459   8,034   14,968 
Non-GAAP operating income (loss)$3,312   $489  $(6,352) $(1,058) $(22,104)
% of Net sales 6%  1%  (17%)   (1%)  (14 %)
                     
Non-operating income (expense), net per GAAP$127  $67  $(3,699) $195  $(3,833)
Loss and other-than-temporary impairment of cost method investments       4,263      4,263 
Gain on liquidation of foreign subsidiary       (597)     (597)
Non-GAAP non-operating income (expense)$127  $67  $(33) $195  $ (167)
                     
Net income (loss) per GAAP$1,953  $(4,586) $(22,941) $(12,257) $(43,811)
Non-GAAP adjustments to gross profit 812   1,730   1,362   3,376    2,672 
Non-GAAP adjustments to operating expenses 1,371   3,228   11,459   8,034   14,968 
Non-GAAP adjustments to non-operating expense       3,666      3,666  
Income tax effect of other non-GAAP adjustments (731)  26   (83)  (857)  (913)
Non-GAAP net income (loss)$3,405  $398  $(6,537) $(1,704) $(23,418)
% of Net sales 7%  1%  (17%)   (1%)   (15%)
Basic Non-GAAP net income (loss) per share$0.11  $0.01  $(0.21) $(0.05) $(0.76)
Diluted Non-GAAP net income (loss) per share$0.11   $0.01  $(0.21) $(0.05) $(0.76)
 

 

Electro Scientific Industries, Inc.
Fourth Quarter and Fiscal 2016 Results
(Amounts in thousands)
(Unaudited)
 
Consolidated Condensed Statements of Cash Flows:                   
 Fiscal quarter ended Fiscal year ended
 Apr 2, 2016 Jan 2, 2016 Mar 28, 2015 Apr 2, 2016 Mar 28, 2015
Net income (loss)$1,953  $(4,586)  $(22,941) $(12,257) $(43,811)
Non-cash adjustments and changes in operating activities (5,249)  8,089   11,969   16,959   16,318 
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (3,296)  3,503   (10,972)  4,702   (27,493)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 3,217   (5,234)  (8,213)  (13,812)   20,207 
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 313   277   456    724   (8,709)
Effect of exchange rate changes on cash 108   (117)  (343)  (195)  (1,472)
NET CHANGE IN CASH AND CASH EQUIVALENTS 342   (1,571)   (19,072)  (8,581)  (17,467)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD  42,071   43,642   70,066   50,994   68,461 
CASH AND CASH EQUIVALENTS AT END OF PERIOD$42,413   $42,071  $50,994  $ 42,413  $50,994 
 


Reconciliation of GAAP to Non-GAAP Financial Measures - Projected Fiscal quarter ending
Jul 2, 2016
   
Non-GAAP diluted earnings per share $ 0.04 - $0.09
Purchase accounting  (0.02)
Equity compensation  (0.04)
Other items   
GAAP diluted EPS $(0.02) - $0.03
   


Brian Smith

ESI

503-672-5760

smithb@esi.com  

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Source: Electro Scientific Industries, Inc.

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