Orbotech Reports Q4 and Full Year 2017 Results

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Orbotech Ltd. Today announced its consolidated financial results for the fourth quarter and full year ended December 31, 2017.

2017 Fourth Quarter Highlights

• Record revenues of $256.9 million
• Gross margin of 47.3%
• Cash flow from operations of $84.3 million
• GAAP EPS of $1.14 (diluted) reflecting the tax benefit resulting from a valuation allowance release; non-GAAP EPS of $0.87 (diluted)

2017 Full Year Highlights Compared with 2016 Full Year

• Revenues of $900.9 million, up 11.7% compared with $806.4 million
• Gross margin of 47.2%, up from 46.2%
• Cash flow from operations of $130 million, compared with $108 million
• GAAP EPS of $2.71 (diluted) reflecting the tax benefit resulting from a valuation allowance release, up 58% from $1.71 (diluted)
• Non-GAAP EPS of $2.91 (diluted), up 15% from $2.52 (diluted)

2018 Guidance

• First quarter 2018 revenue range: $235 million to $250 million; gross margin range: 47.0%-47.5%
• First half 2018 revenue of approximately $500 million; gross margin range: 47.5%-48%
• Full year 2018 revenue growth of 12%-14% compared to 2017

Commenting on the results, Asher Levy, chief executive officer, said: “We are very pleased to report strong quarterly results that concluded a record performance in 2017. During the year, we achieved record bookings, and our backlog at the end of 2017 is double the amount at the end of 2016, which also strengthens and improves our visibility. The positive momentum in Orbotech’s served industries, and our unique positioning, enabled us to grow significantly during 2017 and to reinforce our overall competitive position. As we enter into 2018, we expect to continue to introduce our customers to new and innovative solutions that will help them overcome some of the most difficult production challenges they face today.”

Revenues for the fourth quarter of 2017 totaled $256.9 million, compared with $215.0 million in the fourth quarter of 2016, and $245.7 million in the third quarter of 2017.

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

Revenues from the Company’s printed circuit board (PCB) business were $90.4 million (including $55.0 million in equipment sales) in the fourth quarter of 2017. This compares to PCB revenues of $77.2 million (including $48.6 million in equipment sales) in the fourth quarter of 2016.Revenues from the Company’s flat panel display (FPD) business were $72.1 million (including $60.7 million in equipment sales) in the fourth quarter of 2017. This compares to FPD revenues of $71.6 million (including $60.2 million in equipment sales) in the fourth quarter of 2016.Revenues from the Company’s semiconductor device (SD) business were $90.3 million (including $77.8 million in equipment sales) in the fourth quarter of 2017. This compares to SD revenues of $62.1 million (including $48.4 million in equipment sales) in the fourth quarter of 2016.

Revenues in the Company’s other segments totaled $4.0 million in the fourth quarter of 2017, compared with $4.2 million in the fourth quarter of 2016.

Service revenues for the fourth quarter of 2017 were $61.0 million, compared with $55.6 million in the fourth quarter of 2016.

Revenues for the full year of 2017 totaled $900.9 million, compared with $806.4 million for the full year of 2016.

Gross profit and gross margin in the fourth quarter of 2017 were $121.6 million and 47.3%, respectively, compared with $100.7 million and 46.8%, respectively, in the fourth quarter of 2016. Gross profit and gross margin in the full year of 2017 were $425.3 million and 47.2%, respectively, compared with $372.4 million and 46.2%, respectively, in the full year of 2016.GAAP net income and GAAP net income margin in the fourth quarter of 2017 were $55.9 million and 21.8%, respectively, compared with $25.6 million and 11.9%, respectively, in the fourth quarter of 2016. GAAP net income and GAAP net income margin for the full year of 2017 were $132.4 million and 14.7%, respectively, compared with $79.4 million and 9.9% in the full year of 2016. The GAAP results reflect a net benefit of approximately $16 million consisting of the impact of increase in deferred tax assets mainly for a valuation allowance releases and decrease in deferred tax liabilities offset by an increase in the Company’s tax provisions. The valuation allowance release of $18.8 million occurred in the fourth quarter and the most significant component related to the Company’s carryforward losses in the United States. In view of the strong business conditions, the Company believes it is more likely than not that it will be able to use these carryforward losses in the United States and therefore released the applicable valuation allowance.

GAAP earnings per share (diluted) for the fourth quarter of 2017 were $1.14, compared with $0.53, for the fourth quarter of 2016. GAAP earnings per share (diluted) for the full year of 2017 were $2.71 compared with $1.71 in the full year of 2016.

Adjusted EBITDA (as defined below) and adjusted EBITDA margin for the fourth quarter of 2017 were $55.6 million and 21.6%, respectively, compared with $49.9 million and 23.2%, respectively, in the fourth quarter of 2016. Adjusted EBITDA and adjusted EBITDA margin for the full year of 2017 were $190.0 million and 21.1%, respectively, compared with $168.1 million and 20.8% for the full year of 2016.

Non-GAAP net income and non-GAAP net income margin for the fourth quarter of 2017 were $42.5 million and 16.5%, respectively, compared with $33.7 million and 15.7%, respectively, for the fourth quarter of 2016.  Non-GAAP net income and non-GAAP net income margin for the full year of 2017 were $142.4 and 15.8%, respectively, compared with $116.9 million and 14.5%, respectively, for the full year of 2016. Non-GAAP earnings per share (diluted) for the fourth quarter of 2017 were $0.87, compared with $0.70 per share, for the fourth quarter of 2016. Non-GAAP earnings per share (diluted) for the full year of 2017 were $2.91, compared with $2.52 for the full year of 2016.

As of December 31, 2017, the Company had cash, cash equivalents, short term bank deposits and marketable securities of $327.8 million, and debt of $72.5 million. During the fourth quarter of 2017, the Company generated cash from operations of $84.3 million. As of December 31, 2017, the actual number of ordinary shares outstanding was approximately 48.4 million.

2018 Guidance

The Company expects first quarter 2018 revenue to be in the range of $235 million to $250 million and gross margin to be in the range of 47.0%-47.5%, based on current expectations of product mix. The Company expects first half 2018 revenues to be approximately $500 million. The Company expects gross margin in the range of 47.5%-48% for the first half of 2018 based on current expectations of product mix. The Company expects full year 2018 revenue growth of approximately 12%-14% compared to 2017.

About Orbotech Ltd.

Orbotech Ltd. is a leading global supplier of yield-enhancing and process-enabling solutions for the manufacture of electronics products.  Orbotech provides cutting-edge solutions for use in the manufacture of printed circuit boards (PCBs), flat panel displays (FPDs), and semiconductor devices (SDs), designed to enable the production of innovative, next-generation electronic products and improve the cost effectiveness of existing and future electronics production processes. Orbotech’s core business lies in enabling electronic device manufacturers to inspect and understand PCBs and FPDs and 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, click here.