ESI Inks Agreement to be Acquired by MKS Instruments, Releases 2Q FY2019 Results

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Electro Scientific Industries, Inc. announced the signing of a definitive agreement to be acquired by MKS Instruments, Inc. and financial results for its fiscal 2019 second quarter ended September 29, 2018. Financial measures are provided on both a GAAP and 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 below.

ESI Signs Definitive Agreement

ESI announces the signing of a definitive agreement for MKS Instruments, Inc. to acquire ESI for $30.00 per share. The all-cash transaction is valued at approximately $1 billion. The transaction is subject to customary closing conditions, including the approval of ESI’s shareholders and antitrust approvals in the U.S. and certain other foreign jurisdictions, and is expected to close in the first quarter of calendar 2019. MKS intends to fund the transaction with cash on hand and a new, fully-committed debt financing. See the separate announcement from MKS Instruments for additional transaction details.

As a result, ESI is canceling today’s previously announced investor call.

In connection with this transaction, Stifel is acting as financial advisor and Wilson Sonsini Goodrich & Rosati P.C. is acting as legal advisor to ESI.

FY19 Q2 Financial Performance

Second quarter revenue was $85.9 million, compared to $71.0 million in the second quarter of last fiscal year. GAAP net income was $16.8 million or $0.47 per diluted share, compared to net income of $4.3 million or $0.12 per diluted share one year ago. On a non-GAAP basis net income was $21.1 million or $0.59 per diluted share, compared to net income of $13.7 million or $0.39 per share in the prior fiscal year's second quarter. Total orders for the quarter were $66.9 million, compared to $128.9 million one year ago and $82.3 million in the prior quarter.

"With Component Test and Service bookings remaining well above historical levels in the quarter, we continue to demonstrate the increased diversity of our product portfolio. We also officially launched our new Capstone TM flex drilling system and Allegro LC MLCC test tool, both of which have been extremely well received, and are expected to contribute new product revenue in the second half of the fiscal year," said Michael Burger, ESI’s president and CEO.

GAAP gross margin was 45.5%, compared to 37.4% in the second quarter of last fiscal year and operating expense was $20.0 million, down from $22.1 million last year, both improvements resulting from last year's restructuring costs. Operating income was $19.1 million, or 22% of revenue, compared to income of $4.4 million in last fiscal year's second quarter.

Non-GAAP gross margin was 45.9%, compared to 46.4% one year ago. Non-GAAP operating expense decreased year over year from $18.6 million to $18.3 million resulting in non-GAAP operating income of $21.1 million or 25% of sales.

At quarter end, total cash, cash equivalents, restricted cash and current investments increased to $179.3 million. The company generated $51.1 million of cash from operations during the quarter, driven primarily by strong customer collections and reduced inventory levels.

About ESI

ESI enables our customers to commercialize technology using precision laser processes. ESI's solutions produce the industry's highest quality and throughput, 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 here.