Orbotech Reports Second Quarter 2018 Results

2018 second quarter highlights

YAVNE, Israel, Aug. 1, 2018 — (PRNewswire) — ORBOTECH LTD. (NASDAQ: ORBK) (the "Company") today announced its consolidated financial results for the second quarter of 2018.

During the second quarter of 2018, the Company continued to execute strongly and to deliver innovative solutions that will help its customers overcome some of the most difficult production challenges facing the electronics industry today. The technology leadership and momentum in Orbotech's business underscore the Company's confidence in its ability to capitalize on the opportunities available to it for the remainder of 2018.  As previously announced, on July 12, 2018, the Korean Supreme Court dismissed the prosecutor's appeal against the Seoul Central District Court's (Appellate Division) 2014 decision acquitting the Company's Korean subsidiary and five of its employees in the matter of alleged unlawful acquisition and divulgence of confidential technical information. Orbotech and its Korean subsidiary are very pleased that the Korean Supreme Court has vindicated Orbotech and that this matter, which has been ongoing since 2012, has now reached a final conclusion.

Revenues for the second quarter of 2018 totaled $267.5 million, compared with $210.7 million in the second quarter of 2017, and $250.6 million in the first quarter of 2018.

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

  • Revenues from the Company's printed circuit board ("PCB") business were $99.7 million (including $62.2 million in equipment sales) in the second quarter of 2018.  This compares to PCB revenues of $82.5 million (including $51.1 million in equipment sales) in the second quarter of 2017.
  • Revenues from the Company's flat panel display ("FPD") business were $81.5 million (including $69.1 million in equipment sales) in the second quarter of 2018.  This compares to FPD revenues of $69.7 million (including $58.6 million in equipment sales) in the second quarter of 2017.
  • Revenues from the Company's semiconductor device ("SD") business were $82.5 million (including $68.1 million in equipment sales) in the second quarter of 2018.  This compares to SD revenues of $54.9 million (including $44.1 million in equipment sales) in the second quarter of 2017.

Revenues in the Company's other segments totaled $3.8 million in the second quarter of 2018, compared with $3.7 million in the second quarter of 2017.

Service revenues for the second quarter of 2018 were $66.4 million, compared with $55.3 million in the second quarter of 2017.

Gross profit and gross margin in the second quarter of 2018 were $125.9 million and 47.1%, respectively, compared with $98.6 million and 46.8%, respectively, in the second quarter of 2017.

GAAP net income and GAAP net income margin in the second quarter of 2018 were $36.1 million and 13.5%, respectively, compared with $25.0 million and 11.9%, respectively, in the second quarter of 2017.

GAAP earnings per share (diluted) for the second quarter of 2018 were $0.73, compared with $0.51 for the second quarter of 2017.

A reconciliation of each of the Company's non-GAAP measures to the comparable GAAP measure (the "Reconciliation") is included at the end of this press release.

Adjusted EBITDA (as defined below) and adjusted EBITDA margin for the second quarter of 2018 were $61.0 million and 22.8%, respectively, compared with $44.3 million and 21.0%, respectively, in the second quarter of 2017.

Non-GAAP net income and non-GAAP net income margin for the second quarter of 2018 were $45.7 million and 17.1%, respectively, compared with $32.9 million and 15.6%, respectively, for the second quarter of 2017.  Non-GAAP earnings per share (diluted) for the second quarter of 2018 were $0.92, compared with $0.67 per share, for the second quarter of 2017.

As of June 30, 2018, the Company had cash, cash equivalents, short term bank deposits and marketable securities of $358.2 million, and debt of $56.3 million.  During the second quarter of 2018, the Company generated cash from operations of $80.2 million.  As of June 30, 2018, the actual number of ordinary shares outstanding was approximately 48.6 million.

Third Quarter 2018 Guidance

The Company expects third quarter 2018 revenues to be in the range of $255 million to $270 million based on current expectations of product mix.  

In light of the pending acquisition by KLA-Tencor Corporation, Orbotech will not provide guidance other than with respect to quarterly revenues, nor will it hold a conference call to discuss its financial results.

About Orbotech Ltd.

Orbotech Ltd. (NASDAQ: ORBK) 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, visit www.orbotech.com and www.spts.com.

Cautionary Statement Regarding Forward-Looking Statements

Except for historical information, the matters discussed in this press release are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.  These statements relate to, among other things, future prospects, developments and business strategies and involve certain risks and uncertainties.  The words "anticipate," "believe," "could," "will," "plan," "expect" and "would" and similar terms and phrases, including references to assumptions, have been used in this press release to identify forward-looking statements.  These forward-looking statements are made based on management's expectations and beliefs concerning future events affecting Orbotech and are subject to uncertainties and factors relating to Orbotech's operations and business environment, the previously announced acquisition of Orbotech by KLA, the manner in which the parties plan to effect the transaction, including the share repurchase program being contemplated by KLA, KLA's ability to raise additional capital necessary to complete the repurchase program within the time frame expected, the expected benefits, synergies and costs of the acquisition of Orbotech by KLA , management plans relating to the transaction, the timing, outcome and impact of the sell-buy rights related to Orbotech's ownership interest in Frontline triggered by the Orbotech shareholders' approval of the acquisition by KLA or any similar or voluntary transaction, the expected timing of the completion of the transaction, the parties' ability to complete the transaction considering the various closing conditions, including conditions related to regulatory approvals, the plans, strategies and objectives of management for future operations, product development, product extensions, product integration, complementary product offerings and growth opportunities in certain business areas, the potential future financial impact of the transaction, and any assumptions underlying any of the foregoing.  Actual results may differ materially from those referred to in the forward-looking statements due to a number of important factors, including but not limited to the foregoing items as well as the possibility that expected benefits of the transaction may not materialize as expected, that the transaction may not be timely completed, if at all, that KLA-Tencor may not be able to successfully integrate the solutions and employees of the two companies or ensure the continued performance or growth of Orbotech's products or solutions, the risk that the Company may not achieve its revenue expectations within and for 2018 (including, without limitation, due to shifting move-in dates); cyclicality in the industries in which the Company operates, the Company's supply chain management and production capacity, order cancelation (often without penalty), timing and occurrence of product acceptance (the Company defines 'bookings' and 'backlog' as purchase arrangements with customers that are based on mutually agreed terms, which, in some cases for bookings and backlog, may still be subject to completion of written documentation and may be changed or cancelled by the customer, often without penalty), fluctuations in product mix within and among divisions, worldwide economic conditions generally, especially in the industries in which the Company operates, the timing and strength of product and service offerings by the Company and its competitors, changes in business or pricing strategies, changes in the prevailing political and regulatory framework in which the relevant parties operate, including as a result of the United Kingdom's prospective withdrawal from the European Union (known as "Brexit") and political uncertainty in the United States , or in economic or technological trends or conditions, including currency fluctuations, inflation and consumer confidence, on a global, regional or national basis, the level of consumer demand for sophisticated devices such as smart mobile devices, automotive electronics, flexible applications and devices, augmented reality/virtual reality and wearable devices, high-performance computing, liquid crystal display and organic light emitting diode screens and other sophisticated devices, the Company's global operations and its ability to comply with varying legal, regulatory, exchange, tax and customs regimes, the timing and outcome of tax audits, including the best judgment tax assessment issued by the Israel Tax Authority with respect to the audit of tax years 2012-2014 in Israel and the related criminal investigation, the Company's ability to achieve strategic initiatives, including related to its acquisition strategy, the Company's debt and corporate financing activities; impact of the favorable resolution of the litigation in Korea and the timing, final outcome and impact of the criminal investigation in Korea, including any impact on existing or future business opportunities in Korea and elsewhere, any civil actions related to the Korean matter brought by third parties, including the Company's customers, which may result in monetary judgments or settlements, expenses associated with the Korean matter, and ongoing or increased hostilities in Israel and the surrounding areas.

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