PORTLAND, Ore.--(BUSINESS WIRE)--Electro Scientific Industries, Inc. (NASDAQ:ESIO), a leading supplier of innovative laser-based manufacturing solutions for the microtechnology industry, today announced results for its fiscal 2012 second quarter ended October 1, 2011. Financial measures are provided on both a GAAP and non-GAAP basis, which excludes the impact of purchase accounting, equity compensation and non-recurring items.
Revenue in the second quarter was $81.9 million, compared to $77.0 million in the first quarter of 2012 and $59.6 million in the second quarter of last fiscal year. On a GAAP basis, net income was $8.5 million or $0.29 per diluted share, compared to $5.9 million or $0.20 per diluted share in the prior quarter. On a non-GAAP basis, second quarter net income was $9.3 million or $0.32 per diluted share, compared to $7.9 million or $0.27 per diluted share in the first quarter of fiscal 2012 and $2.9 million or $0.10 per diluted share in the second quarter of fiscal 2011.
“We delivered another quarter of strong sales and earnings growth,” stated Nick Konidaris, president and CEO of ESI. “Year over year, sales grew 37% and non-GAAP earnings per share more than tripled.”
Orders for the second quarter were $40.6 million, compared to $98.9 million in the prior quarter and $70.2 million in the corresponding quarter last year. Konidaris continued, “Following near-record order levels in the first quarter, orders declined due to lumpiness in our micromachining business and deferred capacity additions in DRAM, LED and passive components due to concerns over the economic environment. Although visibility is limited, we expect customer activity to increase in the third quarter.”
Gross margin at 44% was flat with last quarter and last year. Operating expenses decreased sequentially by $2.7 million primarily due to lower stock compensation. Non-GAAP operating expenses increased slightly, from $23.1 million to $23.4 million, but decreased as a percent of sales. Non-GAAP operating income was $13.1 million, or 16% of sales, up from $11.3 million or 15% of sales in the first quarter, and it represented the highest level in more than five years.
Balance Sheet and Cash Flow
At quarter end, cash and investments including restricted cash grew to $226 million. Cash flow from operations was $26.4 million during the second quarter, primarily a result of profitable operations and strong cash collections.
Third Quarter 2012 Outlook
Based on current business conditions, ESI expects revenues for the third quarter of fiscal 2012 to be in the $50 million range. Third quarter non-GAAP earnings per share are expected to be at breakeven or slightly below.
Konidaris concluded, "The uncertain economic and market environment has caused many of our customers to delay their near-term capacity additions. These pauses are typical in some of our markets, and could last several quarters. During this period demand will be primarily driven by our new product introductions as well as opportunities related to growth in smartphones and tablets. In the meantime, we plan to continue to invest aggressively in R&D in order to advance our position and support our customers.”
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 800-688-0796 (domestic participants) or 617-614-4070 (international participants). The conference ID number is 43538874. A live audio webcast can be accessed at www.esi.com. Upon completion of the call, an audio replay will be accessible through November 5, 2011, at 888-286-8010 (domestic participants) or 617-801-6888 (international participants), passcode 76788016. 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 financial measures exclude the impact of purchase accounting, equity compensation and other non-recurring 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 is a leading supplier of innovative laser-based manufacturing solutions for the microtechnology industry. Our systems enable precise structuring and testing of micron to submicron features in semiconductors, electronic devices, LEDs and other high-value components. We partner with our customers to make breakthrough technologies possible in the semiconductor, microelectronics and other emerging industries. Founded in 1944, 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, 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 economic strength and political stability, and overall demand for electronic devices (such as capacitors, semiconductor memory devices and advanced electronic packages) 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; 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. | ||||||||||||||||||||
| Second Quarter Fiscal 2012 Results | ||||||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Fiscal quarter ended | Two fiscal quarters ended | |||||||||||||||||||
| Operating Results: | Oct 1, 2011 | Jul 2, 2011 | Oct 2, 2010 | Oct 1, 2011 | Oct 2, 2010 | |||||||||||||||
| Net sales | $ | 81,884 | $ | 77,046 | $ | 59,554 | $ | 158,930 | $ | 118,025 | ||||||||||
| Cost of sales | 45,943 | 43,286 | 33,553 | 89,229 | 70,551 | |||||||||||||||
| Gross profit | 35,941 | 33,760 | 26,001 | 69,701 | 47,474 | |||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Selling, service and administration | 14,884 | 16,496 | 15,046 | 31,380 | 27,891 | |||||||||||||||
| Research, development and engineering | 10,742 | 11,234 | 10,217 | 21,976 | 20,428 | |||||||||||||||
| Legal settlement costs | - | 550 | - | 550 | - | |||||||||||||||
| Net operating expenses | 25,626 | 28,280 | 25,263 | 53,906 | 48,319 | |||||||||||||||
| Operating income (loss) | 10,315 | 5,480 | 738 | 15,795 | (845 | ) | ||||||||||||||
| Non-operating (expense) income: | ||||||||||||||||||||
| Sale of previously impaired auction rate securities | - | 2,729 | - | 2,729 | - | |||||||||||||||
| Interest and other (expense) income, net | (406 | ) | (137 | ) | 187 | (543 | ) | 245 | ||||||||||||
| Total non-operating (expense) income | (406 | ) | 2,592 | 187 | 2,186 | 245 | ||||||||||||||
| Income (loss) before income taxes | 9,909 | 8,072 | 925 | 17,981 | (600 | ) | ||||||||||||||
| Provision for (benefit from) income taxes | 1,372 | 2,159 | 1,536 | 3,531 | (190 | ) | ||||||||||||||
| Net income (loss) | $ | 8,537 | $ | 5,913 | $ | (611 | ) | $ | 14,450 | $ | (410 | ) | ||||||||
| Net income (loss) per share - basic | $ | 0.30 | $ | 0.21 | $ | (0.02 | ) | $ | 0.51 | $ | (0.01 | ) | ||||||||
| Net income (loss) per share - diluted | $ | 0.29 | $ | 0.20 | $ | (0.02 | ) | $ | 0.49 | $ | (0.01 | ) | ||||||||
| Electro Scientific Industries, Inc. | |||||||||||
| Second Quarter Fiscal 2012 Results | |||||||||||
| (Amounts in thousands) | |||||||||||
| (Unaudited) | |||||||||||
| Financial Position As Of: | Oct 1, 2011 | Jul 2, 2011 | Apr 2, 2011 | ||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 84,143 | $ | 88,331 | $ | 116,412 | |||||
| Restricted cash | 22,269 | 22,269 | 10,769 | ||||||||
| Short-term investments | 96,503 | 88,546 | 69,245 | ||||||||
| Total cash, restricted cash and investments | 202,915 | 199,146 | 196,426 | ||||||||
| Trade receivables, net | 29,631 | 60,531 | 44,100 | ||||||||
| Inventories | 75,705 | 71,982 | 65,362 | ||||||||
| Shipped systems pending acceptance | 1,339 | 6,446 | 5,289 | ||||||||
| Deferred income taxes, net | 9,644 | 9,667 | 9,892 | ||||||||
| Other current assets | 4,308 | 6,414 | 6,784 | ||||||||
| Total current assets | 323,542 | 354,186 | 327,853 | ||||||||
| Non-current assets: | |||||||||||
| Non-current investments | 23,063 | - | 8,097 | ||||||||
| Auction rate securities | - | - | 5,166 | ||||||||
| Property, plant and equipment, net | 38,730 | 39,524 | 39,661 | ||||||||
| Non-current deferred income taxes, net | 28,865 | 29,676 | 30,822 | ||||||||
| Goodwill | 4,014 | 4,014 | 4,014 | ||||||||
| Acquired intangible assets, net | 9,159 | 9,585 | 10,035 | ||||||||
| Other assets | 12,469 | 11,942 | 14,519 | ||||||||
| Total assets | $ | 439,842 | $ | 448,927 | $ | 440,167 | |||||
| Liabilities and shareholders' equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 15,936 | $ | 23,940 | $ | 18,650 | |||||
| Accrued liabilities | 20,021 | 21,037 | 33,425 | ||||||||
| Deferred revenue | 9,363 | 21,964 | 16,039 | ||||||||
| Total current liabilities | 45,320 | 66,941 | 68,114 | ||||||||
| Non-current income taxes payable | 9,603 | 9,597 | 9,754 | ||||||||
| Shareholders' equity: | |||||||||||
| Preferred and common stock | 162,546 | 158,386 | 153,189 | ||||||||
| Retained earnings | 221,870 | 213,333 | 207,420 | ||||||||
| Accumulated other comprehensive income | 503 | 670 | 1,690 | ||||||||
| Total shareholders' equity | 384,919 | 372,389 | 362,299 | ||||||||
| Total liabilities and shareholders' equity | $ | 439,842 | $ | 448,927 | $ | 440,167 | |||||
| End of period shares outstanding | 28,805 | 28,628 | 28,299 | ||||||||
| Electro Scientific Industries, Inc. | |||||||||||||||||||||
| Analysis of Second Quarter Fiscal 2012 Results | |||||||||||||||||||||
| (Dollars and shares in thousands) | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| Fiscal quarter ended | Two fiscal quarters ended | ||||||||||||||||||||
| Oct 1, 2011 | Jul 2, 2011 | Oct 2, 2010 | Oct 1, 2011 | Oct 2, 2010 | |||||||||||||||||
| Sales detail: | |||||||||||||||||||||
| Semiconductor Group | $ | 24,171 | $ | 18,025 | $ | 13,160 | $ | 42,196 | $ | 32,217 | |||||||||||
| Interconnect/ Micromachining Group | 51,227 | 48,212 | 33,090 | 99,439 | 53,701 | ||||||||||||||||
| Components Group | 6,486 | 10,809 | 13,304 | 17,295 | 32,107 | ||||||||||||||||
| Total | $ | 81,884 | $ | 77,046 | $ | 59,554 | $ | 158,930 | $ | 118,025 | |||||||||||
| Gross margin % | 44 | % | 44 | % | 44 | % | 44 | % | 40 | % | |||||||||||
| Selling, service and administration expense % | 18 | % | 21 | % | 25 | % | 20 | % | 24 | % | |||||||||||
| Research, development and engineering expense % | 13 | % | 15 | % | 17 | % | 14 | % | 17 | % | |||||||||||
| Operating income (loss) % | 13 | % | 7 | % | 1 | % | 10 | % | (1 | %) | |||||||||||
| Effective tax rate % | 14 | % | 27 | % | 166 | % | 20 | % | 32 | % | |||||||||||
| Weighted average shares outstanding - basic | 28,747 | 28,471 | 28,010 | 28,609 | 27,901 | ||||||||||||||||
| Weighted average shares outstanding - diluted | 29,426 | 29,262 | 28,010 | 29,326 | 27,901 | ||||||||||||||||
| End of period employees | 683 | 684 | 627 | 683 | 627 | ||||||||||||||||
| Electro Scientific Industries, Inc. | ||||||||||||||||||||||||||
| Second Quarter Fiscal 2012 Results | ||||||||||||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||
| Reconciliation of GAAP to Non-GAAP Financial Measures: | ||||||||||||||||||||||||||
| Fiscal quarter ended | Two fiscal quarters ended | |||||||||||||||||||||||||
| Oct 1, 2011 | Jul 2, 2011 | Oct 2, 2010 | Oct 1, 2011 | Oct 2, 2010 | ||||||||||||||||||||||
| Net sales | $ | 81,884 | $ | 77,046 | $ | 59,554 | $ | 158,930 | $ | 118,025 | ||||||||||||||||
| Gross profit per GAAP | $ | 35,941 | $ | 33,760 | $ | 26,001 | $ | 69,701 | $ | 47,474 | ||||||||||||||||
| Add back: | ||||||||||||||||||||||||||
| Purchase accounting included in cost of sales | 289 | 289 | 289 | 578 | 578 | |||||||||||||||||||||
| Equity compensation included in cost of sales | 261 | 296 | 294 | 557 | 576 | |||||||||||||||||||||
| Total non-GAAP adjustments to gross profit | 550 | 585 | 583 | 1,135 | 1,154 | |||||||||||||||||||||
| Non-GAAP gross profit | $ | 36,491 | $ | 34,345 | $ | 26,584 | $ | 70,836 | $ | 48,628 | ||||||||||||||||
| Non-GAAP gross margin | 44.6 | % | 44.6 | % | 44.6 | % | 44.6 | % | 41.2 | % | ||||||||||||||||
| Operating expenses per GAAP | $ | 25,626 | $ | 28,280 | $ | 25,263 | $ | 53,906 | $ | 48,319 | ||||||||||||||||
| Less: | ||||||||||||||||||||||||||
| Purchase accounting included in operating expenses: | ||||||||||||||||||||||||||
| Selling, service and administration | 72 | 114 | 139 | 186 | 328 | |||||||||||||||||||||
| Research, development and engineering | 47 | 47 | 36 | 94 | 72 | |||||||||||||||||||||
| Subtotal - purchase accounting included in operating expenses | 119 | 161 | 175 | 280 | 400 | |||||||||||||||||||||
| Equity compensation included in operating expenses: | ||||||||||||||||||||||||||
| Selling, service and administration | 1,599 | 3,938 | 1,638 | 5,537 | 3,862 | |||||||||||||||||||||
| Research, development and engineering | 537 | 546 | 399 | 1,083 | 776 | |||||||||||||||||||||
| Subtotal - equity compensation included in operating expenses | 2,136 | 4,484 | 2,037 | 6,620 | 4,638 | |||||||||||||||||||||
| Acquisition costs (settlement proceeds) included in operating expenses: | ||||||||||||||||||||||||||
| Selling, service and administration | - | - | 280 | - | (609 | ) | ||||||||||||||||||||
| Subtotal - acquisition costs (settlement proceeds) included in operating expenses | - | - | 280 | - | (609 | ) | ||||||||||||||||||||
| Other non-recurring items included in operating expenses: | ||||||||||||||||||||||||||
| Legal settlement costs | - | 550 | - | 550 | - | |||||||||||||||||||||
| Subtotal - other non-recurring items included in operating expenses | - | 550 | - | 550 | - | |||||||||||||||||||||
| Total non-GAAP adjustments to operating expenses | 2,255 | 5,195 | 2,492 | 7,450 | 4,429 | |||||||||||||||||||||
| Non-GAAP operating expenses | $ | 23,371 | $ | 23,085 | $ | 22,771 | $ | 46,456 | $ | 43,890 | ||||||||||||||||
| % of Net sales | 29 | % | 30 | % | 38 | % | 29 | % | 37 | % | ||||||||||||||||
| Operating income (loss) per GAAP | $ | 10,315 | $ | 5,480 | $ | 738 | $ | 15,795 | $ | (845 | ) | |||||||||||||||
| Non-GAAP adjustments to gross profit | 550 | 585 | 583 | 1,135 | 1,154 | |||||||||||||||||||||
| Non-GAAP adjustments to operating expenses | 2,255 | 5,195 | 2,492 | 7,450 | 4,429 | |||||||||||||||||||||
| Non-GAAP operating income | $ | 13,120 | $ | 11,260 | $ | 3,813 | $ | 24,380 | $ | 4,738 | ||||||||||||||||
| % of Net sales | 16 | % | 15 | % | 6 | % | 15 | % | 4 | % | ||||||||||||||||
| Non-operating (expense) income, net per GAAP | $ | (406 | ) | $ | 2,592 | $ | 187 | $ | 2,186 | $ | 245 | |||||||||||||||
| Non-GAAP adjustment for sale of previously impaired auction rate securities | - | (2,729 | ) | - | (2,729 | ) | - | |||||||||||||||||||
| Non-GAAP adjustment for other litigation related costs | - | 59 | - | 59 | - | |||||||||||||||||||||
| Non-GAAP non-operating (expense) income | $ | (406 | ) | $ | (78 | ) | $ | 187 | $ | (484 | ) | $ | 245 | |||||||||||||
| Net income (loss) per GAAP | $ | 8,537 | $ | 5,913 | $ | (611 | ) | $ | 14,450 | $ | (410 | ) | ||||||||||||||
| Non-GAAP adjustments to gross profit | 550 | 585 | 583 | 1,135 | 1,154 | |||||||||||||||||||||
| Non-GAAP adjustments to operating expenses | 2,255 | 5,195 | 2,492 | 7,450 | 4,429 | |||||||||||||||||||||
| Non-GAAP adjustments to non-operating expense | - | (2,670 | ) | - | (2,670 | ) | - | |||||||||||||||||||
| Income tax effect of non-GAAP adjustments | (2,002 | ) | (1,164 | ) | 394 | (3,166 | ) | (1,547 | ) | |||||||||||||||||
| Non-GAAP net income | $ | 9,340 | $ | 7,859 | $ | 2,858 | $ | 17,199 | $ | 3,626 | ||||||||||||||||
| % of Net sales | 11 | % | 10 | % | 5 | % | 11 | % | 3 | % | ||||||||||||||||
| Basic Non-GAAP net income per share | $ | 0.32 | $ | 0.28 | $ | 0.10 | $ | 0.60 | $ | 0.13 | ||||||||||||||||
| Diluted Non-GAAP net income per share | $ | 0.32 | $ | 0.27 | $ | 0.10 | $ | 0.59 | $ | 0.13 | ||||||||||||||||
| Electro Scientific Industries, Inc. | |||||||||||||||||||||||||||
| Second Quarter Fiscal 2012 Results | |||||||||||||||||||||||||||
| (Amounts in thousands) | |||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||
| Consolidated Condensed Statements of Cash Flows: | |||||||||||||||||||||||||||
| Fiscal quarter ended | Two fiscal quarters ended | ||||||||||||||||||||||||||
| Oct 1, 2011 | Jul 2, 2011 | Oct 2, 2010 | Oct 1, 2011 | Oct 2, 2010 | |||||||||||||||||||||||
| Net income (loss) | $ | 8,537 | $ | 5,913 | $ | (611 | ) | $ | 14,450 | $ | (410 | ) | |||||||||||||||
| Non-cash adjustments and changes in operating activities | 17,867 | (16,781 | ) | (1,266 | ) | 1,086 | 13,302 | ||||||||||||||||||||
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | 26,404 | (10,868 | ) | (1,877 | ) | 15,536 | 12,892 | ||||||||||||||||||||
| NET CASH USED IN INVESTING ACTIVITIES | (32,233 | ) | (18,303 | ) | (12,920 | ) | (50,536 | ) | (13,118 | ) | |||||||||||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 1,810 | 395 | 150 | 2,205 | 219 | ||||||||||||||||||||||
| Effect of exchange rate changes on cash | (169 | ) | 695 | 842 | 526 | 1,092 | |||||||||||||||||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | (4,188 | ) | (28,081 | ) | (13,805 | ) | (32,269 | ) | 1,085 | ||||||||||||||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 88,331 | 116,412 | 54,225 | 116,412 | 39,335 | ||||||||||||||||||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 84,143 | $ | 88,331 | $ | 40,420 | $ | 84,143 | $ | 40,420 | |||||||||||||||||