Rudolph Technologies Reports 2014 Second Quarter Results

  • Record High Software Revenue;
  • Strong Gross Margins Drive Non GAAP Earnings to High End of Guidance

FLANDERS, N.J.--()--Rudolph Technologies, Inc. (NYSE: RTEC), a leading provider of process characterization equipment, lithography equipment and software for wafer fabs and Advanced Packaging facilities, today announced financial results for the second quarter 2014.

2014 Second Quarter Highlights:

  • Second quarter revenue was $43.0 million, an increase of 3 percent over the 2014 first quarter.
  • Second quarter GAAP net loss was $4.4 million, or $(0.13) per diluted share, driven by litigation expenses.
  • Non-GAAP net income was $1.4 million, or $0.04 per diluted share.
  • Gross margins for the quarter increased to 54 percent, marking the 18th consecutive quarter above 50 percent.
  • Cash and marketable securities decreased $6.2 million to $177.3 million.

Paul F. McLaughlin, Chairman and Chief Executive Officer, commented, “Our results for the second quarter reflected the strength in our unique business model, which targets selected front-end and back-end higher growth markets and provides us a broad and expanding customer base with a more balanced product portfolio across all industry cycles. Significant contributions delivered by our software products led to record revenue and operating profits for our Data Analysis and Review Business (DARBU). DARBU software solutions are often a leading indicator, as customers look for ways to improve yield during periods of preparation for expanding production.

“During the quarter, we announced record sales of our Advanced Process Control Software following a record number of Yield Management Software installations in the prior six months. Wins included manufacturers in the USA, Japan and Europe, reflecting multiple customers in the mobile communications supply chain, hard disc drive and the burgeoning power device market. Expanding on nearly 800 tools connected in 2013, recent wins are adding another 1,000 tool connections in 2014. In addition, we recently announced a collaboration that allows users of Veeco’s industry-leading equipment access to Rudolph’s fault detection and predictive maintenance software designed to increase system productivity and improve manufacturing efficiency. Partnering with a capital equipment leader like Veeco demonstrates the importance of DARBU’s yield analysis and data-mining software in maximizing production outcomes, not just for silicon fabs but also for top OEMs in our industry.”

Mr. McLaughlin added, “Building on our expertise in acoustic metrology developed for our industry-standard MetaPULSE® systems used for front-end metal film metrology, we recently announced the availability of Rudolph’s new patented SONUS™ Technology, designed for measuring thick films and film stacks used in copper pillar bumps and for detecting defects, such as voids, in through silicon vias (TSVs). SONUS Technology is a non-contact, non-destructive acoustic metrology and defect detection technique that is designed to be of higher resolution, faster, and less costly than alternative techniques. Copper pillar bumps and TSVs are key enabling technologies in the rapidly growing field of advanced packaging, where 2.5D and 3D assembly methods are helping drive the More than Moore roadmap. Rudolph has collaborated with TEL NEXX specifically to develop pillar bump and TSV plating process control based on SONUS Technology.”

Mr. McLaughlin concluded, “Looking ahead, our confidence remains high for a stronger second half led by back-end advanced packaging and lithography business. We have expansive exposure to today's technology inflection points; and our position as a total value-added solutions provider has further strengthened, resulting in a rich and substantially stronger advanced technology portfolio that has more than doubled in product offerings over the last five years. We continue to see back-end customers using front-end technology to meet their advanced packaging requirements; and we believe we are in a leadership position to capture above industry average growth from this emerging dynamic. We are confident that our chosen markets will benefit from both cyclical and sector growth, comprised of strong demand for our expanding package of leading-edge solutions.”

Second Quarter 2014 Financial Results
Second quarter revenue totaled $43.0 million, a 3 percent increase compared with $41.6 million for the 2014 first quarter. During the second quarter, international sales represented approximately 77 percent of revenue, while domestic sales accounted for 23 percent. In the 2014 first quarter, international sales represented approximately 76 percent of revenue and domestic sales accounted for 24 percent.

Gross margin was 54 percent of revenues in the 2014 second quarter, compared to 52 percent in the 2014 first quarter. The second quarter gross margin was positively impacted by record software sales, which represented 16 percent of revenues and was well above the Company’s target model of 10 percent.

Operating expenses for the second quarter of 2014 totaled $32.8 million, an increase of $11.3 million from $21.5 million in the 2014 first quarter. R&D expenses for the second quarter totaled $10.8 million, compared with $10.0 million in the 2014 first quarter. S,G&A expenses for the second quarter totaled $21.3 million, compared with $10.8 million in the first quarter of 2014. The increase in SG&A expenses was primarily due to the recording of a $6.3 million additional charge for the infringement ruling in the ITC litigation case, as well as a $3.3 million accrual for plaintiff’s attorney fees that the Company is contesting.

GAAP net loss for the second quarter of 2014 was $4.4 million, or $(0.13) per diluted share, compared with a net loss of $724 thousand, or $(0.02) per diluted share, for the first quarter of 2014. The second quarter GAAP net loss included $13.1 million in non-GAAP charges as detailed in the attached Reconciliation of GAAP to Non-GAAP Financial Measures. Excluding those items, second quarter 2014 net income was $1.4 million, or $0.04 per diluted share, compared to $1.0 million, or $0.03 per diluted share, in the 2014 first quarter.

Balance Sheet Strength
At June 30, 2014, cash and marketable securities totaled $177.3 million, a decrease of $6.2 million from $183.5 million at the end of the 2014 first quarter. Accounts receivable increased to $50.8 million and inventory increased to $65.6 million as of June 30, 2014. Working capital decreased $946 thousand in the quarter, ending at $266.1 million at June 30, 2014.

Conference Call
Rudolph Technologies will discuss its 2014 second quarter results and other matters on a conference call it is hosting today at 4:30 PM EDT. To access the live conference call, please dial (855) 859-2056 and reference Conference ID# 76383830. A live audio webcast will also be available to investors on the Company’s website at www.rudolphtech.com. To listen to the live call, please go to the website at least fifteen minutes early to register, download and install any necessary software. A digital replay of the conference call will be available on Rudolph’s website for one week following the live broadcast.

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 amortization of intangible assets, the impact of litigation fees, acquisition related costs, restructuring expenses and share-based compensation. 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. To that end, non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, GAAP financial measures. 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 Rudolph Technologies
Rudolph Technologies, Inc. is a worldwide leader in the design, development, manufacture and support of defect inspection, advanced packaging lithography, process control metrology, and data analysis systems and software used by semiconductor device manufacturers worldwide. Rudolph provides a full-fab solution through its families of proprietary products that provide critical yield-enhancing information, enabling microelectronic device manufacturers to drive down the costs and time to market of their products. The Company’s expanding portfolio of equipment and software solutions is used in both the wafer processing and final manufacturing of ICs, and in adjacent markets such as FPD, LED and Solar. Headquartered in Flanders, New Jersey, Rudolph supports its customers with a worldwide sales and service organization. Additional information can be found on the Company’s website at www.rudolphtech.com.

Forward Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”) which include Rudolph’s business momentum and future growth; the benefit to customers of Rudolph’s products and customer service; Rudolph’s ability to both deliver products and services consistent with our customers’ demands and expectations and strengthen its market position; Rudolph’s expectations regarding semiconductor market outlook; as well as other matters that are not purely historical data. Rudolph wishes to take advantage of the “safe harbor” provided for by the Act and cautions that actual results may differ materially from those projected as a result of various factors, including risks and uncertainties, many of which are beyond Rudolph’s control. Such factors include, but are not limited to, the Company’s ability to leverage its resources to improve its position in its core markets; its ability to weather difficult economic environments; its ability to open new market opportunities and target high-margin markets; the strength/weakness of the back-end and/or front-end semiconductor market segments; and fluctuations in customer capital spending. Additional information and considerations regarding the risks faced by Rudolph are available in Rudolph’s Form 10-K report for the year ended December 31, 2013 and other filings with the Securities and Exchange Commission. As the forward-looking statements are based on Rudolph’s current expectations, the Company cannot guarantee any related future results, levels of activity, performance or achievements. Rudolph does not assume any obligation to update the forward-looking information contained in this press release.

RUDOLPH TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) - (Unaudited)
   
June 30, 2014 December 31, 2013
    (Audited)
 
 
ASSETS
Current assets
Cash and marketable securities $ 177,301 $ 167,372
Accounts receivable, net 50,811 53,437
Inventories 65,624 61,351
Prepaid and other assets 22,204   14,804
Total current assets 315,940 296,964
Net property, plant and equipment 11,837 13,058
Intangibles 32,619 34,017
Other assets 28,685   27,323
Total assets $ 389,081   $ 371,362
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 16,347 $ 12,772
Other current liabilities 33,509   18,918
Total current liabilities 49,856 31,690
Senior convertible notes 53,225 51,751
Other non-current liabilities 9,403   8,918
Total liabilities 112,484 92,359
Stockholders’ equity 276,597   279,003
Total liabilities and stockholders’ equity $ 389,081   $ 371,362
 
RUDOLPH TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts) - (Unaudited)
       
Three Months Ended Six Months Ended
June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2013
 
Revenues $ 43,018 $ 46,059 $ 84,667 $ 87,709
Cost of revenues 19,714   22,544   39,794   42,320  
Gross profit 23,304   23,515   44,873   45,389  
Operating expenses:
Research and development 10,841 10,214 20,846 19,917
Selling, general and administrative 21,285 10,519 32,066 20,771
Amortization 670   648   1,340   1,264  
Total operating expenses 32,796   21,381   54,252   41,952  
Operating income (loss) (9,492 ) 2,134 (9,379 ) 3,437
Interest expense, net 1,341 1,200 2,622 2,409
Other (income) expense 162   (398 ) 35   (49 )
Income (loss) before income taxes (10,995 ) 1,332 (12,036 ) 1,077
Provision (benefit) for income taxes (6,583 ) 573   (6,900 ) (75 )
Net income (loss) $ (4,412 ) $ 759   $ (5,136 ) $ 1,152  
 
Net income (loss) per share:
 
Basic $ (0.13 ) $ 0.02 $ (0.15 ) $ 0.04
Diluted $ (0.13 ) $ 0.02 $ (0.15 ) $ 0.03
 
Weighted average shares outstanding:
 
Basic 33,240 32,567 33,186 32,633
Diluted 33,240 33,155 33,186 33,284
 
RUDOLPH TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts) - (Unaudited)
       
Three Months Ended Six Months Ended
June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2013
 
GAAP operating income (loss) $ (9,492 ) $ 2,134 $ (9,379 ) $ 3,437
Non-GAAP adjustments:
Acquisition related expenses 409 773
Amortization of intangibles 670 648 1,340 1,264
Litigation costs 9,929 264 10,235 518
Restructuring expenses 413 413
Share-based compensation 1,717   998   3,162   1,955  
Total non-GAAP adjustments 13,138   1,910   15,923   3,737  
Non-GAAP operating income $ 3,646   $ 4,044   $ 6,544   $ 7,174  
 
 
GAAP net income (loss) $ (4,412 ) $ 759 $ (5,136 ) $ 1,152
Total non-GAAP adjustments 13,138 1,910 15,923 3,737
Income tax effect of non-GAAP adjustments (1) (7,304 ) (667 ) (8,366 ) (1,308 )
Non-GAAP net income $ 1,422   $ 2,002   $ 2,421   $ 3,581  
 
Net income per share:
Basic $ 0.04 $ 0.06 $ 0.07 $ 0.11
Diluted $ 0.04 $ 0.06 $ 0.07 $ 0.11
 

1) For the six month periods ended June 30, 2014 and 2013, the non-GAAP adjustments were taxed at a marginal tax rate of 52.5% and 35.0%, respectively.

Contacts

Investors:
Rudolph Technologies, Inc.
Steven R. Roth, 973-448-4302
Senior Vice President & CFO
steven.roth@rudolphtech.com
or
Guerrant Associates
Laura Guerrant-Oiye, 808-882-1467
Principal
lguerrant@guerrantir.com
or
Trade Press:
Rudolph Technologies, Inc.
Amy Pauling, 952-259-1794
amy.pauling@rudolphtech.com

Release Summary

Rudolph Technologies announces financial results for the second quarter 2014.

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Contacts

Investors:
Rudolph Technologies, Inc.
Steven R. Roth, 973-448-4302
Senior Vice President & CFO
steven.roth@rudolphtech.com
or
Guerrant Associates
Laura Guerrant-Oiye, 808-882-1467
Principal
lguerrant@guerrantir.com
or
Trade Press:
Rudolph Technologies, Inc.
Amy Pauling, 952-259-1794
amy.pauling@rudolphtech.com