Attached files
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| 8-K - 8-K - ELECTRO SCIENTIFIC INDUSTRIES INC | form8k04012017.htm |
Brian Smith
ESI
503-672-5760
smithb@esi.com
ESI Announces Fourth Quarter and Full Year Fiscal 2017 Results
PORTLAND, Ore. – May 9, 2017 – Electro Scientific Industries, Inc. (NASDAQ:ESIO), an innovator of laser-based manufacturing solutions for the microtechnology industry, today announced results for its fiscal 2017 fourth quarter and year ended April 1, 2017. Financial measures are provided on both a GAAP and a non-GAAP basis, which excludes the impact of purchase accounting, equity compensation, restructuring, impairments of intangible assets, inventory, and goodwill, and other items.
Fourth quarter revenue was $49.9 million, compared to $51.5 million in the fourth quarter of last fiscal year and $33.8 million last quarter. GAAP net loss was $17.9 million or $0.54 per share, and included $18.1 million of charges primarily related to restructuring and the impairment of goodwill, intangible assets, and inventory. Of the charges, approximately $5.2 million are expected to be paid in cash. Non-GAAP net income was $2.9 million or $0.09 per diluted share.
“The company had a strong quarter operationally with orders, revenues, and non-GAAP earnings exceeding expectations,” stated Michael Burger, president and CEO of ESI. “The seasonally strong orders resulted in our highest backlog in nearly five years and position us well as we enter fiscal 2018. I am also pleased with the progress we are making on our restructuring plan. Our new executive team is in place and we are on track with our plans to improve our consistency of earnings over time."
Orders in the fourth quarter were $82.3 million, compared to $55.6 million last year and $44.1 million in the prior quarter. Burger continued, “Seasonally strong markets and solid execution drove orders to their highest quarterly level in over five years. Year over year we grew fourth quarter orders in all product groups, as well as in service."
On a GAAP basis gross margin was 36.5%, compared with 41.1% in the fourth quarter of fiscal 2016, and included approximately $4.0 million dollars of charges reflecting the impairment of intangible assets and impairment of inventory associated with our restructuring activities. Operating expenses were $36.3 million, up from $20.1 million one year ago, and included $6.6 million of restructuring costs and a $7.4 million impairment of goodwill. Operating loss was $18.1 million, compared to income of $1.1 million in the year-ago quarter.
On a non-GAAP basis gross margin was 45.7% compared to 42.7% one year ago. Non-GAAP operating expenses increased year over year to $20.1 million. Non-GAAP operating income was $2.7 million, or 5.4% of sales, compared to income of $3.3 million in the fourth quarter of last year.
Full Year Fiscal 2017 Results
Fiscal 2017 revenue was $161.0 million, a decline of 12.7% compared to $184.4 million in fiscal 2016. On a GAAP basis, fiscal 2017 net loss was $37.4 million or $1.15 per share, compared to net loss of $12.3 million or $0.39 per share in the prior year. On a non-GAAP basis, net loss was $9.4 million or $0.29 per share, compared to net loss of $1.7 million or $0.05 per share in 2016.
Balance Sheet and Cash Flow
At quarter end, total cash and investments, including restricted cash, were $66.5 million. The company used $1.1 million of cash in operations during the quarter. For the fiscal year the company used $0.8 million of operating cash. During the quarter, inventories were flat sequentially and trade receivables increased by $12.9 million. In addition, during the quarter the company received proceeds from a $14 million ten-year term loan secured by the company’s headquarters facility.
First Quarter 2018 Outlook
Based on current market and backlog conditions, revenues for the first quarter of fiscal 2018 are expected to be in the low $60 million range. Non-GAAP earnings per diluted share is expected to be $0.15 to $0.20. Additionally, we expect to incur approximately $1-2 million of restructuring charges and $3.5 to $4.5 million of inventory and asset impairments as we finalize our restructuring plans.
Burger concluded, "Our markets were seasonally strong in the fourth quarter. Although visibility is limited, we are seeing a better market environment and fewer headwinds than one year ago, which is encouraging. Our objective is to execute and drive demand so that the seasonally weaker quarters will see less of a drop-off compared to last fiscal year. In addition, the reorganization we announced in February should help us to improve execution, lower our breakeven revenue level, and deliver profitability in both strong and weak demand cycles."
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 888-339-2688 (domestic participants) or 617-847-3007 (international participants). The conference ID number is 12233475. A live audio webcast can be accessed at www.esi.com. 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, or adjusted, financial measures exclude the impact of purchase accounting, equity compensation, restructuring, inventory and goodwill write-downs, and other items. We believe that this presentation of non-GAAP financial measures allows investors to 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’s integrated solutions allow industrial designers and process engineers to control the power of laser light to transform materials in ways that differentiate their consumer electronics, wearable devices, semiconductor circuits and high-precision components for market advantage. ESI’s laser-based manufacturing solutions feature the micro-machining industry’s highest precision and speed, 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 at www.esi.com.
Forward-Looking Statements
This press release includes forward-looking statements about the markets we serve, growth, products, revenue, and earnings, including our expectations around restructuring our business, improving execution, and delivering more consistent earnings. These forward-looking statements are based on information available to us on the date of this release and we undertake 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; 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; our ability to respond promptly to customer requirements; the risk that we may not be able to ship products on the schedule required by customers, whether as a result of production delays, supply delays, or otherwise; our ability 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; our need to continue investing in research and development; our ability to hire and retain key employees; our ability to create and sustain intellectual property protection around its products; the risk that competing or alternative technologies could reduce demand for our products; the risk that we may not be successful in penetrating new or adjacent markets; the risk that we do not successfully integrate Visicon Technologies or achieve the anticipated cost synergies; the risk that the incorporation of Visicon's vision technology does not give us a competitive advantage; the risk that our new products may not gain acceptance in the marketplace; the risk that new products may not be introduced to the market in the anticipated time frame or at all; risks associated with our restructuring efforts; foreign currency fluctuations; the risk that duties or tariffs could be imposed or increased on goods imported or exported by us; the risk that changes to policies regarding immigration and visits to the United States could negatively impact our ability to hire or retain and train qualified personnel or our ability to operate internationally on an integrated basis; 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.
Fourth Quarter Fiscal 2017 Results
Condensed Consolidated Statements of Operations
(Unaudited)
Fiscal quarter ended | Fiscal year ended | ||||||||||||||||||
(In thousands, except per share data) | Apr 1, 2017 | Dec 31, 2016 | Apr 2, 2016 | Apr 1, 2017 | Apr 2, 2016 | ||||||||||||||
Net sales: | |||||||||||||||||||
Systems | $ | 40,029 | $ | 25,427 | $ | 44,043 | $ | 125,098 | $ | 142,957 | |||||||||
Services | 9,889 | 8,352 | 7,443 | 35,925 | 41,434 | ||||||||||||||
Total net sales | 49,918 | 33,779 | 51,486 | 161,023 | 184,391 | ||||||||||||||
Cost of sales: | |||||||||||||||||||
Systems | 27,499 | 17,283 | 25,247 | 81,350 | 89,169 | ||||||||||||||
Services | 4,189 | 5,048 | 5,055 | 18,207 | 22,519 | ||||||||||||||
Total cost of sales | 31,688 | 22,331 | 30,302 | 99,557 | 111,688 | ||||||||||||||
Gross profit | 18,230 | 11,448 | 21,184 | 61,466 | 72,703 | ||||||||||||||
Gross margin | 36.5 | % | 33.9 | % | 41.1 | % | 38.2 | % | 39.4 | % | |||||||||
Operating expenses: | |||||||||||||||||||
Selling, general and administration | 13,781 | 13,280 | 12,134 | 52,698 | 49,753 | ||||||||||||||
Research, development and engineering | 8,461 | 7,868 | 7,694 | 31,719 | 32,400 | ||||||||||||||
Restructuring costs | 6,614 | 321 | 227 | 6,935 | 2,824 | ||||||||||||||
Acquisition and integration costs | — | 31 | — | 366 | 194 | ||||||||||||||
Impairment of goodwill | 7,445 | — | — | 7,445 | — | ||||||||||||||
Net operating expenses | 36,301 | 21,500 | 20,055 | 99,163 | 85,171 | ||||||||||||||
Operating (loss) income | (18,071 | ) | (10,052 | ) | 1,129 | (37,697 | ) | (12,468 | ) | ||||||||||
Non-operating income: | |||||||||||||||||||
Interest and other income, net | 103 | 34 | 127 | 265 | 195 | ||||||||||||||
Total non-operating income | 103 | 34 | 127 | 265 | 195 | ||||||||||||||
(Loss) income before income taxes | (17,968 | ) | (10,018 | ) | 1,256 | (37,432 | ) | (12,273 | ) | ||||||||||
Benefit from income taxes | (45 | ) | (325 | ) | (697 | ) | (23 | ) | (16 | ) | |||||||||
Net (loss) income | $ | (17,923 | ) | $ | (9,693 | ) | $ | 1,953 | $ | (37,409 | ) | $ | (12,257 | ) | |||||
Net (loss) income per share—basic | $ | (0.54 | ) | $ | (0.29 | ) | $ | 0.06 | $ | (1.15 | ) | $ | (0.39 | ) | |||||
Net (loss) income per share—diluted | $ | (0.54 | ) | $ | (0.29 | ) | $ | 0.06 | $ | (1.15 | ) | $ | (0.39 | ) | |||||
13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141 | www.esi.com
Electro Scientific Industries, Inc.
Fourth Quarter Fiscal 2017 Results
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands) | Apr 1, 2017 | Dec 31, 2016 | Apr 2, 2016 | ||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 56,642 | $ | 44,891 | $ | 42,413 | |||||
Short-term investments | 5,743 | 6,301 | 15,252 | ||||||||
Trade receivables, net | 40,494 | 27,644 | 42,770 | ||||||||
Inventories, net | 58,942 | 58,830 | 60,470 | ||||||||
Shipped systems pending acceptance | 5,713 | 3,983 | 1,181 | ||||||||
Other current assets | 6,180 | 5,903 | 5,340 | ||||||||
Total current assets | 173,714 | 147,552 | 167,426 | ||||||||
Non-current assets: | |||||||||||
Property, plant and equipment, net | 21,619 | 23,660 | 24,543 | ||||||||
Deferred income taxes, net | 890 | 836 | 914 | ||||||||
Goodwill | 3,027 | 9,352 | 7,445 | ||||||||
Acquired intangible assets, net | 6,564 | 9,611 | 7,146 | ||||||||
Other assets | 18,931 | 17,025 | 12,626 | ||||||||
Total assets | $ | 224,745 | $ | 208,036 | $ | 220,100 | |||||
Liabilities and shareholders' equity | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 21,213 | $ | 14,345 | $ | 16,061 | |||||
Accrued liabilities | 21,752 | 16,015 | 18,334 | ||||||||
Current portion, long-term debt | 434 | — | — | ||||||||
Deferred revenue | 14,712 | 10,822 | 6,373 | ||||||||
Total current liabilities | 58,111 | 41,182 | 40,768 | ||||||||
Non-current liabilities: | |||||||||||
Long-term debt | 13,489 | — | — | ||||||||
Income taxes payable | 1,036 | 1,048 | 1,266 | ||||||||
Deferred income tax liability, net | 8 | 218 | 234 | ||||||||
Other liabilities | 7,570 | 6,085 | 7,801 | ||||||||
Total liabilities | 80,214 | 48,533 | 50,069 | ||||||||
Shareholders’ equity: | |||||||||||
Preferred and common stock | 207,152 | 204,859 | 195,024 | ||||||||
Accumulated deficit | (61,407 | ) | (43,485 | ) | (23,998 | ) | |||||
Accumulated other comprehensive loss | (1,214 | ) | (1,871 | ) | (995 | ) | |||||
Total shareholders’ equity | 144,531 | 159,503 | 170,031 | ||||||||
Total liabilities and shareholders’ equity | $ | 224,745 | $ | 208,036 | $ | 220,100 | |||||
End of period shares outstanding | 33,260 | 33,151 | 31,613 | ||||||||
13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141 | www.esi.com
Electro Scientific Industries, Inc.
Analysis of Fourth Quarter Fiscal 2017 Results
(Unaudited)
Fiscal quarter ended | Fiscal year ended | ||||||||||||||||||
(Dollars and shares in thousands) | Apr 1, 2017 | Dec 31, 2016 | Apr 2, 2016 | Apr 1, 2017 | Apr 2, 2016 | ||||||||||||||
Sales detail: | |||||||||||||||||||
PCB | $ | 28,339 | $ | 15,987 | $ | 29,152 | $ | 88,771 | $ | 94,121 | |||||||||
Component Test | 7,382 | 5,407 | 5,609 | 22,381 | 19,901 | ||||||||||||||
Semiconductor | 8,036 | 6,690 | 8,974 | 29,557 | 38,262 | ||||||||||||||
Industrial Machining | 6,161 | 5,695 | 7,751 | 20,314 | 32,107 | ||||||||||||||
Net Sales | $ | 49,918 | $ | 33,779 | $ | 51,486 | $ | 161,023 | $ | 184,391 | |||||||||
As % of net sales | |||||||||||||||||||
GAAP | |||||||||||||||||||
Gross profit | 36.5% | 33.9% | 41.1% | 38.2% | 39.4% | ||||||||||||||
Selling, service and administration expense | 28% | 39% | 24% | 33% | 27% | ||||||||||||||
Research, development and engineering expense | 17% | 23% | 15% | 20% | 18% | ||||||||||||||
Net operating expenses | 73% | 64% | 39% | 62% | 46% | ||||||||||||||
Operating (loss) income | (36%) | (30%) | 2% | (23%) | (7%) | ||||||||||||||
Non-GAAP | |||||||||||||||||||
Gross profit | 45.7% | 34.5% | 42.7% | 42.3% | 41.3% | ||||||||||||||
Net operating expenses | 40% | 57% | 36% | 48% | 42% | ||||||||||||||
Operating income (loss) | 5% | (23%) | 6% | (6%) | (1%) | ||||||||||||||
GAAP - Effective tax rate % | 0.3% | 3% | (55%) | 0.1% | 0.1% | ||||||||||||||
Weighted average shares outstanding | |||||||||||||||||||
Basic | 33,065 | 32,919 | 31,580 | 32,551 | 31,411 | ||||||||||||||
Diluted GAAP | 33,065 | 32,919 | 32,393 | 32,551 | 31,411 | ||||||||||||||
Diluted Non-GAAP | 33,822 | 32,919 | 32,393 | 32,551 | 31,411 | ||||||||||||||
End of period employees | 683 | 716 | 651 | 683 | 651 | ||||||||||||||
13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141 | www.esi.com
Electro Scientific Industries, Inc.
Fourth Quarter Fiscal 2017 Results
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
Fiscal quarter ended | Fiscal year ended | ||||||||||||||||||
(In thousands, except per share data) | Apr 1, 2017 | Dec 31, 2016 | Apr 2, 2016 | Apr 1, 2017 | Apr 2, 2016 | ||||||||||||||
Gross profit per GAAP | $ | 18,230 | $ | 11,448 | $ | 21,184 | $ | 61,466 | $ | 72,703 | |||||||||
Purchase accounting | 447 | 229 | 278 | 1,133 | 1,140 | ||||||||||||||
Equity compensation | 105 | 142 | 99 | 503 | 445 | ||||||||||||||
(Recovery of) charges for inventory write-off of damaged product | — | (170 | ) | — | 946 | — | |||||||||||||
Charges for write-off of inventory | 1,696 | — | — | 1,696 | 1,356 | ||||||||||||||
Charges for impairment of intangibles | 2,349 | — | 435 | 2,349 | 435 | ||||||||||||||
Non-GAAP gross profit | $ | 22,827 | $ | 11,649 | $ | 21,996 | $ | 68,093 | $ | 76,079 | |||||||||
Operating expenses per GAAP | $ | 36,301 | $ | 21,500 | $ | 20,055 | $ | 99,163 | $ | 85,171 | |||||||||
Purchase accounting | (414 | ) | (210 | ) | (262 | ) | (1,077 | ) | (1,229 | ) | |||||||||
Equity compensation | (1,707 | ) | (1,674 | ) | (882 | ) | (5,934 | ) | (3,787 | ) | |||||||||
Recovery of (charges for) write-off of damaged product | — | 54 | — | (46 | ) | — | |||||||||||||
Acquisition and integration costs | — | (31 | ) | — | (366 | ) | (194 | ) | |||||||||||
Restructuring costs | (6,614 | ) | (321 | ) | (227 | ) | (6,986 | ) | (2,824 | ) | |||||||||
Impairment of goodwill | (7,445 | ) | — | — | (7,445 | ) | — | ||||||||||||
Non-GAAP operating expenses | $ | 20,121 | $ | 19,318 | $ | 18,684 | $ | 77,309 | $ | 77,137 | |||||||||
Operating (loss) income per GAAP | $ | (18,071 | ) | $ | (10,052 | ) | $ | 1,129 | $ | (37,697 | ) | $ | (12,468 | ) | |||||
Non-GAAP adjustments to gross profit | 4,597 | 201 | 812 | 6,627 | 3,376 | ||||||||||||||
Non-GAAP adjustments to operating expenses | 16,180 | 2,182 | 1,371 | 21,854 | 8,034 | ||||||||||||||
Non-GAAP operating income (loss) | $ | 2,706 | $ | (7,669 | ) | $ | 3,312 | $ | (9,216 | ) | $ | (1,058 | ) | ||||||
Non-operating income, net per GAAP | $ | 103 | $ | 34 | $ | 127 | $ | 265 | $ | 195 | |||||||||
Acquisition-related adjustments | — | — | — | (190 | ) | — | |||||||||||||
Non-GAAP non-operating income | $ | 103 | $ | 34 | $ | 127 | $ | 75 | $ | 195 | |||||||||
Non-GAAP income (loss) before income taxes | $ | 2,809 | $ | (7,635 | ) | $ | 3,439 | $ | (9,141 | ) | $ | (863 | ) | ||||||
Net (loss) income per GAAP | $ | (17,923 | ) | $ | (9,693 | ) | $ | 1,953 | $ | (37,409 | ) | $ | (12,257 | ) | |||||
Non-GAAP adjustments to gross profit | 4,597 | 201 | 812 | 6,627 | 3,376 | ||||||||||||||
Non-GAAP adjustments to operating expenses | 16,180 | 2,182 | 1,371 | 21,854 | 8,034 | ||||||||||||||
Non-GAAP adjustments to non-operating expense | — | — | — | (190 | ) | — | |||||||||||||
Income tax effect of other non-GAAP adjustments | 32 | (248 | ) | (731 | ) | (252 | ) | (857 | ) | ||||||||||
Non-GAAP net income (loss) | $ | 2,886 | $ | (7,558 | ) | $ | 3,405 | $ | (9,370 | ) | $ | (1,704 | ) | ||||||
Basic Non-GAAP net income (loss) per share | $ | 0.09 | $ | (0.23 | ) | $ | 0.11 | $ | (0.29 | ) | $ | (0.05 | ) | ||||||
Diluted Non-GAAP net income (loss) per share | $ | 0.09 | $ | (0.23 | ) | $ | 0.11 | $ | (0.29 | ) | $ | (0.05 | ) | ||||||
13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141 | www.esi.com
Electro Scientific Industries, Inc.
Fourth Quarter Fiscal 2017 Results
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Fiscal quarter ended | Fiscal year ended | ||||||||||||||||||
(In thousands) | Apr 1, 2017 | Dec 31, 2016 | Apr 2, 2016 | Apr 1, 2017 | Apr 2, 2016 | ||||||||||||||
Net (loss) income | $ | (17,923 | ) | $ | (9,693 | ) | $ | 1,953 | $ | (37,409 | ) | $ | (12,257 | ) | |||||
Non-cash adjustments and changes in operating activities | 16,789 | 6,017 | (5,249 | ) | 36,576 | 16,959 | |||||||||||||
Net cash (used in) provided by operating activities | (1,134 | ) | (3,676 | ) | (3,296 | ) | (833 | ) | 4,702 | ||||||||||
Net cash (used in) provided by investing activities | (203 | ) | (3,687 | ) | 3,217 | 2,614 | (13,812 | ) | |||||||||||
Net cash provided by (used in) financing activities | 13,923 | 381 | 313 | 14,165 | 724 | ||||||||||||||
Effect of exchange rate changes on cash | 255 | (812 | ) | 108 | (627 | ) | (195 | ) | |||||||||||
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 12,841 | (7,794 | ) | 342 | 15,319 | (8,581 | ) | ||||||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD | 44,891 | 52,685 | 42,071 | 42,413 | 50,994 | ||||||||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | $ | 57,732 | $ | 44,891 | $ | 42,413 | $ | 57,732 | $ | 42,413 | |||||||||
13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141 | www.esi.com
Reconciliation of GAAP to Non-GAAP Financial Measures - Projected | Fiscal quarter ending Jul 1, 2017 |
Non-GAAP diluted earnings per share | $0.15 - $0.20 |
Purchase accounting | ($0.02) - ($0.01) |
Equity compensation | ($0.05) - ($0.04) |
Other items | ($0.20) - ($0.12) |
GAAP diluted EPS | ($0.12) - $0.03 |
13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141 | www.esi.com