UNITED STATES

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Nova Reports Third Quarter 2017 Results

 

Third Quarter 2017 Highlights:

·

Quarterly revenue of $54.1 million, within company guidance

·

GAAP net income of $11.5 million, or $0.40 per diluted share, exceeding guidance of $0.27 to $0.37 per share

·

Non-GAAP net income of $13.1 million, or $0.46 per diluted share, exceeding guidance of $0.33 to $0.43 per share

·

Continuous diversification with Memory customers generating 45% of quarterly revenue

·

On pace to achieve fifth consecutive record revenue year, driven by growing market adoption of both OCD and XPS metrology solutions

 

 

A reconciliation between GAAP operating results and non-GAAP operating results is provided following the financial statements that are part of this release. Non-GAAP results exclude amortization of acquired intangible assets, net adjustments of deferred tax assets, stock-based compensation expenses, expense related to royalty buyout agreement with the Office of the Chief Scientist and inventory write-off.

 

Management Comments

 

"Strength in both our Dimensional and Materials metrology product lines drove another solid quarter, supporting our expectations for a fifth sequential record year," commented Eitan Oppenhaim, President and Chief Executive Officer of Nova. "Our initiatives to diversify our customer base and expand our presence in the Memory segment continue to bear fruit with growing contribution from several Memory customers, including a leading Memory manufacturer that accounted for 30% of the product revenues."

 

"With another record year clearly in our sights, we are progressing steadily toward our long-term growth targets while enhancing our product offering and expanding our market presence," concluded Mr. Oppenhaim.

 

2017 Fourth Quarter Financial Outlook

 

Management provided an outlook for the fourth quarter, the period ending December 31, 2017. Based on current estimates, management expects:

 

·

$53 million to $57 million in revenue

 

·

$0.29 to $0.37 in diluted GAAP EPS

 

·

$0.34 to $0.42 in diluted non-GAAP EPS

 

2017 Third Quarter Results

 

Total revenues for the third quarter of 2017 were $54.1 million, a decrease of 4% compared to the second quarter of 2017 and a year-over-year increase of 23% relative to the third quarter of 2016.

 

 

Operating expenses in the third quarter of 2017 were $18.3 million, compared to $17.7 million in the second quarter of 2017 and compared to $16.6 million in the third quarter of 2016.

On a non-GAAP basis, which excludes amortization of acquired intangible assets, net adjustments of deferred tax assets and stock-based compensation expenses, expense related to royalty buyout agreement with the Office of the Chief Scientist and inventory write-off, the company reported net income of $13.1 million, or $0.46 per diluted share, in the third quarter of 2017. This is compared with net income of $15.2 million, or $0.53 per diluted share, in the second quarter of 2017, and compared with net income of $9.4 million, or $0.34 per diluted share, in the third quarter of 2016.

 

Total cash reserves at September 30, 2017 were $144.6 million, compared to $91.7 million at December 31, 2016.

 

Conference Call Information

 

Nova will host a conference call today, November 1, 2017, at 9 a.m. Eastern Time, to discuss the financial results and outlook. To attend the conference call, please dial one of the following teleconferencing numbers. Please begin by placing your calls five minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number.

 

U.S. Dial-in Number: 1-800-310-1961

ISRAEL Dial-in Number: 1-809-245-905

INTERNATIONAL Dial-in Number: 1-719-325-2291

At:

9 a.m. Eastern Time

6 a.m. Pacific Time

3 p.m. Israeli Time

Please reference conference ID 1221502

 

The conference call will also be webcast live from a link on Nova's website at http://ir.novameasuring.com.

 

A replay of the conference call will be available from November 2, 2017 at 12 p.m. Eastern Time to November 9, 2017 at 11:59 p.m. Eastern Time. To access the replay, please dial one of the following numbers:

 

Replay Dial-in TOLL-FREE   1-844-512-2921

Replay Dial-in TOLL/INTERNATIONAL   1-412-317-6671

Replay Pin Number:  1221502

 

A replay will also be available for 90 days on Nova's website at http://ir.novameasuring.com.

 

About Nova: Nova delivers continuous innovation by providing advanced metrology solutions for the semiconductor manufacturing industry. Deployed with the world's largest integrated-circuit manufacturers, Nova's products deliver state-of-the-art, high-performance metrology solutions for effective process control throughout the semiconductor fabrication lifecycle. Nova's product portfolio, which combines high-precision hardware and cutting-edge software, supports the development and production of the most advanced devices in today's high-end semiconductor market. Nova's technical innovation and market leadership enable customers to improve process performance, enhance products' yields and accelerate time to market. Nova acts as a partner to semiconductor manufacturers from its offices around the world. Additional information may be found at www.novameasuring.com.

 

Nova is traded on the NASDAQ & TASE under the symbol NVMI.

 

 

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This press release contains forward-looking statements within the meaning of safe harbor provisions of the Private Securities Litigation Reform Act of 1995 relating to future events or our future performance, such as statements regarding, but are not limited to, anticipated growth opportunities and projections about our business and its future revenues, expenses and profitability. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied in those forward looking statements. Factors that may affect our results, performance, circumstances or achievements include, but are not limited to, the following: our dependency on three product lines; our dependency on a small number of large customers and small number of suppliers; the highly cyclical and competitive nature of the markets we target and we operate in; our inability to reduce spending during a slowdown in the semiconductor industry; our ability to respond effectively on a timely basis to rapid technological changes; our ability to recognize the benefits of ReVera acquisition and risks that the acquisition may disrupt current plans and operations and impact relationships with customers, distributors and suppliers; our dependency on PEMs; risks related to exclusivity obligations and non-limited liability that may be included in our commercial agreements and arrangements; our ability to retain our competitive position despite the ongoing consolidation in our industry; risks related to our dependence on our manufacturing facilities; risks related to changes in our order backlog; risks related to efforts to complete and integrate current and/or future acquisitions; risks related to the worldwide financial instabilities; risks related to our intellectual property; new product offerings from our competitors; unanticipated manufacturing or supply problems; risks related to government programs we participate in; risks related to taxation; changes in customer demand for our products; risks related to currency fluctuations, risks related to acquisitions we may pursue and risks related to our operations in Israel. We cannot guarantee future results, levels of activity, performance or achievements. The matters discussed in this press release also involve risks and uncertainties summarized under the heading "Risk Factors" in Nova's Annual Report on Form 20-F for the year ended December 31, 2016 filed with the Securities and Exchange Commission on March 3, 2017. These factors are updated from time to time through the filing of reports and registration statements with the Securities and Exchange Commission. Nova Measuring Instruments Ltd. does not assume any obligation to update the forward-looking information contained in this press release.

(Tables to Follow)

 

(U.S. dollars in thousands) - (Unaudited)

 

		As of
		September 30, 2017				December 31, 2016
ASSETS
Current assets
Cash and cash equivalents			20,020				20,406
Short-term interest-bearing bank deposits			123,833				70,546
Trade accounts receivable			33,554				42,626
Inventories			38,952				29,260
Other current assets			8,500				5,068
Total current assets			224,859				167,906
Long-term assets
Long-term interest-bearing bank deposits			750				750
Deferred tax assets			2,009				3,020
Severance pay funds			1,457				1,425
Property and equipment, net			9,526				10,017
Identifiable intangible assets, net			13,440				15,361
Goodwill			20,114				20,114
Total long-term assets			47,296				50,687
Total assets			272,155				218,593
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Trade accounts payable			17,623				16,501
Deferred revenues			11,426				4,072
Other current liabilities			21,072				18,461
Total current liabilities			50,121				39,034
Long-term liabilities
Deferred tax liabilities			447				1,094
Liability for employee severance pay			2,541				2,418
Other long-term liabilities			1,603				1,330
Total long-term liabilities			4,591				4,842
Shareholders' equity			217,443				174,717
Total liabilities and shareholders’ equity			272,155				218,593

 

 (U.S. dollars in thousands, except per share data) - (Unaudited)

 

		Three months ended								Nine months ended
		September 30, 2017				September 30, 2016				September 30, 2017				September 30, 2016
Revenues:
Products			41,119				32,944				129,589				82,633
Services			12,939				11,116				35,025				31,058
Total revenues			54,058				44,060				164,614				113,691
Cost of revenues:
Products			13,790				13,127				44,719				33,080
Services			7,389				6,476				20,762				18,725
Expense related to royalty buyout agreement with the Office of the Chief Scientist			-				12,875				-				12,875
Inventory write-off			-				1,889				-				1,889
Total cost of revenues			21,179				34,367				65,481				66,569
Gross profit			32,879				9,693				99,133				47,122
Operating expenses:
Research and development expenses, net			9,826				9,181				28,339				25,773
Sales and marketing expenses			5,863				5,020				17,843				14,922
General and administration expenses			1,947				1,802				5,542				5,133
Amortization of acquired intangible assets			641				637				1,921				1,909
Total operating expenses			18,277				16,640				53,645				47,737
Operating income (loss)			14,602				(6,947	)			45,488				(615	)
Financing income, net			626				301				1,566				1,026
Income (loss) before tax on income			15,228				(6,646	)			47,054				411
Income tax expenses (benefit)			3,726				(1,868	)			8,836				(869	)
Net income (loss) for the period			11,502				(4,778	)			38,218				1,280
Earnings (loss) per share:
Basic			0.41				(0.18	)			1.38				0.05
Diluted			0.40				(0.18	)			1.34				0.05
Shares used for calculation of earnings (loss) per share:
Basic			27,788				27,169				27,637				27,136
Diluted			28,601				27,169				28,437				27,361

 

(U.S. dollars in thousands) - (Unaudited)

 

		Three months ended								Nine months ended
		September 30, 2017				September 30, 2016				September 30, 2017				September 30, 2016
Cash flows from operating activities:
Net income (loss) for the period			11,502				(4,778	)			38,218				1,280
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation			938				1,191				2,831				3,540
Amortization of acquired intangible assets			641				637				1,921				1,909
Amortization of deferred stock-based compensation			669				639				1,880				2,044
Increase (decrease) in liability for employee termination benefits, net			18				(1	)			91				95
Deferred tax assets, net			289				(1,813	)			364				(1,395	)
Decrease (increase) in trade accounts receivable			2,798				(783	)			9,072				(4,512	)
Decrease (increase) in inventories			(5,292	)			1,722				(9,908	)			(1,335	)
Increase in other current and long-term assets			(2,477	)			(687	)			(3,432	)			(295	)
Increase (decrease) in trade accounts payable			(1,586	)			(760	)			1,122				(2,004	)
Increase (decrease) in other current liabilities and other long-term liabilities			736				2,043				3,024				(564	)
Increase (decrease) in short term deferred revenues			1,190				701				7,354				(1,405	)
Net cash provided by (used in) operating activities			9,426				(1,889	)			52,537				(2,642	)
Cash flow from investment activities:
Decrease (increase) in short-term interest-bearing bank deposits			(30,628	)			5,682				(53,287	)			(250	)
Additions to property and equipment			(857	)			(535	)			(2,124	)			(1,615	)
Net cash provided by (used in) investment activities			(31,485	)			5,147				(55,411	)			(1,865	)
Cash flows from financing activities:
Purchases of treasury shares			-				-				-				(937	)
Shares issued under employee stock-based plans			347				941				2,488				1,365
Net cash provided by financing activities			347				941				2,488				428
Increase (decrease) in cash and cash equivalents			(21,712	)			4,199				(386	)			(4,079	)
Cash and cash equivalents – beginning of period			41,732				19,455				20,406				27,733
Cash and cash equivalents – end of period			20,020				23,654				20,020				23,654

 

(U.S. dollars in thousands, except percentage and per share data) - (Unaudited)

 

 

		Three months ended
		September 30, 2017				June 30, 2017				September 30, 2016
GAAP cost of revenues			21,179				22,732				34,367
Expense related to royalty buyout agreement with the Office of the Chief Scientist			-				-				(12,875	)
Inventory write-off			-				-				(1,889	)
Stock-based compensation in cost of products			(113	)			(74	)			(79	)
Stock-based compensation in cost of services			(57	)			(56	)			(52	)
Non-GAAP cost of revenues			21,009				22,602				19,472
GAAP gross profit			32,879				33,394				9,693
Gross profit adjustments			170				130				14,895
Non-GAAP gross profit			33,049				33,524				24,588
GAAP gross margin as a percentage of revenues			61	%			59	%			22	%
Non-GAAP gross margin as a percentage of revenues			61	%			60	%			56	%
GAAP operating expenses			18,277				17,708				16,640
Stock-based compensation in research and development			(259	)			(188	)			(200	)
Stock-based compensation in sales and marketing			(95	)			(146	)			(226	)
Stock-based compensation in general and administrative			(145	)			(84	)			(82	)
Amortization of acquired intangible assets			(641	)			(640	)			(637	)
Non-GAAP operating expenses			17,137				16,650				15,495
Non-GAAP operating income			15,912				16,874				9,093
GAAP operating margin as a percentage of revenues			27	%			28	%			(16	)%
Non-GAAP operating margin as a percentage of revenues			29	%			30	%			21	%
GAAP tax on income			3,726				2,898				(1,868	)
Deferred tax assets adjustments, net			(289	)			(666	)			1,813
Non-GAAP tax on income			3,437				2,232				(55	)
GAAP net income (loss)			11,502				13,313				(4,778	)
Amortization of acquired intangible assets			641				640				637
Expense related to royalty buyout agreement with the Office of the Chief Scientist			-				-				12,875
Stock-based compensation expenses			669				548				639
Deferred tax assets adjustments, net			289				666				(1,813	)
Inventory write-off			-				-				1,889
Non-GAAP net income			13,101				15,167				9,449
GAAP basic earnings (loss) per share			0.41				0.48				(0.18	)
Non-GAAP basic earnings per share			0.47				0.55				0.35
GAAP diluted earnings (loss) per share			0.40				0.47				(0.18	)
Non-GAAP diluted earnings per share			0.46				0.5 3				0.34
Shares used for calculation of earnings (loss) per share:
Basic			27,788				27,655				27,169
Diluted			28,601				28,562				27,536