Nova Reports Third Quarter 2017 Results

REHOVOT, Israel, Nov. 1, 2017 /PRNewswire/ -- Nova (NASDAQ: NVMI), a leading innovator and a key provider of metrology solutions for advanced process control used in semiconductor manufacturing, today reported financial results for the third quarter 2017, the period ended September 30, 2017.

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

 

GAAP Results ($K)


Q3 2017

Q2 2017

Q3 2016

Revenues

$54,058

$56,126

$44,060

Net Income (Loss)

$11,502

$13,313

$(4,778)

Earnings (Loss) per Diluted Share

$0.40

$0.47

$(0.18)

NON-GAAP Results ($K)


Q3 2017

Q2 2017

Q3 2016

Net Income

$13,101

$15,167

$9,449

Earnings per Diluted Share

$0.46

$0.53

$0.34

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.

"Nova is evolving to offer a wider range of solutions, expanding our addressable markets and supporting our plans for sustainable growth," continued Mr. Oppenhaim. "Following the successful integration of ReVera, today we can offer a unique and differentiated portfolio, which combines disruptive hardware and software capabilities and is appealing to a growing number of customers.

"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.

Gross margin for the third quarter of 2017 was 61%, compared to gross margin of 59% in the second quarter of 2017 and compared to the gross margin of 22% in the third quarter of 2016, which included $12.9 million of expense related to royalty buyout agreement with the Office of the Chief Scientist and $1.9 million of expense related to inventory write-off.

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 GAAP basis, the company reported net income of $11.5 million, or $0.40 per diluted share, in the third quarter of 2017. This is compared with $13.3 million, or $0.47 per diluted share, in the second quarter of 2017, and compared with net loss of $4.8 million, or $0.18 loss per diluted share, in the third quarter of 2016, which was inclusive of a non-recurring expense of $12.9 million related to royalty payment to the Israeli Office of the Chief Scientist and $1.9 million of expense related to inventory write-off .

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.

This press release provides financial measures that exclude charges for amortization of acquired intangible assets, net adjustment of deferred tax assets, stock-based compensation expenses and expense related to royalty buyout agreement with the Office of the Chief Scientist and inventory write-off and are therefore not calculated in accordance with generally accepted accounting principles (GAAP). Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding Nova's performance because they reflect our operational results and enhances management's and investors' ability to evaluate Nova's performance before charges or benefits considered by management to be outside Nova's ongoing operating results. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Management believes that it is in the best interest of its investors to provide financial information that will facilitate comparison of both historical and future results and allows greater transparency to supplemental information used by management in its financial and operational decision making. A reconciliation of each GAAP to non-GAAP financial measure discussed in this press release is contained in the accompanying financial tables.

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)

 

NOVA MEASURING INSTRUMENTS LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

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




As of

ASSETS


September 30,

2017


December 31,

2016


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


 

 

NOVA MEASURING INSTRUMENTS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(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


 

 

NOVA MEASURING INSTRUMENTS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(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

 

 

NOVA MEASURING INSTRUMENTS LTD.

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(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








 

 

Company Contact:


Investor Relations Contacts:

Dror David, Chief Financial Officer


Hayden/ MS-IR LLC

Nova Measuring Instruments Ltd.


Miri Segal

Tel: +972-73-229-5760


Tel: +917-607-8654

E-mail: info@novameasuring.com


E-mail: msegal@ms-ir.com

www.novameasuring.com


Or



Brett Maas



Tel: +646-536-7331



E-mail: brett@haydenir.com

 

 

View original content:http://www.prnewswire.com/news-releases/nova-reports-third-quarter-2017-results-300547143.html

SOURCE Nova Measuring Instruments Ltd.



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