ESI Announces First Quarter Fiscal 2017 Results

PORTLAND, Ore., Aug. 02, 2016 (GLOBE NEWSWIRE) -- Electro Scientific Industries, Inc. (NASDAQ:ESIO), an innovator of laser-based manufacturing solutions for the microtechnology industry, today announced results for its fiscal 2017 first quarter ended July 2, 2016. Financial measures are provided on both a GAAP and a non-GAAP basis, which excludes the impact of purchase accounting, equity compensation, restructuring, inventory impairments, and other items.

First quarter revenue was $47.7 million, compared to $51.5 million in the fourth quarter of 2016 and $43.1 million in the first quarter of last fiscal year. GAAP net loss was $0.1 million or $0.00 per share. On a non-GAAP basis net income was $3.0 million or $0.09 per diluted share, compared to $3.4 million or $0.11 per diluted share in the prior quarter.

“Revenues grew 11% year over year,” stated Ed Grady, president and CEO of ESI. “In addition, solid gross margins and diligent expense management led to a quarter of near-breakeven GAAP profitability, adjusted EPS at the high end of expectations, and strong cash generation. Further, we made significant strides in the placement and qualification of our new products with multiple customers, which should generate incremental revenue in the coming quarters."

Bookings in the first quarter were $30.4 million, compared to $55.6 million in the prior quarter and $41.9 million last year. Grady continued, “As we expected, our flex via drilling business saw a decline in bookings after several quarters of very strong demand activity. The decline turned out to be more than we had anticipated, as slowing projected consumer electronics growth resulted in a pause in buying activity as customers assessed their capacity utilization. However, we expect this market to recover later in our fiscal year, as increased flex content across multiple industries, miniaturization, and new consumer electronics products should continue to drive underlying growth in this market.”

On a GAAP basis gross margin was 43.7%, compared to 41.1% in the prior quarter. Cost of sales included a $1.1 million estimated impairment to inventory and equipment at our manufacturing facility in Wuhan resulting from flooding in central China. Operating expenses were $20.5 million, up slightly from $20.1 million in the prior quarter. Operating income was $0.3 million, compared to $1.1 million last quarter.

Non-GAAP gross margin was 46.7% compared to 42.7% in the prior quarter. Non-GAAP operating expenses increased slightly to $18.9 million from $18.7 million last quarter. Non-GAAP operating income was $3.3 million, flat compared to the fourth quarter.

Balance Sheet and Cash Flow

At quarter end, cash and investments grew to $69.8 million, from $60.2 million last quarter. The company generated $11.4 million in cash from operations. Inventories decreased by $0.9 million, trade receivables decreased by $8.5 million, and accounts payable increased by $3.0 million.

Acquisition of Visicon Technologies

The company also announced that it has closed on the acquisition of Visicon Technologies, Inc., a leading supplier of high-accuracy and high-throughput measurement and defect detection systems based in Napa, California. "Visicon brings to ESI a strong portfolio of standalone defect detection systems for the medical device and consumer electronics markets. We believe this business provides complementary technology, expands our presence into the medical device market, and is highly leveraged into our consumer electronics customer base." The company expects that Visicon will add $10-20 million of annual revenue and will be accretive on an adjusted basis by the end of this fiscal year.

Second Quarter 2017 Outlook

Based on current market conditions, revenues for the second quarter of fiscal 2017 are expected to be between $30 million and $35 million. Non-GAAP loss per share is expected to be $0.20 to $0.25.

Grady concluded, "Despite near-term softness in our core markets our growth strategy remains on track. Our core markets have good long-term growth drivers, we have a leading position, and we expect to see business levels return as capacity utilization increases. In addition, we expect to see results from initial placements of our new products over the course of the year with increasing volumes this fiscal year and early next year. As our new products gain traction and our addressable market expands and diversifies, the quarterly swings in bookings and revenue should diminish over time. Our acquisition of Visicon increases our market diversification and should enhance our ability to differentiate in the laser micromachining market. In the meantime, we are focused on managing our cost structure well and investing to execute our growth strategy."

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 76618135. 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 write-down and other 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’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 industry’s highest precision and speed, and target the lowest total cost of ownership. ESI is headquartered in Portland, Oregon, with global operations per 10-K. 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 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 and regional economic strength and political stability, timing of consumer product introductions and overall demand for electronic devices (such as semiconductors, printed circuit boards, displays, LEDs, capacitors and other components) 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; the risk that we may not be successful in penetrating new or adjacent markets; the risk that we do not successfully integrate Visicon Technologies; 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; the risk that our cost-reduction program will not result in the anticipated level of savings; foreign currency fluctuations; the risk that efficiencies realized from our site consolidation are not as large as expected; 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.