Newport Corporation (

NEWP

)

Q3 2010 Earnings Call Transcript

October 27, 2010 5:00 pm ET

Executives

Robert Phillippy – President and CEO

Charles Cargile – CFO, SVP and Treasurer

Analysts

Mark Douglass – Longbow Research

Mark Miller – Noble Financial

Ajit Pai – Stifel Nicolaus

Dave Kang – B. Riley & Company

Jim Ricchiuti – Needham & Company

Jiwon Lee – Sidoti & Company

Jim Brilliant – Century Management

Presentation

Operator

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» Newport Corporation Q3 2009 Earnings Call Transcript

Good day everyone and welcome to the Newport Corporation Third Quarter 2010 Financial Results Conference Call. Today’s call is being recorded. At this time for opening remarks and introductions, I’d like to turn the call over to the Chief Executive Officer, Mr. Robert Phillippy, please go ahead sir.

Robert Phillippy

Good afternoon and welcome to Newport’s third quarter 2010 conference call. With me is our Chief Financial Officer, Chuck Cargile. Before we get started, I’d like to remind you that during the course of this conference call, we will be making a number of forward-looking statements that are based on our current expectations and involve various risks and uncertainties that are discussed in our periodic SEC filings. Although we believe that the assumptions underlying these statements are reasonable, any of them could prove inaccurate and there can be no assurance that the results will be realized.

The Newport team delivered another strong financial performance in the third quarter of 2010. Perhaps the most notable headline is that we achieved all-time record quarterly sales of $125.2 million, which represents growth of 41.7% over the third quarter of 2009. There were many other highlights in the quarter as well.

For example, our orders of 129.5 million were the highest we’ve ever achieved in the third quarter and the second highest in the company’s history. This level represents 39.9% growth over the third quarter of 2009. Even with record sales, our book-to-bill ratio was greater than one, continuing to grow our backlog.

We also achieved operating income of $15.8 million and earnings of $0.34 per diluted share. Both of these numbers demonstrate the earnings leverage we can generate at higher sales levels. This strong orders, sales and earnings performance coupled with our record backlog of 132 million causes our outlook to be increasingly positive. We now expect our full-year sales to be approximately 475 million, an all-time record for Newport and expect our earnings per diluted share to exceed $1.

I’ll comment further on our outlook a bit later in this call, but first I would like to provide an overview of the conditions and trends in our target markets and characterize our orders in that context.

Third quarter orders of 43.7 million from customers in our microelectronics and market continued at the high level we experienced in the second quarter and grew by 92.4% versus the third quarter of 2009. In particular, we continued to see robust order activity from Tier 1 semiconductor equipment customers. These OEM customers continue to experience strong bookings and revenues for their current generation products and are increasingly engaging us to provide enabling photonics components and subassemblies for their new development programs. As such, we expect this strong demand to continue for the remainder of 2010 and into 2011.

We received $37.7 million in orders from research market customers in the third quarter. This represents a 3.6% sequential increase but a decline of 1.6% versus the strong third quarter of 2009. We are still receiving orders tied to ARRA funding in the U.S. but stimulus related funding in general appears to be winding down.

The global research market picture continues to be mixed with strong growth opportunities in some countries offset by sluggish funding environments related to macroeconomic factors and others.

This market continues to provide a source of stable profitable business and gives us a platform to identify and capitalize on emerging applications for photonics technology.

Orders from life and health sciences customers in the third quarter were 27.5 million, up 4.2% sequentially and 53.9% versus the third quarter of 2009. This significant growth was primarily driven by our business with bioinstrumentation OEM customers.

According to industry reports, the overall bioinstrumentation market has been growing between 7 to 9% over the past year. Our business with these customers has grown at a faster rate due to the collaborative design projects we have been engaged in over the last 24 months. We have now received production orders for these new products and so we expect to experience a degree of volatility in order activity in this market over the new few quarters.

Third quarter orders from industrial manufacturing customers were 20.6 million, up 7% sequentially and 50.7% from the third quarter of 2009. Our performance in this area included large OEM orders from photonics industry manufacturers and orders of our advanced packaging systems for the automated assembly of complex electronic devices.

We continue to benefit from the overall recovery in the industrial market. In our broad and deep portfolio enables us to participate in a wide range of applications that deploy photonics technology.

We historically expect trends in this market to move in the general direction of the overall economy. Although over the past four quarters, our industrial business has grown at a much faster rate than the macroeconomic environment would suggest.

The summary of this brief review is that demand for our products remained strong across all of our target markets and we have capitalized on this opportunity to produce significant revenue and earnings growth.

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