PORTLAND, Ore., May 09, 2017 (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 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 )

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  

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  

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 )

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  

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

 
Brian Smith ESI503-672-5760smithb@esi.com

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