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Nova Reports Record Fourth Quarter and Full Year 2016 Results

Rehovot, Israel, , February 14, 2017

Record Full-Year Revenue of $163.9 Million

Full-Year GAAP Net Income of $9.6 Million

Record Full-Year Non-GAAP Net Income of $30.3 Million

Rehovot, Israel, February 14, 2017 Nova Measuring Instruments (Nasdaq: NVMI), a leading innovator and a key provider of metrology solutions for advanced process control used in semiconductor manufacturing, today reported record financial results for the fourth quarter and full year 2016, the periods ended December 31, 2016.

Fourth Quarter 2016 Highlights:

  • Record quarterly revenue of $50.2 million, up 14% sequentially and 25% year-over-year, significantly exceeding guidance of $42 to $46 million and as preannounced on January 26, 2017
  • GAAP net income of $8.4 million, or $0.30 per diluted share, up 58% year-over-year on a per-share basis, exceeding guidance of $0.23 to $0.29 per share
  • Non-GAAP net income of $11.7 million, or $0.42 per diluted share, up 24% sequentially and 121% year-over-year on a per-share basis, exceeding guidance of $0.31 to $0.40 per share
  • Received over $10 million in XPS orders from multiple foundry customers
  • Received multiple orders from leading 3D-NAND manufacturers

Full Year 2016 Highlights:

  • Record full-year revenue of $163.9 million, up 10% year-over-year
  • GAAP net income of $9.6 million, or $0.35 per diluted share, including non-recurring expense of $12.9 million related to royalty payment to the Israeli Office of the Chief Scientist
  • Record non-GAAP net income of $30.3 million, or $1.10 per diluted share, up 44% year-over-year on a per-share basis
  • Diversified customer mix yielded four customers contributing more than 10% each to the annual product revenues
GAAP Results ($K)
Q4 2016 Q3 2016 Q4 2015 FY 2016 FY 2015
Revenues $50,212 $44,060 $40,022 $163,903 $148,514
Net Income (Loss) $8,364 $(4,778) $5,161 $9,644 $15,725
Earnings (Loss) per Diluted Share $0.30 $(0.18) $0.19 $0.35 $0.57
NON-GAAP Results ($K)
Q4 2016 Q3 2016 Q4 2015 FY 2016 FY 2015
Net Income $11,719 $9,449 $5,278 $30,321 $21,030
Earnings per Diluted Share $0.42 $0.34 $0.19 $1.10 $0.76

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, acquisition related expenses, expense related to royalty buyout agreement with the Office of the Chief Scientist and inventory write-off.

Management Comments
“The fourth quarter was an outstanding conclusion to another record year, demonstrating our ability to execute our growth plans effectively while improving our customer diversification and operational model,” commented Eitan Oppenhaim, President and Chief Executive Officer of Nova. “We believe that the strong end to 2016 sets us on course for another growth year in 2017, bolstered by growing demand for our entire product portfolio, combining dimensions and materials metrology solutions. The strength of our business, as evidenced by our strong guidance for the first quarter, will continue into 2017 as we continue to secure wins from multiple customers in various industry segments.”

Mr. Oppenhaim continued, “Nova’s broad offering, which is embraced by our diversified customer base, allows us today to address a wider range of challenges that generate more opportunities for us to grow in 2017. During our continued growth, we have leveraged our proven business model to drive record profits, as evidenced by the significant increase in full-year non-GAAP net income. We expect to continue to benefit from our efficient business model in the coming years, leading to continued profitable growth.”  

2017 First Quarter Financial Outlook
Management provided an outlook for the first quarter, the period ending March 31, 2017. Based on current estimates, management expects:

  • $50 million to $54 million in revenue
  • $0.31 to $0.39 in diluted GAAP EPS
  • $0.37 to $0.45 in diluted non-GAAP EPS

2016 Fourth Quarter Results
Total revenues for the fourth quarter of 2016 were $50.2 million, in line with the results announced on January 26, 2017. Sequentially, this represented an increase of 14% compared to the third quarter of 2016, and an increase of 25% relative to the fourth quarter of 2015.

Gross margin for the fourth quarter of 2016 was 56%, compared sequentially with gross margin of 22% in the third quarter of 2016 (which included a non-recurring expense related to royalty buyout agreement) and compared with gross margin of 52% in the fourth quarter of 2015.

Operating expenses in the fourth quarter of 2016 were $17.4 million. This is compared with $16.6 million in the third quarter of 2016 and compared with $17.3 million in the fourth quarter of 2015.

On a GAAP basis, the company reported net income of $8.4 million, or $0.30 per diluted share, in the fourth quarter of 2016. This is compared with a net loss of $4.8 million, or $0.18 per diluted share, in the third quarter of 2016. The company reported net income of $5.2 million, or $0.19 per diluted share, in the fourth quarter of 2015.

On a non-GAAP basis, which excludes amortization of acquired intangible assets, net adjustments of deferred tax assets and stock-based compensation expenses, the company reported net income of $11.7 million, or $0.42 per diluted share, in the fourth quarter of 2016. This is compared with net income of $9.4 million, or $0.34 per diluted share, in the third quarter of 2016, and compared with net income of $5.3 million, or $0.19 per diluted share, in the fourth quarter of 2015.

Cash utilization in the fourth quarter was higher than normal mainly due to the timing of shipments during the quarter, and management expects the first quarter of 2017 to include higher than normal cash generation.

 

2016 Full Year Results
Total revenues for 2016 were $163.9 million, an increase of 10% compared to total revenues of $148.5 million for 2015.

Gross margin in 2016 was 46%, and included $12.9 million of non-recurring expense related to royalty buyout agreement. This is compared with gross margin of 52% in 2015.

Operating expenses in 2016 were $65.1 million, compared with operating expenses of $65.5 million in 2015.

On a GAAP basis, which included $12.9 million of expense related to a royalty buyout agreement with the Office of the Chief Scientist, the company reported net income of $9.6 million, or $0.35 per diluted share, in 2016. This is compared with a net income of $15.7 million, or $0.57 per diluted share, in 2015.

On a non-GAAP basis, which excludes amortization of acquired intangible assets, net adjustments of deferred tax assets, stock-based compensation expenses, expense related to a royalty buyout agreement with the Office of the Chief Scientist and inventory write-off, the company reported net income of $30.3 million, or $1.10 per diluted share, in 2016. This is compared with net income of $21.0 million, or $0.76 per diluted share, in 2015.

Total cash reserves at the end of 2016 were $91.7 million, compared to $97.8 million at the end of 2015.

Conference Call Information
Nova will host a conference call today, February 14, 2017, at 9 a.m. Eastern Time, to discuss the financial results and future 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: 1-888-244-2417
ISRAEL Dial-in Number: 1 80 925 8350
INTERNATIONAL Dial-in Number: 1-913-312-0966

At:
9 a.m. Eastern Time
6 a.m. Pacific Time
4 p.m. Israeli Time
Please reference conference ID 3628025

The conference call will also be webcast live from a link on Nova’s website at http://ir.novameasuring.com. For those unable to participate in the conference call, there will be a replay available from a link on Nova’s website at http://ir.novameasuring.com.

About Nova: Nova Measuring Instruments 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, acquisition related expenses, 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 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, 2015 filed with the Securities and Exchange Commission on February 29, 2016. 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  December 31,
ASSETS 2016 2015
Current assets
Cash and cash equivalents 20,406 27,733
Short-term interest-bearing bank deposits 70,546 69,298
Trade accounts receivable 42,626 19,046
Inventories 29,260 27,683
Deferred tax assets 3,540
Other current assets 5,068 2,888
Total current assets 167,906 150,188
Long-term assets
Long-term interest-bearing bank deposits 750 750
Deferred tax assets 3,020 5,735
Severance pay funds 1,425 1,514
Property and equipment, net 10,017 11,062
Identifiable intangible assets, net 15,361 17,906
Goodwill 20,114 20,114
Total long-term assets 50,687 57,081
Total assets 218,593 207,269

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Trade accounts payable 16,501 14,378
Deferred revenues 4,072 5,828
Deferred tax liabilities 956
Other current liabilities 18,461 15,996
Total current liabilities 39,034 37,158
Long-term liabilities
Deferred tax liabilities 1,094 5,760
Liability for employee severance pay 2,418 2,469
Other long-term liabilities 1,330 822
Total long-term liabilities 4,842 9,051
Shareholders’ equity 174,717 161,060
Total liabilities and shareholders’ equity 218,593 207,269

 

NOVA MEASURING INSTRUMENTS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

Three months ended

December 31,

Year ended

December 31,

2016 2015 2016 2015
Revenues:
Products 39,806 30,581 122,439 111,178
Services 10,406 9,441 41,464 37,336
Total revenues 50,212 40,022 163,903 148,514
Cost of revenues:
Products 15,497 12,593 48,577 47,185
Services 6,557 5,524 25,282 20,743
Expense related to royalty buyout agreement with the Office of the Chief Scientist –   –   12,875 –  
Inventory write-off –   –   1,889 –  
Amortization of acquired intangible assets in cost of products –   1,051 –   3,506
Total cost of revenues 22,054 19,168 88,623 71,434
Gross profit 28,158 20,854 75,280 77,080
Operating expenses:
Research and development expenses, net 9,225 10,826 34,998 39,703
Sales and marketing expenses 5,814 4,474 20,736 15,768
General and administration expenses 1,702 1,606 6,835 5,856
Acquisition related expenses –   –   –   2,655
Amortization of acquired intangible assets 636 378 2,545 1,517
Total operating expenses 17,377 17,284 65,114 65,499
Operating income 10,781 3,570 10,166 11,581
Financing income, net 190 184 1,216 643
Income before tax on income 10,971 3,754 11,382 12,224
Income tax expenses (benefit) 2,607 (1,407) 1,738 (3,501)
Net income for the period 8,364 5,161 9,644 15,725
Earnings per share:
Basic 0.31 0.19 0.35 0.58
Diluted 0.30 0.19 0.35 0.57
Shares used for calculation of earnings per share:
Basic 27,292 27,073 27,175 27,185
Diluted 27,704 27,334 27,503 27,510

 

NOVA MEASURING INSTRUMENTS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

Three months ended

December 31,

Year ended

December 31,

2016 2015 2016 2015
Cash flows from operating activities:
Net income for the period 8,364 5,161 9,644 15,725
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation 731 1,288 4,271 4,597
Amortization of acquired intangible assets 636 1,429 2,545 5,023
Amortization of deferred stock-based compensation 691 765 2,735 2,673
Increase (decrease) in liability for employee termination benefits, net (57) 35 38 70
Deferred tax assets, net 2,028 (2,077) 633 (5,046)
Loss on securities (23) (10)
Decrease (increase) in trade accounts receivable (19,068) 4,297 (23,580) (1,959)
Decrease (increase) in inventories (335) 745 (1,670) (1,949)
Decrease (increase) in other current and long term assets (1,885) 872 (2,180) 370
Increase in trade accounts payable 4,127 1,469 2,123 1,604
Increase in other current liabilities and other long-term liabilities 3,601 683 3,037 3,329
Increase (decrease) in short and long term deferred revenues (351) (1,928) (1,756) 1,361
Net cash provided by (used in) operating activities (1,518) 12,716 (4,160) 25,788
Cash flow from investment activities:
Decrease (increase) in short-term interest-bearing bank deposits (998) (10,045) (1,248) 37,991
Proceeds from short-term held for trading securities 2,005 2,005
Acquisition of subsidiary, net of acquired cash (45,344)
Additions to property and equipment (1,518) (2,205) (3,133) (4,373)
Net cash used in investment activities (2,516) (10,245) (4,381) (9,721)
Cash flows from financing activities:
Purchases of treasury shares (937) (4,302)
Shares issued under employee stock-based plans 786 232 2,151 2,319
Net cash provided by (used in) financing activities 786 232 1,214 (1,983)
Increase (decrease) in cash and cash equivalents (3,248) 2,703 (7,327) 14,084
Cash and cash equivalents – beginning of period 23,654 25,030 27,733 13,649
Cash and cash equivalents – end of period 20,406 27,733 20,406 27,733

 

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
December  31,
2016
September  30,
2016
December  31,
2015
GAAP cost of revenues 22,054 34,367 19,168
 Amortization of acquired intangible assets in cost of products (1,051)
 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 (88) (79) (94)
 Stock-based compensation in cost of services (54) (52) (63)
Non-GAAP cost of revenues 21,912 19,472 17,960
GAAP gross profit 28,158 9,693 20,854
Gross profit adjustments 142 14,895 1,208
Non-GAAP gross profit 28,300 24,588 22,062
GAAP gross margin as a percentage of revenues 56% 22% 52%
Non-GAAP gross margin as a percentage of revenues 56% 56% 55%
GAAP operating expenses 17,377 16,640 17,284
 Stock-based compensation in research and development (247) (200) (322)
 Stock-based compensation in sales and marketing (211) (226) (213)
 Stock-based compensation in general and administrative (91) (82) (73)
 Amortization of acquired intangible assets (636) (637) (378)
Non-GAAP operating expenses 16,192 15,495 16,298
Non-GAAP operating income 12,108 9,093 5,764
GAAP operating margin as a percentage of revenues 21% (16%) 9%
Non-GAAP operating margin as a percentage of revenues 24% 21% 14%
GAAP tax on income 2,607 (1,868) (1,407)
 Deferred tax assets adjustments, net (2,028) 1,813 2,077
Non-GAAP tax on income 579 (55) 670
GAAP net income (loss) 8,364 (4,778) 5,161
 Amortization of acquired intangible assets 636 637 1,429
 Expense related to royalty buyout agreement with the Office of   the Chief Scientist 12,875
 Stock-based compensation expenses 691 639 765
 Deferred tax assets adjustments, net 2,028 (1,813) (2,077)
 Inventory write-off 1,889
Non-GAAP net income 11,719 9,449 5,278
GAAP basic earnings (loss) per share 0.31 (0.18) 0.19
Non-GAAP basic earnings per share 0.43 0.35 0.19
GAAP diluted earnings (loss) per share 0.30 (0.18) 0.19
Non-GAAP diluted earnings per share 0.42 0.34 0.19
Shares used for calculation of earnings (loss) per share:
 Basic 27,292 27,169 27,073
 Diluted 27,704 27,536 27,334

 

NOVA MEASURING INSTRUMENTS LTD.

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

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

Year ended December 31,
2016 2015
GAAP cost of revenues 88,623 71,434
 Amortization of acquired intangible assets in cost of products (3,506)
 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 (342) (373)
 Stock-based compensation in cost of services (218) (203)
Non-GAAP cost of revenues 73,299 67,352
GAAP gross profit 75,280 77,080
Gross profit adjustments 15,324 4,082
Non-GAAP gross profit 90,604 81,162
GAAP gross margin as a percentage of revenues 46% 52%
Non-GAAP gross margin as a percentage of revenues 55% 55%
GAAP operating expenses 65,114 65,499
 Stock-based compensation in research and development (983) (1,084)
 Stock-based compensation in sales and marketing (884) (744)
 Stock-based compensation in general and administrative (308) (269)
 Acquisition related expenses (2,655)
 Amortization of acquired intangible assets (2,545) (1,517)
Non-GAAP operating expenses 60,394 59,230
Non-GAAP operating income 30,210 21,932
GAAP operating margin as a percentage of revenues 6% 8%
Non-GAAP operating margin as a percentage of revenues 18% 15%
GAAP tax on income 1,738 (3,501)
 Deferred tax assets adjustments, net (633) 5,046
Non-GAAP tax on income 1,105 1,545
GAAP net income 9,644 15,725
 Amortization of acquired intangible assets 2,545 5,023
 Expense related to royalty buyout agreement with the Office of   the Chief Scientist   12,875
 Stock-based compensation expenses 2,735 2,673
 Deferred tax assets adjustments, net     633 (5,046)
 Inventory write-off 1,889
 Acquisition related expenses 2,655
Non-GAAP net income 30,321 21,030
GAAP basic earnings per share 0.35 0.58
Non-GAAP basic earnings per share 1.12 0.77
GAAP diluted earnings per share 0.35 0.57
Non-GAAP diluted earnings per share 1.10 0.76
Shares used for calculation of earnings per share:
 Basic 27,175 27,185
 Diluted 27,503 27,510
Company Contact:
Dror David, Chief Financial Officer
Nova Measuring Instruments Ltd.
Tel: +972-73-229-5760
E-mail: info@novami.com
www.novami.com
Investor Relations Contacts:
Miri Segal
MS-IR LLC
Tel: +917-607-8654
E-mail: msegal@ms-ir.com