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Nova Announces 2015 Full-Year Results

Rehovot, Israel, February 17, 2016

Record Annual Revenues of $148.5 million

Annual Non-GAAP Net Income of $21.0 million

Rehovot, Israel, February 17, 2016 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 2015 full-year results. The company closed the acquisition of ReVera on April 2, 2015. Accordingly, the company’s fourth quarter and annual results include the contribution of ReVera, with no similar contribution in some of the previous periods.

Fourth Quarter 2015 Highlights:

  • Revenues of $40.0 million, at the high end of the guidance ($37-$41 million)
  • Non-GAAP net income of $5.3 million, or $0.19 per diluted share, at the high end of guidance ($0.11-$0.20 per diluted share)
  • Diversified customer mix yielded four customers contributing more than 10% each                to the quarterly revenues, including one leading memory customer
  • Selected by the world’s leading foundry to deliver Optical and X-ray metrology solutions for multiple process steps at 10/7/5nm technology nodes

Full Year 2015 Highlights:

  • Record full-year revenues of $148.5 million
  • Non-GAAP net income of $21.0 million, or $0.76 per diluted share
  • Five customers contributed 10% or more to annual product revenues, compared to                       only two in 2014
  • Product revenues from the Memory segment grew to 30% of annual product revenues, compared to only 15% in 2014
  • Growing customers’ adoption of Nova’s software solutions generated 104% increase in annual software revenues
  • Creating a unique offering with the successful integration of ReVera
GAAP Results ($K)
Q4 2015 Q3 2015 Q4 2014 FY 2015 FY 2014
Revenues $40,022 $40,446 $25,823 $148,514 $120,618
Net Income $5,161 $5,437 $3,291 $15,725 $18,652
Earnings per Diluted Share $0.19 $0.20 $0.12 $0.57 $0.67
NON-GAAP Results ($K)
Q4 2015 Q3 2015 Q4 2014 FY 2015 FY 2014
Net Income $5,278 $6,316 $2,259 $21,030 $19,150
Earnings per Diluted Share $0.19 $0.23 $0.08 $0.76 $0.69

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, deferred tax assets adjustments (net), stock-based compensation expenses and acquisition related expenses.

Management Comments
“The fourth quarter results represent a strong finish to a record year, with revenues and net income at the high end of our guidance,” commented Eitan Oppenhaim, President and Chief Executive Officer of Nova. “Our annual achievements demonstrate once again our ability to execute upon our strategic initiatives, while improving our products and customers diversification and maintaining a solid operational model. Today, Nova’s industry leading position is supported by a growing base of customers that are embracing our ability to deliver best-in-class optical and x-ray suit of products, augmented by advanced software and modeling solutions. With these solid results, we are well positioned to win more opportunities in the market, setting the stage for Nova’s continued growth in the coming years.”

2016 First Quarter Financial Outlook
Management provided an outlook for the first quarter, the period ending March 31, 2016.
Based on current estimates, management expects:

  • $33 million to $37 million in revenue
  • $0.10 to $0.17 in diluted non-GAAP EPS
  • $0.06 to $0.11 in diluted GAAP EPS

2015 Fourth Quarter Results
Total revenues for the fourth quarter of 2015 were $40.0 million, decrease of 1% compared to the third quarter of 2015, and an increase of 55% relative to the fourth quarter of 2014.

Gross margin for the fourth quarter of 2015 was 52%, and included $1.1 million of amortization of acquired intangible assets in cost of product. This is compared with 56% in the third quarter of 2015 and compared with 52% in the fourth quarter of 2014.

Operating expenses in the fourth quarter of 2015 were $17.3 million, and included $0.4 million of amortization of acquired intangible assets. This is compared with $17.4 million in the third quarter of 2015 and compared to $11.9 million in the fourth quarter of 2014.

On a GAAP basis, the company reported net income of $5.2 million, or $0.19 per diluted share, in the fourth quarter of 2015. This is compared with net income of $5.4 million, or $0.20 per diluted share, in the third quarter of 2015. The company reported net income of $3.3 million, or $0.12 per diluted share, in the fourth quarter of 2014.

On a Non-GAAP basis, which excludes amortization of acquired intangible assets, adjustments of deferred tax assets and stock-based compensation expenses, the company reported net income of $5.3 million, or $0.19 per diluted share, in the fourth quarter of 2015. This is compared net income of $6.3 million, or $0.23 per diluted share, in the third quarter of 2015 and to net income of $2.3 million, or $0.08 per diluted share, in the fourth quarter of 2014.

2015 Full Year Results
Total revenues for 2015 were $148.5 million, an increase of 23% compared to total revenues of $120.6 million for 2014.

Gross margin in 2015 was 52%, and included $3.5 million of amortization of acquired intangible assets in cost of product. This is compared with gross margin of 53% in 2014.

Operating expenses in 2015 were $65.5 million, and included $2.7 million of acquisition related expenses and $1.5 million of amortization of acquired intangible assets. This is compared with operating expenses of $46.7 in 2014.

On a GAAP basis, the company reported net income of $15.7 million, or $0.57 per diluted share, in 2015. This is compared with net income of $18.7 million, or $0.67 per diluted share, in 2014.

On a Non-GAAP basis, which excludes amortization of acquired intangible assets, adjustments of deferred tax assets, stock-based compensation expenses and acquisition related expenses, the company reported net income of $21.0 million, or $0.76 per diluted share, in 2015. This is compared with net income of $19.2 million, or $0.69 per diluted share, in 2014.

Total cash reserves at the end of 2015 were $97.8 million, compared to $123.7 million at the end of 2014.

Conference Call Information
Nova will host a conference call on Wednesday, February 17, 2016 at 4:30 p.m. Eastern Time, to discuss the fourth quarter results and future outlook.

To attend the conference call, please dial one of the following teleconferencing numbers. Please begin by placing your calls 5 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:  1-888-401-4668
ISRAEL Dial-in Number:  1 80 924 5906
INTERNATIONAL Dial-in Number:  1-719-457-2083

At:
4:30 p.m. Eastern Time
1:30 p.m. Pacific Time
11:30 p.m. Israeli Time
Please reference conference ID 2897451

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 Ltd. 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 non-cash charges for amortization of acquired intangible assets, deferred tax assets adjustments (net), stock-based compensation expenses and acquisition related expenses 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; changes in tax requirements; 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, 2014 filed with the Securities and Exchange Commission on February 25, 2015. 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 2015 2014 (Audited)
Current assets
Cash and cash equivalents 27,733 13,649
Short-term interest-bearing bank deposits 69,298 107,289
Held for trading securities 1,995
Trade accounts receivable 19,046 15,566
Inventories 27,683 16,107
Deferred tax assets 3,540 142
Other current assets 2,888 3,097
Total current assets 150,188 157,845
Long-term assets
Long-term interest-bearing bank deposits 750 750
Deferred tax assets 5,735 1,654
Severance pay funds 1,514 1,580
Property and equipment, net 11,062 11,450
Identifiable intangible assets, net 17,906
Goodwill 20,114
Total long-term assets 57,081 15,434
Total assets 207,269 173,279
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Trade accounts payable 14,378 11,568
Deferred revenues 5,828 3,022
Deferred tax liabilities 956
Other current liabilities 15,996 12,606
Total current liabilities 37,158 27,196
Long-term liabilities
Deferred tax liabilities 5,760
Liability for employee severance pay 2,469 2,465
Other long-term liabilities 822
Deferred revenues   36
Total long-term liabilities 9,051 2,501
Shareholders’ equity 161,060 143,582
Total liabilities and shareholders’ equity 207,269 173,279

 

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,
2015   2014   2015   2014

(Audited)

Revenues:
Products 30,581   17,260   111,178   92,208 
Services 9,441   8,563   37,336   28,410 
Total revenues 40,022   25,823   148,514   120,618 
Cost of revenues:
Products 12,593   7,394   47,185   39,784
Services 5,524   4,967   20,743   17,221
Amortization of acquired intangible

  assets in cost of products

1,051     3,506  
Total cost of revenues 19,168   12,361   71,434   57,005
Gross profit 20,854   13,462   77,080   63,613
Operating expenses:
Research and Development expenses, net 10,826   7,935   39,703   29,498
Sales and Marketing expenses 4,474   2,948   15,768   12,747
General and Administration expenses 1,606   981   5,856   4,457
Acquisition related expenses     2,655  
Amortization of acquired intangible assets 378     1,517  
Total operating expenses 17,284   11,864   65,499   46,702
Operating income 3,570   1,598   11,581   16,911
Financing income, net 184   166   643   563
Income before tax on income 3,754   1,764   12,224   17,474
Income tax benefit 1,407   1,527   3,501   1,178
Net income for the period 5,161   3,291   15,725   18,652
Earnings per share:
Basic 0.19   0.12   0.58   0.68
Diluted 0.19   0.12   0.57   0.67
Shares used for calculation of earnings per share:
Basic 27,073   27,273   27,185   27,447
Diluted 27,334   27,491   27,510   27,807

 

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,

2015   2014   2015   2014

(Audited)

Cash flows from operating activities:
Net income for the period 5,161   3,291   15,725   18,652
Adjustments to reconcile net income to net cashprovided by operating activities:
Depreciation 1,288   1,005   4,597   3,951
Amortization of acquired intangible assets 1,429   –     5,023   –  
Amortization of deferred stock-based compensation 765   510   2,673   2,124
Increase (decrease) in liability for employee termination

    benefits, net

35   (42)   70   (71)
Deferred tax assets, net (2,077)   (1,542)   (5,046)   (1,626)
Gain (loss) on securities (23)   175   (10)   175
Decrease (increase) in trade accounts receivable 4,297   7,208   (1,959)   12,381
Decrease (increase) in inventories 745   935   (1,949)   2,226
Decrease (increase) in other current assets 872   (386)   370   408
Increase (decrease) in trade accounts payable 1,469   2,674   1,604   (4,038)
Increase (decrease) in other current liabilities and

   other long-term liabilities

683   (438)   3,329   64
Increase (decrease) in short and long term deferred

   revenues

(1,928)   (1,127)   1,361   (703)
Net cash provided by operating activities 12,716   12,263   25,788   33,543
Cash flow from investment activities:
Decrease (increase) in short-term interest-bearing

   bank deposits

(10,045)   (7,295)   37,991   (27,737)
Proceeds from short-term available for sale securities   1,617     1,617
Investment in short-term held for trading securities   (1,942)     (1,942)
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 (2,205)   (1,693)   (4,373)   (5,234)
Net cash used in investment activities (10,245)   (9,313)   (9,721)   (33,296)
Cash flows from financing activities:
Purchases of treasury shares   (2,450)   (4,302)   (6,726)
Shares issued under employee stock-based plans 232     2,319   2,586
Net cash provided by (used in) financing activities 232   (2,450)   (1,983)   (4,140)
Increase (decrease) in cash and cash equivalents 2,703   500   14,084   (3,893)
Cash and cash equivalents – beginning of period 25,030   13,149   13,649   17,542
Cash and cash equivalents – end of period 27,733     13,649   27,733   13,649

 

NOVA MEASURING INSTRUMENTS LTD.

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(U.S. dollars in thousands, except percentage) – (Unaudited)

Three months ended
December

31, 2015

  September

30, 2015

  December

31, 2014

GAAP cost of revenues 19,168   17,812   12,361
 Amortization of acquired intangible assets in cost of products (1,051)   (13)  
 Stock-based compensation in cost of products (94)   (109)   (78)
 Stock-based compensation in cost of services (63)   (62)   (28)
Non-GAAP cost of revenues 17,960   17,628   12,255
GAAP gross profit 20,854   22,634   13,462
Gross profit adjustments 1,208   184   106
Non-GAAP gross profit 22,062   22,818   13,568
GAAP gross margin as a percentage of revenues 52%   56%   52%
Non-GAAP gross margin as a percentage of revenues 55%   56%   53%
GAAP operating expenses 17,284   17,385   11,864
 Stock-based compensation in Research and Development (322)   (318)   (184)
 Stock-based compensation in Sales and Marketing (213)   (205)   (160)
 Stock-based compensation in General and Administrative (73)   (84)   (60)
 Amortization of acquired intangible assets (378)   (570)  
Non-GAAP operating expenses 16,298   16,208   11,460
Non-GAAP operating income 5,764   6,610   2,108
GAAP operating margin as a percentage of revenues 9%   13%   6%
Non-GAAP operating margin as a percentage of revenues 14%   16%   8%
GAAP tax on income (1,407)   (94)   (1,527)
 Deferred tax assets adjustments, net 2,077   482   1,542
Non-GAAP tax on income 670   388   15
GAAP net income 5,161   5,437   3,291
 Amortization of acquired intangible assets 1,429   583  
 Stock-based compensation expenses 765   778   510
 Deferred tax assets adjustments, net (2,077)   (482)   (1,542)
Non-GAAP net income 5,278   6,316   2,259
GAAP basic earnings per share 0.19   0.20   0.12
Non-GAAP basic earnings per share 0.19   0.23   0.08
GAAP diluted earnings per share 0.19   0.20   0.12
Non-GAAP diluted earnings per share 0.19   0.23   0.08
Shares used for calculation of earnings per share:
 Basic 27,073   27,172   27,273
 Diluted 27,334   27,481   27,491

 

NOVA MEASURING INSTRUMENTS LTD.

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(U.S. dollars in thousands, except percentage) – (Unaudited)

Year ended December 31,
2015   2014
GAAP cost of revenues 71,434   57,005
 Amortization of acquired intangible assets in cost of products (3,506)  
 Stock-based compensation in cost of products (373)   (375)
 Stock-based compensation in cost of services (203)   (178)
Non-GAAP cost of revenues 67,352   56,452
GAAP gross profit 77,080   63,613
Gross profit adjustments 4,082   553
Non-GAAP gross profit 81,162   64,166
GAAP gross margin as a percentage of revenues 52%   53%
Non-GAAP gross margin as a percentage of revenues 55%   53%
GAAP operating expenses 65,499   46,702
 Stock-based compensation in Research and Development (1,084)   (870)
 Stock-based compensation in Sales and Marketing (744)   (446)
 Stock-based compensation in General and Administrative (269)   (255)
 Acquisition related expenses (2,655)  
 Amortization of acquired intangible assets (1,517)  
Non-GAAP operating expenses 59,230   45,131
Non-GAAP operating income 21,932   19,035
GAAP operating margin as a percentage of revenues 8%   14%
Non-GAAP operating margin as a percentage of revenues 15%   16%
GAAP tax on income (3,501)   (1,178)
 Deferred tax assets adjustments, net 5,046   1,626
Non-GAAP tax on income 1,545   448
GAAP net income 15,725   18,652
 Amortization of acquired intangible assets 5,023  
 Stock-based compensation expenses 2,673   2,124
 Deferred tax assets adjustments, net (5,046)   (1,626)
 Acquisition related expenses 2,655  
Non-GAAP net income 21,030   19,150
GAAP basic earnings per share 0.58   0.68
Non-GAAP basic earnings per share 0.77   0.70
GAAP diluted earnings per share 0.57   0.67
Non-GAAP diluted earnings per share 0.76   0.69
Shares used for calculation of earnings per share:
 Basic 27,185   27,447
 Diluted 27,510   27,807
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