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Nova Reports Record Revenues for Third Quarter 2016

REHOVOT, Israel, November 2, 2016

Expecting 4th Consecutive Record Revenue Year

Rehovot, Israel, November 2, 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 financial results for the third quarter of 2016, the period ended September 30, 2016.

Third Quarter 2016 Highlights:

  • Quarterly revenues grew 24% sequentially to record high of $44.1 million, up 9% year over year, exceeding the high end of the guidance
  • GAAP net loss of $4.8 million, or $0.18 per diluted share, inclusive of the non-recurring expense of $12.9 million related to royalty payment to the Israeli Office of the Chief Scientist
  • Non-GAAP net income of $9.4 million, or $0.34 per diluted share, up 100% sequentially and 49% year over year, exceeding the high end of the guidance
  • Continued penetration into the memory segment yielded two leading memory customers contributing more than 10% each to the quarterly products revenues
GAAP Results ($K)
  Q3 2016 Q2 2016 Q3 2015
Revenues $44,060 $35,575 $40,446
Net Income (Loss) $(4,778) $3,153 $5,437
Earnings (Loss) per Diluted Share $(0.18) $0.11 $0.20
NON-GAAP Results ($K)
  Q3 2016 Q2 2016 Q3 2015
Net Income $9,449 $4,703 $6,316
Earnings per Diluted Share $0.34 $0.17 $0.23

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

Management Comments
“It was a strong and well-executed quarter for Nova as we delivered significant growth in revenue and non-gaap profitability, exceeding our guidance,” commented Eitan Oppenhaim, President and Chief Executive Officer of Nova. “Strong demand across the entire breadth of our product offering in multiple segments drove record quarterly revenue, reinforcing our confidence in a strong second-half and positions us for another growth year. We are encouraged by our expanding market position, as we continue to solidify our Foundry presence while making significant inroads into the Memory space. This progress is evident by this quarter’s diversified customer mix that included four customers contributing more than 10% each to the quarterly products revenues, including two leading memory customers.”

Mr. Oppenhaim added, “During the quarter we continued to leverage our financial strength to maximize shareholder value, signing a royalty buyout agreement with the Israeli Office of the Chief Scientist, eliminating approximately $24 million in future obligations. The agreement, coupled with our efficient operational model, will enhance our financial flexibility and will allow us to invest in sustainable, profitable growth. As evident from this quarter’s results, our efforts are already bearing fruit, demonstrating that we are on a clear path toward achieving our long-term profitability target.”

2016 Fourth Quarter Financial Outlook
Management provided an outlook for the fourth quarter, the period ending December 31, 2016. Based on current estimates, management expects:

  • $42 million to $46 million in revenue
  • $0.23 to $0.29 in diluted GAAP EPS
  • $0.31 to $0.40 in diluted non-GAAP EPS

2016 Third Quarter Results
Total revenues for the third quarter of 2016 were $44.1 million, an increase of 24% compared to the second quarter of 2016, and an increase of 9% relative to the third quarter of 2015.

Gross margin for the third quarter of 2016 was 22%, and included $12.9 million of expense related to royalty buyout agreement with the Office of the Chief Scientist (currently known as the National Authority for Technological Innovation) and $1.9 million of expense related to inventory write-off. This is compared with gross margin of 53% in the second quarter of 2016 and compared with gross margin of 56% in the third quarter of 2015.

Operating expenses in the third quarter of 2016 were $16.6 million. This is compared with $15.4 million in the second quarter of 2016 and compared with $17.4 million in the third quarter of 2015.

On a GAAP basis, which included $12.9 million of expense related to royalty buyout agreement with the Office of the Chief Scientist and $1.9 million of expense related to inventory write-off, the company reported net loss of $4.8 million, or $0.18 loss per diluted share, in the third quarter of 2016. This is compared with net income of $3.2 million, or $0.11 per diluted share, in the second quarter of 2016. The company reported net income of $5.4 million, or $0.20 per diluted share, in the third quarter of 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 royalty buyout agreement with the Office of the Chief Scientist and inventory write-off, the company reported net income of $9.4 million, or $0.34 per diluted share, in the third quarter of 2016. This is compared with net income of $4.7 million, or $0.17 per diluted share, in the second quarter of 2016, and compared with net income of $6.3 million, or $0.23 per diluted share, in the third quarter of 2015.

Conference Call Information
Nova will host a conference call today, November 2, 2016, 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: 1-888-428-9480
ISRAEL Dial-in Number: 1 80 924 6042
INTERNATIONAL Dial-in Number: 1-719-457-2628

At:
9 a.m. Eastern Time
6 a.m. Pacific Time
3 p.m. Israeli Time
Please reference conference ID 2393527

The conference call will also be webcast live 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
ASSETS  

September 30,

2016

 

December 31,

2015

(Audited)

Current assets        
Cash and cash equivalents   23,654   27,733
Short-term interest-bearing bank deposits   69,548   69,298
Trade accounts receivable   23,558   19,046
Inventories   28,889   27,683
Deferred tax assets   4,773   3,540
Other current assets   3,472   2,888
         
Total current assets   153,894   150,188
         
Long-term assets        
Long-term interest-bearing bank deposits   750   750
Deferred tax assets   5,284   5,735
Severance pay funds   1,485   1,514
Property and equipment, net   9,266   11,062
Identifiable intangible assets, net   15,997   17,906
Goodwill   20,114   20,114
         
Total long-term assets   52,896   57,081
         
Total assets   206,790   207,269

LIABILITIES AND SHAREHOLDERS’ EQUITY
       
Current liabilities        
Trade accounts payable   12,374   14,378
Deferred revenues   4,423   5,828
Deferred tax liabilities   1,064   956
Other current liabilities   15,352   15,996
         
Total current liabilities   33,213   37,158
         
Long-term liabilities        
Deferred tax liabilities   5,039   5,760
Liability for employee severance pay   2,535   2,469
Other long-term liabilities   921   822
         
Total long-term liabilities   8,495   9,051
         
Shareholders’ equity   165,082   161,060
         
Total liabilities and shareholders’ equity   206,790   207,269
         

 

NOVA MEASURING INSTRUMENTS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

  Three months ended   Nine months ended
  September 30,
2016
  September 30,
2015
  September 30,
2016
  September 30,
2015
               
Revenues:              
Products 32,944   30,412   82,633   80,597
Services 11,116   10,034   31,058   27,895
Total revenues 44,060   40,446   113,691   108,492
               
Cost of revenues:              
Products 13,127   12,610   33,080     34,592
Services 6,476   5,189   18,725   15,219
Expense related to royalty buyout agreement with the Office of the Chief Scientist 12,875   –     12,875   –  
Inventory write-off 1,889   –     1,889   –  
Amortization of acquired intangible assets in cost of products –     13   –     2,455
Total cost of revenues 34,367   17,812   66,569   52,266
               
Gross profit 9,693   22,634   47,122   56,226
               
Operating expenses:              
Research and development expenses, net 9,181   10,974   25,773   28,877
Sales and marketing expenses 5,020   4,228   14,922   11,294
General and administration expenses 1,802   1,613   5,133   4,250
Acquisition related expenses –     –     –     2,655
Amortization of acquired intangible assets 637   570   1,909   1,139
Total operating expenses 16,640   17,385   47,737   48,215
               
Operating income (loss) (6,947)   5,249   (615)   8,011
               
Financing income, net 301   94   1,026   459
               
Income (loss) before tax on income (6,646)   5,343   411   8,470
               
Income tax expenses (benefit) (1,868)   (94)   (869)   (2,094)
               
Net income (loss) for the period (4,778)   5,437   1,280   10,564
               
Earnings (loss) per share:              
Basic (0.18)   0.20   0.05   0.39  
Diluted (0.18)   0.20   0.05   0.38
               
Shares used for calculation of earnings (loss) per share:              
               
Basic 27,169   27,172   27,136   27,224
Diluted 27,169   27,481   27,361     27,507
             

 

NOVA MEASURING INSTRUMENTS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

  Three months ended   Nine months ended
  September 30, 2016   September 30, 2015   September 30, 2016   September 30, 2015
Cash flows from operating activities:              
Net income (loss) for the period (4,778)   5,437     1,280   10,564
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
             
Depreciation 1,191   1,103   3,540   3,309
Amortization of acquired intangible assets 637   583   1,909   3,594
Amortization of deferred stock-based compensation 639   778   2,044   1,908
Increase (decrease) in liability for employee termination benefits, net (1)   (49)   95   35
Deferred tax assets, net (1,813)   (482)   (1,395)   (2,969)
Loss on securities   81     13
Increase in trade accounts receivable (783)   (1,873)   (4,512)   (6,256)
Decrease (increase) in inventories 1,722   (1,431)   (1,335)   (2,694)
Increase in other current and long term assets (687)   (459)   (295)   (502)
Increase (decrease) in trade accounts payable (760)   (2,428)   (2,004)   135
Increase (decrease) in other current and other long-term liabilities 2,043  
1,964
  (564)   2,646
Increase (decrease) in short and long term deferred revenues 701   4,132   (1,405)   3,289
               
Net cash provided by (used in) operating activities (1,889)   7,356   (2,642)   13,072
               
Cash flow from investment activities:              
Decrease (increase) in short-term interest-bearing bank deposits 5,682  
(450)
  (250)   48,036
Acquisition of subsidiary, net of acquired cash       (45,344)
Additions to property and equipment (535)   (644)   (1,615)   (2,168)
               
Net cash provided by (used in) investment activities 5,147   (1,094)   (1,865)   524
               
Cash flows from financing activities:              
Purchases of treasury shares   (2,913)   (937)   (4,302)
Shares issued under employee stock-based plans 941   138   1,365   2,087
               
Net cash provided by (used in) financing activities 941   (2,775)   428   (2,215)
               
Increase (decrease) in cash and cash equivalents 4,199   3,487   (4,079)   11,381
Cash and cash equivalents – beginning of period 19,455   21,543   27,733   13,649
Cash and cash equivalents – end of period 23,654   25,030   23,654   25,030

 

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
  September  30,
2016
  June  30,
2016
  September  30,
2015
GAAP cost of revenues 34,367   16,676   17,812
 Amortization of acquired intangible assets in cost of products –     –     (13)
 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 (79)   (79)   (109)
 Stock-based compensation in cost of services (52)   (48)   (62)
Non-GAAP cost of revenues 19,472   16,549   17,628
           
GAAP gross profit 9,693   18,899   22,634
Gross profit adjustments 14,895   127   184
Non-GAAP gross profit 24,588   19,026   22,818
GAAP gross margin as a percentage of revenues 22%   53%   56%
Non-GAAP gross margin as a percentage of revenues 56%   53%   56%
           
GAAP operating expenses 16,640   15,376   17,385
 Stock-based compensation in research and development (200)   (230)   (318)
 Stock-based compensation in sales and marketing (226)   (237)   (205)
 Stock-based compensation in general and administrative (82)   (55)   (84)
 Amortization of acquired intangible assets (637)   (636)   (570)
Non-GAAP operating expenses 15,495   14,218   16,208
Non-GAAP operating income 9,093   4,808   6,610
GAAP operating margin as a percentage of revenues (16%)   10%   13%
Non-GAAP operating margin as a percentage of revenues 21%   14%   16%
           
GAAP tax on income (1,868)   626   (94)
 Deferred tax assets adjustments, net 1,813   (265)   482
Non-GAAP tax on income (55)   361   388
           
GAAP net income (loss) (4,778)   3,153   5,437
 Amortization of acquired intangible assets 637   636   583
 Expense related to royalty buyout agreement with the Office of the Chief Scientist   12,875    
 Stock-based compensation expenses 639   649   778
 Deferred tax assets adjustments, net (1,813)   265   (482)
 Inventory write-off 1,889    
Non-GAAP net income 9,449   4,703   6,316
           
GAAP basic earnings (loss) per share (0.18)   0.12   0.20
Non-GAAP basic earnings per share 0.35   0.17   0.23
           
GAAP diluted earnings (loss) per share (0.18)   0.11   0.20
Non-GAAP diluted earnings per share 0.34   0.17   0.23
           
Shares used for calculation of earnings (loss) per share:          
 Basic 27,169   27,123   27,172
 Diluted 27,536   27,422   27,481
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