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Date: November 2, 2016

NOVA MEASURING INSTRUMENTS LTD. (Registrant) By: /s/ Dror David —————————————— Dror David Chief Financial Officer

 

 

Company Contact: Dror David, Chief Financial Officer Nova Measuring Instruments Ltd. Tel: +972-73-229-5760 E-mail: info@novameasuring.com www.novameasuring.com

Investor Relations Contacts: Hayden/ MS-IR LLC Miri Segal Tel: +917-607-8654 E-mail: msegal@ms-ir.com Or Brett Maas Tel: +646-536-7331 E-mail: brett@haydenir.com

 

 

Nova Reports Record Revenues for Third Quarter 2016

Expecting 4^th 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

 

 

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.

 

 

 

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)

 

(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

 

 

 (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

(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

(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