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Rudolph Technologies Reports 2016 Second Quarter Results

  • Strong Lithography Sales Drive Record Quarterly Revenue
  • Earnings Exceed Guidance
Thursday, July 28, 2016 4:05 pm EDT

Public Company Information:

NYSE:
RTEC

WILMINGTON, Mass.--(BUSINESS WIRE)--Rudolph Technologies, Inc. (NYSE: RTEC), a leading provider of process characterization equipment, lithography equipment and software for wafer fabs and advanced packaging facilities, today announced financial results for the 2016 second quarter.

2016 Second Quarter Financial Highlights

  • Second quarter revenue of $62.7 million, a quarterly record, increased 15 percent sequentially and was at the high end of the Company’s guidance.
  • Record quarter for Lithography Systems Group, driven by both display and advanced packaging stepper shipments.
  • Gross margins improved to 55 percent for the quarter, compared with 53 percent for the previous quarter.
  • GAAP net income of $7.6 million, or $0.24 per diluted share; Non-GAAP net income of $9.9 million, or $0.31 per diluted share, exceeded Company guidance and marked the third best quarter in the Company’s history.
  • Cash and marketable securities increased $14.9 million, ending the quarter at $163.1 million.
  • Strong software sales comprised 12 percent of revenue.
 
Key Financial Data for the Quarters Ended June 30, 2016, March 31, 2016
and June 30, 2015
(in thousands, except per share amounts)
 
US GAAP
   

June 2016

   

March 2016

   

June 2015

Revenue $ 62,701 $ 54,362 $ 59,466
Gross profit margin 54.5% 53.4% 53.6%
Operating income $ 12,231 $ 21,137 $ 9,829
Net income $ 7,601 $ 13,939 $ 6,027
Net income per diluted share $ 0.24 $ 0.44 $ 0.19
 
US NON-GAAP

June 2016

March 2016

June 2015

Revenue $ 62,701 $ 54,362 $ 59,466
Gross profit margin 54.6% 53.5% 53.7%
Operating income $ 15,307 $ 9,570 $ 12,170
Net income $ 9,864 $ 5,742 $ 7,582
Net income per diluted share $ 0.31 $ 0.18 $ 0.23
 

Michael Plisinski, chief executive officer, commented, “We delivered strong financial results for the second quarter across a number of key metrics including revenue, gross margin, and operating income; on a sequential basis, revenue increased 15 percent, gross margins expanded 110 basis points, our strong operating leverage resulted in a non-GAAP net income that substantially improved by 72 percent, and earnings per share grew by $0.13. In addition, the shipment of a tool for R&D of next generation AMOLED displays and fan out wafer level packaging contributed to a record quarter for our lithography business.”

Mr. Plisinski added, “Customer demand for Rudolph’s integrated solutions is solid. Looking ahead, we continue to benefit from a number of market drivers, with considerable strength in spending in the RF filters and fan out wafer level packaging markets, as evidenced by orders we have received that are scheduled to ship in the second half of the year. We recently introduced Clearfind™ technology for advanced packaging inspection, which our customers see as a critical technology to improve quality for their customers. This will be incorporated in our upcoming defect inspection systems for advanced packaging and front end applications, which we believe will drive incremental revenue in the second half of the year. By continuing to work in close partnership, we will leverage Rudolph’s broad technology portfolio to efficiently meet the highly technical challenges of our customers.”

Second Quarter 2016 GAAP Financial Results
Second quarter revenue totaled $62.7 million, a 15 percent increase as compared with $54.4 million for the 2016 first quarter. Second quarter gross margin was 55 percent of revenues, compared to 53 percent in the 2016 first quarter. The increase in gross margin was primarily due to a change in product sales mix; specifically, continued strong software sales and the shipment of a flat panel display tool in the quarter.

Operating expenses for the second quarter totaled $22.0 million. Operating expenses for the first quarter of 2016 totaled $7.9 million, which included income from a $14.6 million patent litigation judgment.

GAAP net income for the second quarter of 2016 was $7.6 million, or $0.24 per diluted share, compared with GAAP net income of $13.9 million, or $0.44 per diluted share, for the first quarter of 2016.

Second Quarter Non-GAAP Financial Results
Second quarter Non-GAAP net income was $9.9 million, or $0.31 per diluted share. Non-GAAP results excluded items that decreased GAAP income by $2.3 million, after tax, including share-based compensation expense, patent litigation expense and amortization of intangibles. In the 2016 first quarter, Non-GAAP net income was $5.7 million or $0.18 per diluted share. The first quarter Non-GAAP results excluded a net $8.2 million in income, after tax, which were included in the GAAP results related to a patent litigation judgment, share-based compensation expense, patent litigation expense and amortization of intangibles.

Balance Sheet
At June 30, 2016, cash and marketable securities totaled $163.1 million, an increase of $14.9 million from the 2016 first quarter. Accounts receivable of $64.6 million remained relatively unchanged with the previous quarter. Inventory decreased to $70.6 million as of June 30, 2016 and working capital increased to $214.1 million.

Outlook
The Company is currently anticipating revenue for the third quarter ending September 30, 2016 to be in the range of $59 to $63 million. The Company is also expecting diluted GAAP net income per share to be in the range of $0.21 to $0.25 and non-GAAP net income per diluted share to be in the range of $0.27 to $0.31.

Conference Call
Rudolph Technologies will discuss its 2016 second quarter results and other matters on a conference call it is hosting today at 4:30 PM EDT. To participate in the call, please dial (888) 438-5535 (Domestic) or (719) 325-2420 (International), and reference Conference ID # 4840514 at least five (5) minutes prior to the scheduled start time. A live webcast will also be available on the Company’s website at www.rudolphtech.com.

To listen to the live webcast, please go to the website at least fifteen (15) minutes early to register, download and install any necessary audio software.

There will be a replay of the conference call available from 8:00 pm EDT on June 28 until 11:59 pm EDT on August 4, 2016. To access the replay, please dial (888) 203-1112 (Domestic) or (719) 457-0820 (International) at any time during that period and use Conference ID #4840514.

A replay will also be available on the Company’s website at www.rudolphtech.com.

Discussion of Non-GAAP Financial Measures
The Company has provided in this release non-GAAP financial information including non-GAAP gross profit, operating income, net income, and net income per diluted share, as a supplement to the condensed consolidated financial statements, which are prepared in accordance with generally accepted accounting principles (“GAAP”). Management uses these non-GAAP financial measures internally in analyzing the Company’s financial results to assess operational performance. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its performance and when planning, forecasting and analyzing future periods. Further, the Company believes these non-GAAP financial measures are useful to investors because they allow for greater transparency with respect to key financial metrics that the Company uses in making operating decisions and because the Company believes that investors and analysts use them to help assess the health of its business and for comparison to other companies. Non-GAAP results are presented for supplemental informational purposes only for understanding the Company’s operating results. The non-GAAP information should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from non-GAAP measures used by other companies.

The financial statements provided with this release include a reconciliation of the non-GAAP financial measures to those measures reported in accordance with GAAP.

The Company’s non-GAAP financial measures, used in this press release, reflect adjustments based on the following items:

Stock-based compensation expense. These expenses primarily relate to employee restricted stock units and employee stock options. The Company excludes stock-based compensation expense from its non-GAAP measures primarily because such expenses are non-cash expenses that the Company does not believe are reflective of ongoing operating results.

Amortization expense. The Company incurs expenses for the amortization of intangible assets acquired in acquisitions. The Company excludes these items because these expenses are not reflective of ongoing operating results in the period incurred. These amounts arise from the Company’s prior acquisitions and have no direct correlation to the operation of the Company’s core business.

Patent litigation fees and judgments. The Company, from time to time, may incur charges or benefits that are outside of the ordinary course of the Company’s business related to litigation. The Company believes it is useful to exclude such charges or benefits because it does not consider such amounts to be part of the ongoing operation of the Company’s business and because of the singular nature of the claims underlying the matter.

About Rudolph Technologies
Rudolph Technologies, Inc. is a leader in the design, development, manufacture and support of defect inspection, lithography, process control metrology, and process control software used by semiconductor and advanced packaging device manufacturers worldwide. Rudolph delivers comprehensive solutions throughout the fab with its families of proprietary products that provide critical yield-enhancing information, enabling microelectronic device manufacturers to drive down costs and time to market of their devices. Headquartered in Wilmington, Massachusetts, Rudolph supports its customers with a worldwide sales and service organization. Additional information can be found on the Company’s website at www.rudolphtech.com.

Forward Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”) which include Rudolph’s business momentum and future growth; the benefit to customers of Rudolph’s products and customer service; Rudolph’s ability to both deliver products and services consistent with our customers’ demands and expectations and strengthen its market position; Rudolph’s expectations regarding the semiconductor market outlook; Rudolph’s third quarter 2016 financial outlook; as well as other matters that are not purely historical data. Rudolph wishes to take advantage of the “safe harbor” provided for by the Act and cautions that actual results may differ materially from those projected as a result of various factors, including risks and uncertainties, many of which are beyond Rudolph’s control. Such factors include, but are not limited to, the Company’s ability to leverage its resources to improve its position in its core markets; its ability to weather difficult economic environments; its ability to open new market opportunities and target high-margin markets; the strength/weakness of the back-end and/or front-end semiconductor market segments; and fluctuations in customer capital spending. Additional information and considerations regarding the risks faced by Rudolph are available in Rudolph’s Form 10-K report for the year ended December 31, 2015 and other filings with the Securities and Exchange Commission. As the forward-looking statements are based on Rudolph’s current expectations, the Company cannot guarantee any related future results, levels of activity, performance or achievements. Rudolph does not assume any obligation to update the forward-looking information contained in this press release.

 
RUDOLPH TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) - (Unaudited)
       
June 30, 2016 December 31, 2015
  (Audited)
ASSETS
Current assets
Cash and marketable securities $ 163,100 $ 161,478
Accounts receivable, net 64,576 55,492
Inventories 70,561 71,490
Prepaid and other assets   22,426   8,137
Total current assets 320,663 296,597
Net property, plant and equipment 13,513 12,346
Intangibles 33,898 35,088
Other assets   35,641   35,532
Total assets $ 403,715 $ 379,563
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 20,613 $ 21,466
Senior convertible notes 59,885 57,846
Other current liabilities   26,049   20,019
Total current liabilities 106,547 99,331
Other non-current liabilities   10,388   9,554
Total liabilities 116,935 108,885
Stockholders’ equity   286,780   270,678
Total liabilities and stockholders’ equity $ 403,715 $ 379,563
 
 
RUDOLPH TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts) - (Unaudited)
                   
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2016 2016 2015 2016 2015
Revenues $ 62,701 $ 54,362 $ 59,466 $ 117,063 $ 112,036
Cost of revenues   28,508   25,317     27,582     53,825     51,186
Gross profit   34,193   29,045     31,884     63,238     60,850
Operating expenses:
Research and development 11,879 12,446 10,507 24,325 20,867
Selling, general and administrative 9,488 9,499 11,033 18,987 24,007
Amortization 595 595 515 1,190 1,030
Patent litigation judgment     (14,632 )       (14,632 )  
Total operating expenses   21,962   7,908     22,055     29,870     45,904
Operating income 12,231 21,137 9,829 33,368 14,946
Interest expense, net 1,446 1,469 1,385 2,915 2,767
Other expense   192   107     (212 )   299     426
Income before income taxes 10,593 19,561 8,656 30,154 11,753
Provision for income taxes   2,992   5,622     2,629     8,614     3,878
Net income $ 7,601 $ 13,939   $ 6,027   $ 21,540   $ 7,875
 
Net income per share:
Basic $ 0.25 $ 0.45 $ 0.19 $ 0.70 $ 0.25
Diluted $ 0.24 $ 0.44 $ 0.19 $ 0.68 $ 0.24
 
Weighted average shares outstanding:
Basic 30,779 30,957 31,663 30,869 31,724
Diluted 31,754 31,654 32,339 31,705 32,373
 
 
RUDOLPH TECHNOLOGIES, INC.
NON-GAAP FINANCIAL SUMMARY
(In thousands, except percentage and per share amounts) - (Unaudited)
                   
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2016 2016 2015 2016 2015
 
Revenue $ 62,701 $ 54,362 $ 59,466 $ 117,063 $ 112,036
Gross profit $ 34,256 $ 29,102 $ 31,947 $ 63,358 $ 60,968
Gross margin as percentage of revenue 54.6 % 53.5 % 53.7 % 54.1 % 54.4 %
 
Operating expenses $ 18,949 $ 19,532 $ 19,777 $ 38,481 $ 38,301
Operating income $ 15,307 $ 9,570 $ 12,170 $ 24,877 $ 22,667
Operating margin as a percentage of revenue 24.4 % 17.6 % 20.5 % 21.3 % 20.2 %
 
Net income $ 9,864 $ 5,742 $ 7,582 $ 15,606 $ 12,962
Net income per diluted share $ 0.31 $ 0.18 $ 0.23 $ 0.49 $ 0.40
 
 

RECONCILIATION OF U.S. GAAP GROSS PROFIT,

OPERATING EXPENSES AND OPERATING INCOME TO NON-GAAP
GROSS PROFIT, OPERATING EXPENSES AND OPERATING INCOME
(In thousands, except percentages) - (Unaudited)
                   
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2016 2016 2015 2016 2015
 
U.S. GAAP gross profit $ 34,193 $ 29,045 $ 31,884 $ 63,238 $ 60,850
Pre-tax non-GAAP items:
Share-based compensation expense   63     57     63     120     118  
Non-GAAP gross profit $ 34,256   $ 29,102   $ 31,947   $ 63,358   $ 60,968  
U.S. GAAP gross margin as a percentage of revenue 54.5 % 53.4 % 53.6 % 54.0 % 54.3 %
Non-GAAP gross margin as a percentage of revenue 54.6 % 53.5 % 53.7 % 54.1 % 54.4 %
 
U.S. GAAP operating expenses $ 21,962 $ 7,908 $ 22,055 $ 29,870 $ 45,904
Pre-tax non-GAAP items:
Amortization of intangibles 595 595 515 1,190 1,030
Patent litigation fees 1,255 1,309 806 2,564 1,261
Patent litigation judgment (14,632 ) (14,632 )
Share-based compensation expense   1,163     1,104     957     2,267     5,312  
Non-GAAP operating expenses   18,949     19,532     19,777     38,481     38,301  
Non-GAAP operating income $ 15,307   $ 9,570   $ 12,170   $ 24,877   $ 22,667  
GAAP operating margin as a percentage of revenue 19.5 % 38.9 % 16.5 % 28.5 % 13.3 %
Non-GAAP operating margin as a percentage of revenue 24.4 % 17.6 % 20.5 % 21.3 % 20.2 %
 
 
RUDOLPH TECHNOLOGIES, INC.

RECONCILIATION OF U.S. GAAP NET INCOME TO

NON-GAAP NET INCOME
(In thousands, except share and per share data) - (Unaudited)
                   
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2016 2016 2015 2016 2015
U.S. GAAP net income $ 7,601 $ 13,939 $ 6,027 $ 21,540 $ 7,875
Pre-tax non-GAAP items

Amortization of intangibles

595 595 515 1,190 1,030
Patent litigation fees 1,255 1,309 806 2,564 1,261
Patent litigation judgment (14,632 ) (14,632 )
Share-based compensation expense 1,226 1,161 1,020 2,387 5,430
Net tax provision on non-GAAP items   (813 )   3,370     (786 )   2,557     (2,634 )
Non-GAAP net income $ 9,864   $ 5,742   $ 7,582   $ 15,606   $ 12,962  
Non-GAAP net income per diluted share $ 0.31 $ 0.18 $ 0.23 $ 0.49 $ 0.40
 
 

SUPPLEMENTAL INFORMATION - RECONCILIATION OF THIRD QUARTER 2016

GAAP TO NON-GAAP GUIDANCE (net of tax)
       
Low High
Estimated GAAP net income per diluted share $ 0.21 $ 0.25
Estimated non-GAAP items:
Amortization of intangibles 0.01 0.01
Patent litigation fees 0.02 0.02
Share-based compensation expense   0.03   0.03
Estimated non-GAAP net income per diluted share $ 0.27 $ 0.31
 

Contact:

For Rudolph Technologies, Inc.
Investors:
Steven R. Roth, 973-448-4302
Senior Vice President & CFO
steven.roth@rudolphtech.com
or
Guerrant Associates
Laura Guerrant-Oiye, 808-960-2642
Principal
lguerrant@guerrantir.com
or
Trade Press:
Amy Shay, 952-259-1794
amy.shay@rudolphtech.com

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