• Quarterly record revenue of $73 million, increased 22 percent sequentially
• Earnings per share exceeded guidance
WILMINGTON, MASSACHUSETTS (May 2, 2018) – Rudolph Technologies, Inc. (NYSE: RTEC), a leading provider of semiconductor process control systems, lithography equipment, as well as process control and yield management software for wafer fabs and advanced packaging facilities, today announced financial results for the 2018 first quarter.
2018 First Quarter Highlights
Michael Plisinski, chief executive officer, commented, “Rudolph’s focus on providing high value solutions to diverse high growth markets continues to result in solid performance. Two years ago we identified a high value problem related to the control of hard mask carbon layer for 3D NAND at two large memory customers and announced our expectation to expand our customer base. The breadth of our memory customers is now widespread, including four of the top five memory IDMs and two new IDMs in China.”
Mr. Plisinski concluded, “In addition to the expansion of our customer base in memory, we are pleased to announce progress on a number of other initiatives. Orders for our Dragonfly™ and Firefly™ inspection tools to support advanced packaging and specialty markets in the first quarter could potentially triple the number of systems planned for shipment in the second quarter. Our second display customer recently completed a successful source inspection at our headquarters, resulting in our team being able to ship the Gen 4.5 display stepper on schedule. The tool is already installed and process qualifications will begin this quarter. The diversity of our portfolio and end market demand for our solutions combine for another strong start to the year.”
First Quarter 2018 GAAP Financial Results
First quarter revenue totaled $73.1 million, an increase of 22 percent compared with $60.1 million for the fourth quarter of 2017 and a 20 percent increase compared with $60.7 million in the first quarter of 2017. The first quarter gross margin improved to 58 percent of revenues, compared to 53 percent in the fourth quarter of 2017. A favorable product mix consisting of a high value lithography system for a flat panel display customer, an increase in metal metrology tools, and higher software sales drove the gross margin improvement.
Operating expenses for the first quarter of 2018 totaled $25.0 million, compared to $22.2 million in the 2017 first quarter. As a percentage of revenue, operating expenses represented 34 percent of revenue in the 2018 first quarter compared to 37 percent in the same quarter last year. The increase in operating expenses over the prior year was primarily due to an increase in compensation related expenses, including the resetting of payroll taxes, increased medical costs, annual compensation increases and an increase in headcount. Also contributing to the increase in expenses were costs related to the Company’s recently announced AMOLED initiative and an accrual for a loss contingency related to the misappropriation of payroll taxes by a third party payroll accountant in the United Kingdom.
GAAP net income for the first quarter of 2018 was $15.1 million, or $0.47 per diluted share, compared with a net loss of $(0.8) million, or $(0.03) per diluted share, for the fourth quarter of 2017. The increase in GAAP net income was primarily due to an increase in sales and gross margin, and a lower effective tax rate due to the 2017 Tax Cut and Jobs Act “Tax Reform” passed by the U.S. Congress. Also contributing to the quarter-over-quarter change were non-cash discrete tax charges of $9.5 million recorded in the fourth quarter of 2017 related to Tax Reform. In the first quarter of 2017, GAAP net income was $7.2 million, or $0.22 per diluted share.
First Quarter Non-GAAP Financial Results
First quarter 2018 non-GAAP net income was $16.3 million, or $0.51 per diluted share and exceeded the Company’s guidance. Non-GAAP results excluded certain items, as detailed in the attached table. Fourth quarter 2017 non-GAAP net income was $9.4 million, or $0.29 per diluted share. In the first quarter of 2017, non-GAAP net income was $8.2 million, or $0.26 per diluted share.
Balance Sheet
At March 31, 2018, cash and marketable securities increased $3.0 million over the previous quarter to $180.3 million and cash provided by operating activities was $4.6 million for the first quarter. Accounts receivable increased in the quarter to $74.7 million and inventory increased to $79.8 million primarily due to higher sales volumes and timing of shipments in the quarter. Working capital increased in the quarter and ended at $296.9 million.
Outlook
The Company is currently anticipating revenue for the second quarter ended June 30, 2018 to be in a range of $75 million to $81 million. The Company is also expecting diluted GAAP net income per share to be in the range of $0.38 to $0.45 and non-GAAP net income per diluted share to be in the range of $0.44 to $0.51.
Conference Call
Rudolph Technologies will discuss its 2018 first quarter results on a conference call it is hosting today at 4:30 PM EDT. To participate in the call, please dial (800)-239-9838 (Domestic) or +1 (323)-794-2551 (International), and reference Conference ID #9746199 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.Onto Innovationtech.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 May 2, 2018 until 11:59 pm EDT on May 9, 2018. To access the replay, please dial (888) 203-1112 (Domestic) or +1 (719) 457-0820 (International) at any time during that period and use Conference ID #9746199.
A replay will also be available on the Company’s website at www.Onto Innovationtech.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:
Share-based compensation expense. These expenses 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 of intangibles. 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 income. 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.
Net tax provision (benefit) adjustments. This line item represents the income tax effects of the non-GAAP items.
Tax reform. The Tax Cuts and Jobs Act impacted the Company’s 2017 results primarily due to (i) a one-time non-cash tax expense estimated at $8 million, reflecting the revaluation of its net deferred tax asset using a U.S. federal tax rate of 21%, (ii) a one-time transition tax estimated at $1.5 million on its unremitted foreign earnings and profits, which are offset by utilized foreign tax credits estimated at $1.6 million and (iii) a valuation allowance associated with any remaining foreign tax credits of $1.5 million, which may not be utilized in future periods. The Company will continue to evaluate the impact of tax reform during the measurement period.
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.Onto Innovationtech.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 second quarter 2018 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, 2017 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.
For more information, please contact:
Michael Sheaffer
Senior Director, Corp. Communications
978.253.6273
Mike.Sheaffer@Onto Innovationtech.com