WILMINGTON, MASSACHUSETTS (August 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 second quarter.
2018 Second Quarter Highlights
Michael Plisinski, chief executive officer, commented, “All product teams contributed nicely to the record-setting second quarter. Our software business is back to historical peaks and we expect to set new records in 2019. Our lithography business continues to add new customers and product innovations, expanding our total available market. Our process control products saw broad appeal, particularly from the memory market, and we experienced growing adoption of our new inspection platforms.”
Mr. Plisinski concluded, “Despite the industry pause in the third quarter, we see growth returning in the fourth quarter to levels similar to that in the first half of the year. Longer term, we see the large secular trends in automotive, high performance computing, and wireless communication continuing to create growth opportunities for all of our business units.”
Second quarter revenue totaled $77.5 million, an increase of 6 percent compared with $73.1 million for the first quarter of 2018 and a 15 percent increase compared with $67.4 million in the second quarter of 2017. The second quarter gross margin was 54 percent of revenues, compared to 58 percent in the first quarter of 2018. The decrease in gross margin was the result of the first quarter of 2018 gross margin included a high value lithography system for a flat panel display customer that was comprised of inventory with reduced book value.
Operating expenses for the second quarter of 2018 totaled $25.1 million, compared to $22.8 million in the 2017 second quarter. As a percentage of revenue, operating expenses represented 32 percent of revenue in the 2018 second quarter compared to 34 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, project costs related to the Company’s AMOLED initiative, and an increase in third party sales commissions, offset by lower legal expenses.
GAAP net income for the second quarter of 2018 was $14.7 million, or $0.45 per diluted share, compared with a net income of $9.2 million, or $0.29 per diluted share, for the same period in 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. In the first quarter of 2018, GAAP net income was $15.1 million, or $0.47 per diluted share.
Second quarter 2018 non-GAAP net income was $16.6 million, or $0.51 per diluted share at the high end of the Company’s guidance. Non-GAAP results excluded certain items, as detailed in the attached table. Second quarter 2017 non-GAAP net income was $10.6 million, or $0.33 per diluted share. In the first quarter of 2018, non-GAAP net income was $16.3 million, or $0.51 per diluted share.
At June 30, 2018, cash and marketable securities increased $3.1 million over the previous quarter to $183.5 million and cash provided by operating activities was $4.8 million for the second quarter. Accounts receivable increased in the quarter to $82.6 million and inventory increased to $84.2 million primarily due to higher sales volumes and a slight increase in days sales outstanding in the quarter. Working capital increased in the quarter and ended at $313.4 million.
The Company is currently anticipating revenue for the third quarter ended September 30, 2018 to be $65 million plus or minus 5 percent. The Company is also expecting diluted GAAP net income per share to be in the range of $0.25 to $0.35 and non-GAAP net income per diluted share to be in the range of $0.30 to $0.40.
Rudolph Technologies will discuss its 2018 second quarter results on a conference call it is hosting today at 4:30 PM EDT. To participate in the call, please dial (888) 204-4368 (Domestic) or (323) 794-2423 (International), reference Conference ID # 2088303 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 p.m. ET on August 2 until 11:59 p.m. ET on August 9, 2018. 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 2088303.
A replay will also be available on the Company’s website at www.rudolphtech.com.
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.
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.
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 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.