Photon Control Reports Fourth Quarter and Full Year 2018 Financial Results
VANCOUVER, March 21, 2019 /CNW/ - Photon Control Inc. ("Photon Control" or the "Company") (TSX: PHO), a leading developer and supplier of optical measurement technologies to the global semiconductor industry, has reported its financial results for the three months and year ended December 31, 2018.
Highlights:
- Record year on all key financial metrics, including revenue of $46.7 million; earnings before interest, taxes, depreciation, amortization and foreign exchange gain or loss ("EBITDA") of $15.4 million or 33% of revenue; and net income and earnings per share of $10.7 million and $0.10 per share;
- Revenue of $8.2 million and EBITDA of $2.5 million or 31% of revenue for the quarter ended December 31, 2018;
- Cash on hand of $42.4 million at December 31, 2018; and,
- Repurchased 1.6 million shares under the Normal Course Issuer Bid ("NCIB") in 2018.
"2018 was a record year for Photon Control and we are encouraged by the continued growth of our New Product Introduction funnel, which extends our technology to our customers' existing and next generation platforms," said D. Neil McDonnell, Board Chair and Interim Chief Executive Officer. "We continue to generate cash from operations to invest in new product development and other disruptive technologies, and to also return capital back to our shareholders through our share buyback program. Our Q4 2018 results were consistent with our prior outlook, reflecting depressed levels of wafer fabrication equipment spending, along with continued inventory reduction strategies by our customers, in light of the prolonged downturn. While we are managing the business with prudent control of expenses during the current industry slow-down, we continue to invest in R&D in support of future growth and are extremely positive about the long-term prospects of the Company and our served markets."
Fourth Quarter and Full Year 2018 Financial Results
Total revenue of $46.7 million for full year 2018 increased 7% compared to the prior year total of $43.8 million. The record full year revenue for 2018 is attributable to strong overall market conditions in 2018, repeat orders for fiber optic sensors from our customer base, and the release of new products. Fourth quarter 2018 revenue of $8.2 million decreased 25% from the $11.0 million reported in the prior year fourth quarter. The results for the quarter reflect the continued sell through of inventories held by customers following softer demand for semiconductor capital equipment.
Full year gross profit for 2018 increased 10% to $25.6 million, or 55% gross margin versus 53% gross margin for the full year of 2017. The increase in gross profit was due to higher revenue in the current year and the increase in gross margin was due to better leverage of fixed costs due to the higher revenue levels in 2018. Fourth quarter 2018 gross profit decreased 13% to $4.3 million versus the prior year quarter. Gross margin for the quarter increased to 52% compared to 45% in the prior comparable period due to amortization charges recorded in the fourth quarter of 2017 on intangible assets arising from the acquisition of Photon Control R&D Ltd.
Operating expenses for the three months and year ended December 31, 2018 were $3.1 million and $13.1 million compared to $3.6 million and $15.5 million in 2017. When normalized for non-cash and non-recurring charges, adjusted cash operating expenses increased by $0.1 million and $2.4 million for the quarter and year due to an increased labour workforce to support the Company's future growth strategies and higher development costs incurred for new products.
Total comprehensive income for the quarter was $2.6 million or $0.03 per share compared to $2.6 million or $0.02 per share for the comparable period of 2017, while for the year ended December 31, 2018, total comprehensive income was $10.6 million or $0.10 per share versus $5.5 million or $0.05 per share for the comparable period of 2017.
EBITDA for the three months and year ended December 31, 2018 was $2.5 million or 31% of revenue and $15.4 million or 33% of revenue, compared to $2.8 million or 25% of revenue and $14.3 million or 33% of revenue in the same year-ago periods. The Company defines EBITDA as earnings before interest, taxes, depreciation, amortization and foreign exchange gain or loss. For the comparative period, EBITDA was adjusted to remove the effect of non-recurring items.
As at December 31, 2018, cash on hand was $42.4 million, an increase of $8.1 million from $34.3 million at December 31, 2017. The increase was attributable to the Company's strong operating results and cash flow, offset by $3.0 million deployed toward the share buyback program.
Order backlog (defined as the value of sales orders scheduled to be shipped in the next 6 months) was $13.1 million at December 31, 2018, a decrease from $14.4 million at September 30, 2018 and $18.3 million at December 31, 2017. The decrease in order backlog reflects the record shipments in the first half of 2018, combined with the current slow-down in capital spending from semiconductor manufacturers.
During 2018, the Company re-purchased and cancelled 1,633,225 common shares for a total cost of $3.0 million, in accordance with the current share buyback program. During the period from January 1, 2019 to March 19, 2019, the Company re-purchased 1.6 million common shares toward the NCIB at a cost of $2.2 million.
Tax Restatement
On August 2, 2018, the Company reported that it had discovered a potential liability related to taxes owed to a foreign jurisdiction. The Company entered into a voluntary disclosure agreement with the taxing authority, limiting the liability to taxes owing from 2013 to 2017 and waiving any applicable penalties. The 2017 comparative financial information were restated to reflect a previously unreported net liability of $1.6 million as at December 31, 2017.
Business Outlook
Commenting on the outlook for the business, Mr. McDonnell said, "As a result of continued weakness in capital spending by our customers, we expect Q1 2019 revenues to be in the range of $7.5 to $8.5 million. Despite the current slow-down, we will use our strong financial resources to invest in our strategic initiatives, including development of new products that are expected to add significant revenue as customer introduce these wins, to ensure that we are well-positioned for long-term sustainable growth in revenue and profit. Due to our revenue guidance, coupled with these strategic investments, we anticipate that our EBITDA in the first quarter of 2019 will be in the range of 16 to 20% of revenue. The Company has a strong pipeline of new products under development which contribute to revenue during the prototype and pre-production stages and are expected to add significant revenue as customers introduce these wins into production in the future."
Conference Call
Photon Control will hold a conference call today (Thursday, March 21, 2018) at 11:00 a.m. Eastern time (8:00 a.m. Pacific time) to discuss these results. The call will be hosted by D. Neil McDonnell, Board Chair and Interim Chief Executive Officer, and Daniel Lee, Chief Financial Officer, followed by a question and answer period.
Please call the conference telephone number approximately 10 minutes prior to the commencement of the call. The conference call will be broadcast simultaneously and available for replay here.
Toll-Free Number: 1-877-407-9716
International Number: 1-201-493-6779
Financial Statements and Management's Discussion and Analysis
This news release should be read in conjunction with the Company's consolidated financial statements and related notes for the year ended December 31, 2018, and management's discussion and analysis for the three months and year ended December 31, 2018, copies of which can be found at www.sedar.com.
About Photon Control Inc.
Photon Control Inc. designs, manufactures and distributes a wide range of optical sensors and systems to measure temperature and position. These products are used by the world's largest wafer fabrication equipment manufacturers and end users in the semiconductor and solid-state industries. Photon Control Inc.'s high quality products provide industry leading accuracy, speed and quality in the most extreme conditions and are backed by a team of experts providing a variety of on-site and remote services including custom design, installation, training and support. Headquartered in an ISO 9001:2015 manufacturing facility in Vancouver, BC, Photon Control Inc. is listed on TSX, trading under the symbol ''PHO." Additional information about the company can be found at https://www.photoncontrol.com/investors/
Forward-Looking Statements
This news release contains "forward-looking statements" within the meaning of applicable Canadian securities legislation. These statements generally can be identified by use of forward-looking words such as "may", "will", "could", "would", "should", "might", "expect", "estimate", "anticipate", "intend", "consider", "believe", "anticipate", "plan", "project", "assume", "strategy", "goals", "objectives", "potential", "possible" or "continue" or the negative thereof or similar variations. Such forward-looking statements concern the business and anticipated financial performance of the Company and include, without limitation, the Company's outlook on the long-term prospects of the market and the Company, the Company's expectations with respect to the overall order activity for the balance of the year, projections of the Company's revenue, growth in the dollar value of the wafer fabrication equipment market, revenue from new products, growth in the etch market and the Company's ability to build on its financial and operational foundation in the future.
These forward-looking statements are based on certain factors and assumptions, including, without limitation: the Company's ability to develop, manufacture and sell new products that meet the needs of its customers and gain commercial acceptance; the Company's ability to continue to sell its products in line with quantity, price and delivery expectations; the Company's ability to attract new business; the Company's ability to successfully complete new purchase orders along the timelines expected; continued and future demand for the Company's products; continued sales to the Company's major customers; the continued financial health of the semiconductor industry; the Company's ability to continue and further enhance revenue diversification and open new market opportunities; and the Company's expectations regarding market risk, including interest rate changes, tax changes and foreign currency fluctuations.
Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation: additional measures and controls may not be implemented as expected or along the timelines anticipated; uncertainties relating to the market for the Company's products and maintaining a stable level of orders; fluctuations in revenue as a result of volatility in the markets and product mix; risks relating to the Company's present reliance on its major customers for the majority of its sales; risks relating to the Company's reliance on the financial health of the semiconductor industry; risks relating to the development of competing technologies and the possibility of increased competition; the effect of slow growth in the United States, the Company's principal market, as well as other economies and other economic trends and conditions in the markets that the Company and its customers serve; risks associated with technical difficulties or delays in product introductions, improvements, implementation; uncertainties in product pricing or other initiatives of the Company and its competitors; uncertainties in factors that may result in a reduction in capital expenditures and/or delayed buying decisions affecting demand for the Company's products; risks relating to currency fluctuations, particularly between the Canadian and United States dollars; risks in pursuing additional development projects to support existing customers or pursue other business opportunities; and such other risks as are identified in the Company's Annual Information Form and other disclosure documents filed on SEDAR at www.sedar.com.
The foregoing assumptions, risks and uncertainties are not exhaustive of the items that may affect our forward-looking statements. Should underlying assumptions prove to be incorrect or one or more of these risks and uncertainties materialize, actual results may vary materially from those described in the forward-looking statements. The Company's forward-looking statements are based on beliefs, expectations and opinions of management on the date the statements are made.
For the reasons set forth above, readers should not place undue reliance on forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statements included herein if these beliefs, estimates and opinions or other circumstances should change, except as otherwise required by applicable law.
SOURCE Photon Control Inc.
Investor Relations Contact: [email protected]
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