Photon Control Reports Third Quarter 2019 Financial Results
Vancouver, BC, November 6, 2019 – 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 and nine months ended September 30, 2019.
Third Quarter 2019 Financial Highlights:
- Revenue of $8.7 million;
- Earnings before finance income, accretion expense, income taxes, depreciation, amortization and foreign exchange gain or loss (“EBITDA”) of $2.4 million or 27.9% of revenue;
- Net income of $1.5 million;
- Cash and cash equivalents of $34.0 million at September 30, 2019; and,
- Used cash of $0.9 million in the quarter to re-purchase 0.8 million shares under the Normal Course Issuer Bid (“NCIB”).
“In the current semiconductor capital equipment environment, Photon Control delivered strong revenue, EBITDA and free cash flow for the quarter,” said Nigel Hunton, Chief Executive Officer. “We are pleased with the early returns from our new sales and marketing organization and distributor in Asia, resulting in increased customer collaboration with technology innovation, which sets the foundation for long-term profitable growth for the Company.”
Third Quarter and Year-to-Date 2019 Financial Results
Total revenue for the third quarter of 2019 increased by 23% to $8.7 million compared to $7.1 million for the second quarter of 2019 due to increased revenues derived from new products and significant orders received and fulfilled from the transition of a distributor in Asia. Compared to 2018, total revenue for the third quarter of 2019 decreased 13% from $10.1 million to $8.7 million, and for the year-to-date period, revenue decreased 38% from $38.5 million to $23.9 million. The Company’s revenues are derived from the semiconductor capital equipment sector, which is highly cyclical in nature, and wafer fabrication spending has been delayed following a prolonged multi-year period of growth.
Gross profit for the third quarter of 2019 increased sequentially to $4.8 million from $3.9 million for the prior quarter due to higher overall revenues, while gross margin was flat at 54.8%. Gross margin of 54.8% for the quarter increased from 51.7% in the third quarter of 2018, and for the year-to-date period, gross margin decreased to 54.1% versus 55.5% in the comparable period of 2018.
Operating expenses for the three months ended September 30, 2019 decreased by 16% to $3.1 million compared to $3.7 million for the three months ended June 30, 2019, with the decrease primarily attributable to non-recurring costs included in the prior quarter. Operating expenses of $3.1 million for the quarter were relatively flat compared to the third quarter of 2018. For the nine months ended September 30, 2019, operating expenses were $10.2 million compared to $10.0 million in 2018, with the increase being attributable to the overall growth of the engineering workforce and higher development costs incurred for new products.
Net income for the quarter increased to $1.5 million or $0.01 per share compared to $0.1 million or $0.00 per share for the second quarter of 2019 and $1.2 million or $0.01 per share for the comparable period of 2018. Year-to-date 2019 net income was $1.7 million or $0.02 per share versus $8.0 million or $0.07 per share for the comparable period of 2018.
EBITDA for the three months ended September 30, 2019 increased sequentially to $2.4 million or 27.9% of revenues compared to $1.2 million or 16.9% of revenues in the prior quarter. The Company defines EBITDA as earnings before finance income, accretion expense, income taxes, depreciation, amortization and foreign exchange gain or loss.
As at September 30, 2019, cash and cash equivalents was $34.0 million, an increase of $2.6 million from $31.4 million at June 30, 2019. The increase was primarily attributable to the Company’s cash from operating profit, partially offset by $0.9 million of cash used to buy back shares of the Company.
Order backlog (defined as the value of sales orders scheduled to be shipped in the next 6 months) was $11.9 million at September 30, 2019 compared to $10.7 million at June 30, 2019. The order backlog reflects improved near-term demand from semiconductor wafer fabrication equipment manufacturers.
During the nine months ended September 30, 2019, the Company re-purchased and cancelled 5.5 million common shares for a total cost of $7.1 million, in accordance with the share buyback program.
“We anticipate our fourth quarter revenues to be in the range of $7.0 to $9.0 million,” said Nigel Hunton, Chief Executive Officer. “At this revenue level, we expect our EBITDA margin to be in the range of 21% to 25% of revenue. We are encouraged by the growth of our order backlog and we remain focused on delivering solid EBITDA performance while maintaining our investments in research and development, which strategically positions us for long-term growth in revenue, profitability and shareholder value as the industry recovers.”
Photon Control will hold a conference call today (Wednesday, November 6, 2019) at 11:00 a.m. Eastern time (8:00 a.m. Pacific time) to discuss these results. The call will be hosted by Nigel Hunton, Chief Executive Officer, and Daniel Lee, Chief Financial Officer, followed by a question and answer period.
Please call the applicable conference telephone number approximately 10 minutes prior to the commencement of the call. The conference call will be broadcasted simultaneously and be available for replay. Further information can be found at https://www.photoncontrol.com/investors/
Financial Statements and Management’s Discussion and Analysis
This news release should be read in conjunction with the Company’s condensed interim consolidated financial statements and related notes, and management’s discussion and analysis for the three and nine months ended September 30, 2019, 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. The Company is headquartered in an ISO 9001:2015 manufacturing facility in Vancouver, BC, has a sales and engineering office in San Jose, California, and a sales distribution network in Asia. 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/
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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”, “plan”, “project”, “assume”, “strategy”, “goals”, “objectives”, “potential”, “possible”, “confident” 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, EBITDA, cash position, share buyback, growth in the etch market, timing of the semiconductor industry cycle, cost structure, 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 expected quantity, price and delivery times; the Company’s ability to attract new business; continued and future demand for the Company’s products; continued sales to the Company’s major customers; the Company’s operations not being adversely affected by supply, operating, cyber security, litigation or regulatory risks; the Company’s ability to react to the cyclical nature of the semiconductor industry; 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 and timing of cycles in 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.