Vancouver, BC, May 9, 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 months ended March 31, 2019.
First Quarter 2019 Financial Highlights:
- Revenue of $8.0 million;
- Earnings before interest, taxes, depreciation, amortization and foreign exchange gain or loss (“EBITDA”) of $1.5 million or 19% of revenue;
- Net income of $0.1 million;
- Cash and cash equivalents of $37.3 million at March 31, 2019; and,
- Used cash of $2.5 million to repurchase 1.9 million shares under the Normal Course Issuer Bid (“NCIB”).
“In the quarter, we executed on our strategy of investing in research and development while streamlining operations during the current downturn in the semiconductor cycle,” said D. Neil McDonnell, Board Chair. “Our operating model is resilient and continues to generate positive EBITDA, and we are using our cash strategically to invest in initiatives that will drive growth when stronger levels of industry spending resume. In the quarter, we opened a new office in San Jose, grew our product and intellectual property portfolio and announced the hiring of Nigel Hunton as our President and Chief Executive Officer. Nigel is a semiconductor industry veteran with demonstrated expertise in generating long-term shareholder value and we are pleased to welcome him to the Photon Control team.”
First Quarter 2019 Financial Results
In line with significant year-over-year declines in capital spending within the semiconductor industry, total revenue of $8.0 million for the first quarter of 2019 decreased 42% compared to the prior year. The Company’s revenues are derived from the semiconductor capital equipment sector, which is highly cyclical in nature. While the Company has benefitted from a prolonged multi-year period of growth, the current market conditions have been characterized by a slow-down in wafer fabrication equipment spending, which is experiencing a multi-quarter period of weakness until the market re-stabilizes.
Gross profit for the first quarter of 2019 decreased 46% to $4.2 million, or 53% gross margin versus 57% gross margin in 2018. The decrease in gross profit and margin was due primarily to lower revenue in the current period.
Operating expenses for the three months ended March 31, 2019 were $3.5 million compared to $3.2 million in 2018. The increase is due to growth of the engineering workforce and higher development costs incurred for new products, offset by cost reduction measures realized on general and administrative costs, in response to the market conditions persisting in the semiconductor industry.
Net income for the quarter was $0.1 million or $0.00 per share compared to $2.9 million or $0.03 per share for the comparable period in 2018. EBITDA for the three months ended March 31, 2019 was $1.5 million or 19% of revenue, compared to $4.7 million or 34% of revenue in the same year-ago period.
As at March 31, 2019, cash and cash equivalents was $37.3 million, a decrease of $5.1 million from $42.4 million at December 31, 2018. The decrease was attributable to cash used to buy back company shares and the timing of tax payments made in the period.
Order backlog (defined as the value of sales orders scheduled to be shipped in the next 6 months) was $10.8 million at March 31, 2019, a decrease from $13.1 million at December 31, 2018. The decrease in order backlog reflects the current slow-down in capital spending from semiconductor manufacturers.
During the three months ended March 31, 2019, the Company re-purchased and cancelled 1,887,200 common shares for a total cost of $2.5 million, in accordance with the current share buyback program. During the period from April 1, 2019 to May 7, 2019, the Company re-purchased 1.6 million common shares toward the NCIB at a cost of $2.2 million.
“The industry is witnessing significantly curtailed investments in the memory sector, which are expected to persist for the foreseeable future. As a result, we anticipate our second quarter 2019 revenues to be in the range of $6 to $8 million and EBITDA to be in the range of 13 to 17% of revenue,” said Nigel Hunton, Chief Executive Officer. “While the length of the current market conditions is unknown, we will maintain prudent cost controls and continue to invest in research and development, while generating positive EBITDA. We are confident that our actions will position us for growth in revenue, profit and shareholder value when the industry inevitably rebounds.”
Photon Control will hold a conference call today (Thursday, May 9, 2019) 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; Nigel Hunton, 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 condensed interim consolidated financial statements and related notes, and management’s discussion and analysis for the three months ended March 31, 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. 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/
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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”, “anticipate”, “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 dollar value of the wafer fabrication equipment market, revenue from new products, growth in the etch market, timing of the semiconductor industry cycle, 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 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.