Vancouver, BC, March 18, 2021 – Photon Control Inc. (“Photon Control” or the “Company”) (TSX: PHO), a leading manufacturer of fiber optic measurement solutions to the semiconductor industry, is pleased to announce its financial results (in Canadian dollars) for the three months and full year ended December 31, 2020.
Highlights for the fourth quarter and year ended December 31, 2020 were as follows:
- Record annual revenue of $64.7 million (2019: $32.7m) and $14.9 million (Q419: $8.9m) for the quarter;
- Record annual adjusted EBITDA of $22.8 million (2019: $7.2m) or 35% (2019: 22%) of revenue and $3.7 million (Q419: $2.1m) or 25% (Q419: 24%) for the quarter;
- Record annual net income of $14.1 million (2019: $2.4m) and $1.2 million (Q419: $0.7m) for the quarter;
- Annual basic earnings per share of $0.13 (2019: $0.02) and $0.02 (Q419: $0.01) for the quarter;
- Annual gross margin of 60% (2019: 54%) and 55% (Q419: 53%) for the quarter;
- Record annual investment of $5.7 million and $1.8 million for the quarter into Research and Development;
- Record year-end backlog of $30.3 million (2019: $20.8m); and
- Cash and cash equivalents of $48.4 million at December 31, 2020, increased $15.0 million from December 2019.
“We are very pleased to announce a record year for Photon Control, and a strong finish to 2020, with Q4 revenues 69% higher than the comparable period in 2019,” said Nigel Hunton, Chief Executive Officer. “Throughout the year, we executed on our strategic objectives of outpacing semiconductor capital equipment growth and growing earnings faster than revenues. Compared to industry growth of approximately 18% in 2020, our revenues increased 98%, and earnings growth exceeded 500%, compared to 2019. Our relative outperformance is testament to the enabling role of Photon Control within the global semiconductor manufacturing industry, the strength of our customer partnerships with the world’s leading Original Equipment Manufacturers (“OEMs”), and the increasing importance of precise control of critical processes at successive technology nodes.”
The Company’s revenues are chiefly derived from the semiconductor capital equipment sector, and expenditures for Wafer Fabrication Equipment (“WFE”) have continued at record levels in Q4 of 2020 and Q1 of 2021 to date, and are expected to increase year-over-year in 2021.
Fourth Quarter and Annual 2020 Financial Results
Total revenue for Q420 increased to $14.9 million (Q419: $8.9m) and for the full year, revenue increased to $64.7 million (2019: $32.7m). The Company’s revenues are strongly influenced by overall improved semiconductor capital expenditures on WFE as electronics and data become an increasing part of everyday life. The Company’s outperformance was aided by market penetration into Asia, assisted by strong partnerships with distributors. Our annual revenues were also positively impacted by customers building stock and de-risking the supply chain in response to COVID-19.
Gross profit for Q420 increased to $8.1 million (Q419: $4.7m) and annually to $38.7 million (2019: $17.6m). Q4 2020 gross margin of 55% was in line with our forecast and target model, and full year gross profit was a record $38.7 million or 60%. The increase in gross profit for the quarter and the full year compared to the same periods in 2019 was primarily a result of increased sales volume, causing fixed costs as a percentage of total cost to decrease. Additionally, an increased focus on supply chain management enabled the Company to realize cost savings on its variable costs of production.
Operating expenses for Q420 increased to $5.0 million (Q419: $2.6m) and annually to $17.5 million (2019: $12.8m). The increase was a result of incentive compensation granted in respect of strong results and the Company’s increased investment in research and development and sales and marketing efforts. These investments are a critical part of the Company’s strategy that focuses on new product development and building capacity to fully service customers and addresses market opportunities to grow the business.
Net income for Q420 was $1.2 million or $0.02 per share (Q419: $0.7m or $0.01) and annual net income was $14.1 million or $0.13 per share (2019: $2.4m or $0.02). Net income was adversely impacted by the weakening US dollar, which accelerated late in the year.
Adjusted EBITDA for Q420 was $3.7 million or 25% of revenue (Q419: $2.1m or 24%) and annual adjusted EBITDA was $22.8 million or 35% of revenue (2019: $7.2m or 22%). The decrease for the quarter as compared to the full year period, was primarily due to additional investments in research and development, and the introduction of a long-term incentive compensation program to encourage retention of, and to reward, our key management, as well as the impact of the aforementioned weakening US dollar.
At December 31, 2020, cash and cash equivalents were $48.4 million, an increase of $15.0 million from $33.4 million as at December 31, 2019. The increase was primarily attributable to the Company’s strong financial performance in the year.
Order backlog, defined as the unfilled value of sales orders received or scheduled for fulfillment, was $30.3 million at December 31, 2020, compared to $27.0 million at September 30, 2020. The increase in order backlog reflects continued strength in the WFE market.
Nigel Hunton, CEO, remarked “The business environment for the semiconductor capital equipment market in 2021 continues to strengthen from the record levels achieved in 2020, with continued growth expected in every major semiconductor device market for our products, including the advanced foundry and logic markets, as well as both the DRAM and NAND memory markets. We expect Q1 2021 revenues to be in the range of $16 to $18 million.
We enter 2021 in the strongest financial position in Company history, with continued expectations that we will deliver strong operational execution and increase shareholder value in this robust and very healthy business environment. I want to thank all our stakeholders, including our customers, employees and suppliers for enabling us to deliver a record year in 2020 and in supporting another expected growth year for Photon Control in 2021.”
Photon Control will hold a conference call today (March 18, 2021) at 11:00 am Eastern time (8:00 am Pacific time) to discuss these results. The call will be hosted by Nigel Hunton, Chief Executive Officer, and Damian Towns, Chief Financial Officer, followed by a question and answer period.
Please call 1-800-319-4610 or +1-604-638-5340 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 consolidated financial statements and related notes, and management’s discussion and analysis for the year ended December 31, 2020, copies of which can be found at www.sedar.com.
Events and Conferences
Photon Control participated or is scheduled to participate in the following events and conferences in 2021:
- 33rd Annual Roth Investor Conference – March 15 – 17, 2021
- 16th Annual Needham Virtual Technology & Media Conference – May 17 – 20, 2021
- Stifel 2021 Virtual Cross Sector Insight Conference – June 8 – 10, 2021
- 13th Annual CEO Investor Summit 2021 – June 15, 2021
- Oppenheimer 24th Annual Technology, Internet & Communications Conference – August 10 – 11, 2021
- Jefferies 2021 Semiconductor, IT Hardware & Communications Infrastructure Summit – August 31 – September 1, 2021
- 10th Annual NYC Investor Summit 2021 – December 14, 2021
Details of the events will be made available at https://www.photoncontrol.com/investors/.
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 improve performance and enable innovation for our customers and are used in the semiconductor industry. Photon Control Inc.’s products provide industry-leading accuracy, reliability 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 manufacturing, sales and engineering offices in California and a sales distribution network around the globe. 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/
Investor Relations Contact:
“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 growth outlook.
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; the Company’s ability to 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: 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 the spread of the COVID-19 virus; risks associated with the adverse impact of climate change; 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.
 The Company defines adjusted EBITDA as earnings before finance income, accretion expense, income taxes, depreciation, amortization and foreign exchange gain or loss. See “Non-GAAP Performance Measures” in the MD&A.