Photon Control Reports Fourth Quarter and Full Year 2016 Financial Results - Full Year Revenue Up 17%Monday, May 1, 2017
Burnaby, BC, May 1, 2017--(T-Net)--Photon Control Inc. (TSX-V: PHO), a leading developer of optical measurement technologies, has reported financial results for the fourth quarter and fiscal year ended December 31, 2016.
Fourth Quarter 2016 and 2015 Financial Results Comparison
Full Year 2016 and 2015 Financial Results Comparison
Recent Operational Developments
On April 14, 2017, the Company closed a settlement agreement with Photon Control R&D Ltd. (“R &D”). The settlement ends all litigation, confirms the Company's full ownership of all products and intellectual property previously under dispute, and provides for a new shorter-term royalty agreement between the parties at lower rates. Upon closing of the settlement, personnel of R&D became employed by the Company.
On March 31, 2017, the Company announced the following senior management appointments: Scott Edmonds as Chief Executive Officer (CEO), Paul Hellebrekers as Chief Operating Officer (COO), and Yuri Sikorski as VP Solutions Engineering.
Also on March 31, 2017, the Company announced the appointment of Chuck Cargile and Scott Edmonds as directors, replacing three other resigning members.
The company leased a new, larger facility to increase production capacity and to facilitate more efficient manufacturing.
Scott Edmonds, CEO said: “Our strong revenue growth from our optical sensor business continued through Q4, marking our 8th consecutive quarter of solid results. The fact that we were able to report such strong numbers, despite several distractions during the year, highlights the commitment of our people, the support of our customers and the quality of our products.”
Continued Edmonds: “While revenue strength was not accompanied by net income growth, this was primarily caused by non-recurring expenses, including $0.9 million related to the litigation with R&D and temporarily increased executive and consultant compensation during the period. In addition it should be noted that net income for 2015 included a $1.7 million gain on foreign exchange, which did not recur in 2016. Were we to adjust the comparables for these two items, net income would have been virtually flat from year-to-year.”
Mr. Edmonds continued: “With the litigation resolved, the ownership of our IP confirmed, and the hiring of the R&D staff completed, our organization and resources are now singularly focused on serving the growing needs of our customer base. Today, Photon Control is a single, unified entity with a shared goal of delivering world-class solutions, guided by a strengthened management team and board of directors. We believe this fortified base will prove invaluable as we pursue additional growth opportunities with our current OEM and other customers and through the expansion of our customer base and product lines.”
Fourth Quarter 2016 Financial Results
Total revenue in the fourth quarter of 2016 increased 55% to $9.0 million from $5.8 million in the same year-ago quarter. The increase was primarily due to robust market conditions persisting in the semiconductor industry.
Gross profit increased 48% to $4.3 million (47.6% of total revenue) in the fourth quarter of 2016 compared to $2.9 million (50.1% of total revenue) in the same year-ago period. These decreases in gross margin were primarily due to an increase in customer incentives, indirect manufacturing costs to support greater production output and an increase in lower margin sales of Oil & Gas products. Offsetting these additional expenses were production efficiencies gained from producing higher volumes of certain product lines.
Operating expenses in the fourth quarter of 2016 were $2.3 million (25.5% of total revenue), compared to $1.1 million (18.7% of total revenue) in the same year-ago period. The increase was largely due to one-time costs related to the R&D litigation and temporary increases in executive compensation and consulting costs as well as higher spending on research and development for new and existing products.
Net earnings before taxes for the fourth quarter of 2016 totaled $2.4 million or $0.02 per diluted share, compared to $2.1 million or $0.02 per diluted share in the same year-ago period. The increase was due to higher sales volume, which was partially offset by higher operating expenses.
Corporate taxes in the fourth quarter of 2016 were $1.1 million compared to $0.4 million.
Net earnings and total comprehensive income for the fourth quarter totaled $1.4 million or $0.01 per diluted share, compared $1.7 million or $0.01 per diluted share in the same year-ago period.
At quarter-end, cash and cash equivalents totaled $32.5 million, an increase of $6.3 million as compared to $26.2 million at December 31, 2015.
Order backlog (defined as the value of sales orders scheduled to be shipped in the upcoming 12-month period) at quarter-end increased 26% to $8.8 million from $5.6 million at December 31, 2015.
Full Year 2016 Financial Results
Total revenue in 2016 increased 17% to $32.2 million from $27.6 million in 2015. The increase was primarily due to robust market conditions persisting in the semiconductor industry.
Gross profit for 2016 increased 11% to $16.2 million (50.4% of total revenue) compared to $14.6 million (52.9% of total revenue) in 2015. The decrease in the gross margin percentage was consistent with the factors affecting the quarterly numbers as described above.
Operating expenses for 2016 were $6.8 million (21.1% of total revenue), compared to $4.1 million (15.0% of total revenue) in 2015. The increase in operating expenses were due to, in large part, the R&D litigation costs, higher research and development expenses on new and existing products and increases in stock option expense, as well as to expand the company's reach into new core end markets.
Net earnings before taxes for 2016 totaled $9.4 million or $0.09 per diluted share, compared to $12.2 million or $0.11 per diluted share in 2015. The decrease was primarily attributed to higher operating expenses, a large part of which was atypical spending, as well as a $1.9 million negative variance in foreign exchange rate.
Corporate taxes for 2016 were $2.9 million , compared to $3.0 million in 2015.
Net earnings and total comprehensive income totaled $6.5 million or $0.06 per diluted share., compared to $9.2 million or $0.08 per diluted share in 2015.
About Photon Control Inc.
Photon Control Inc. designs, manufactures and distributes a wide range of optical sensors & instruments to measure temperature, pressure, position, and flow. These products are used by Original Equipment Manufacturers (OEM);as well as end-users in the Semiconductor, Oil and Gas, Power, Life Science, and Manufacturing industries.
Photon Control's products provide high accuracy and reliability in extreme conditions and are supported by a team of experts that offer onsite installation, training, and support. Photon Control Inc. also provides engineering services for customized optical measurement systems. Headquartered in an ISO 9001:2008 manufacturing facility in Burnaby, BC , Photon Control Inc. is listed on the TSX Venture Exchange, trading under the symbol 'PHO." Additional information about the company can be found at www.photon-control.com/investorrelations.html.
This News Release contains "forward-looking statements" within the meaning of applicable Canadian securities legislation. Such forward-looking statements concern the business and anticipated financial performance of the Company and include, without limitation; statements with respect to the Claim; additional controls and measures to be taken by the Company; and the Company's objectives, goals, liquidity, sources of capital, expectations of sales and continued development of technologies and products.
These forward-looking statements are based on certain factors and assumptions, including, without limitation; 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; and the Company's ability to continue and further enhance revenue diversification and open new market opportunities; the Company's evidence forming the basis of the Claim and its financial and management resources and ability to pursue the Claim; and the Company's ability to successfully transition management and board transitions.
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, the Company may face legal action arising from the matters that are the subject of the Claim; the Company may not be successful in obtaining the relief sought in the Claim and may not have all of the intellectual property rights and goodwill that it believes that it has and should have; 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 four 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 in Canada and other economies generally 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; and risks in pursuing additional development projects to support existing customers or pursue other business opportunities.
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.
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