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Photon Control Reports First Quarter 2019 Financial Results
Friday, May 24, 2019Company Profile | Follow Company
Richmond, BC, May 24, 2019--(T-Net)--Photon Control Inc. (TSX: PHO), a 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:
"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.
Business Outlook
"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."
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.
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