ORBOTECH LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS
ENDED MARCH 31, 2013
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3 months ended
March 31
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12 months
ended
December 31
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2013
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2012*
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2012*
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U.S. dollars in thousands
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net income (loss)
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4,840
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1,427
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(46,537
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)
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Adjustment to reconcile net income to net cash provided by operating activities:
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Depreciation and amortization
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2,812
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5,073
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17,919
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Impairment of Intangible assets
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30,142
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Compensation relating to equity awards granted to employees and others - net
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773
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910
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3,070
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Increase (decrease) in liability for employee rights upon retirement
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(640
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)
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114
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(640
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)
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Deferred income taxes
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(53
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)
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(1,186
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)
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(5,440
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)
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Non-cash expenses in respect of restructuring
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601
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601
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Amortization of premium and accretion of discount on marketable Securities, net
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91
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588
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Equity in earnings of Frontline, net of dividend received
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902
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(936
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)
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(1,232
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)
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Other, including capital loss (gain)
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246
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67
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1,498
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Decrease (increase) in accounts receivable:
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Trade
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(15,483
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)
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(2,202
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)
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31,725
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Other
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(1,031
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)
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(2,213
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)
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(2,708
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)
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Decrease in accounts payable and accruals:
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Trade
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(4,058
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)
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(7,005
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(4,789
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)
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Deferred income and other
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(1,361
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)
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(12,283
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)
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(14,679
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)
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Decrease (increase) in inventories
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6,251
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(2,844
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)
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11,925
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Net cash provided by (used in) operating activities
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(6,711
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)
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(20,477
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)
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21,443
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CASH FLOWS FROM INVESTING ACTIVITIES:
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Purchase of property, plant and equipment
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(3,361
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)
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(1,530
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)
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(9,484
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)
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Withdraw (placement) of bank deposits
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(10,986
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)
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51,880
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142,278
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Purchase of marketable securities
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(264
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)
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(14,935
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)
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(15,614
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)
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Proceeds from disposal of property, plant and equipment
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3,034
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Increase in funds in respect of employee rights upon retirement
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(63
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)
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(164
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)
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(254
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)
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Net cash provided by (used in) investing activities
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(14,674
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)
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35,251
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119,960
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Repayment of long-term bank loan
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(40,000
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)
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(8,000
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)
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(32,000
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)
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Employee stock options excercised
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273
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470
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719
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Acquisition of treasury shares
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(2,208
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)
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(1,959
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Net cash used in financing activities
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(41,935
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)
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(7,530
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(33,240
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)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
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(63,320
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)
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7,244
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108,163
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CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
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256,663
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148,500
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148,500
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CASH AND CASH EQUIVALENTS AT END OF PERIOD
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193,343
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155,744
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256,663
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7
ORBOTECH LTD.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
FOR THE THREE MONTHS ENDED
MARCH 31, 2013
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3 months ended
March 31
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12 months
ended
December 31
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|
2013
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2012*
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2012*
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U.S. dollars in thousands (except per share data)
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Reported operating income (loss) on GAAP basis
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6,727
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3,110
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(40,796
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)
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Equity based compensation expenses
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773
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910
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3,070
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Restructuring charges
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1,918
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5,063
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Impairment of Intangible assets
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30,142
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Amortization of intangible assets
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1,010
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3,091
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9,907
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Non-GAAP operating income
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8,510
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9,029
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7,386
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Reported net income (loss) attributable to Orbotech Ltd. on GAAP basis
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5,011
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1,639
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(45,579
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)
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Equity based compensation expenses
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773
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910
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3,070
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Amortization of intangible assets
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1,010
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3,091
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9,907
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Restructuring charges, net of tax credit
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1,918
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4,593
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Impairment of Intangible assets
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30,142
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Share in losses of associated company
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45
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45
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165
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Non-GAAP net income
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6,839
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7,603
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2,298
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Non-GAAP earnings per diluted share
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$
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0.16
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$
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0.17
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$
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0.05
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Shares used in earnings per diluted share calculation-in thousands
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43,739
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43,944
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44,071
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8
Non-GAAP Financial Measures
Non-GAAP net income, non-GAAP net income from continuing operations and non-GAAP net income from continuing operations per share detailed
in the Reconciliation exclude charges, income or losses, as applicable, related to one or more of the following: (i) equity-based compensation expenses; (ii) certain items associated with acquisitions, including amortization and impairment
of intangibles; (iii) discontinued operations; (iv) restructuring charges; and/or (v) share in losses of associated company. Management uses these non-GAAP measures to evaluate the Company’s operating and financial performance in
light of business objectives and for planning purposes. These measures are not in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. Orbotech believes that these measures enhance
investors’ ability to review the Company’s business from the same perspective as the Company’s management and facilitate comparisons with results for prior periods. The presentation of this additional non-GAAP information should not
be considered in isolation or as a substitute for net income; net income attributable to Orbotech Ltd. or earnings per share prepared in accordance with GAAP, and should be read only in conjunction with the Company’s consolidated financial
statements prepared in accordance with GAAP. The reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures are set forth below. For a detailed explanation of the
adjustments made to comparable GAAP measures, please see the Reconciliation.
To supplement the Company’s financial
results presented on a GAAP basis, the Company uses the non-GAAP measures indicated in the Reconciliation, which exclude equity based compensation expenses, amortization of intangible assets, in-process research and development charges, share in
losses/profits of associated companies and impairment and restructuring charges, as well as certain financial expenses and non-recurring income items that are believed to be helpful in understanding and comparing past operating and financial
performance with current results. However, the non-GAAP measures presented are subject to limitations as an analytical tool because they exclude certain recurring items (such as equity compensation and amortization of intangible assets) as described
below and because they do not reflect certain cash expenditures that are required to operate the Company’s business, such as interest expense and taxes. Accordingly, these non-GAAP financial measures are not meant to be considered in isolation
or as a substitute for comparable GAAP measures and should be read only in conjunction with the Company’s consolidated financial statements prepared in accordance with GAAP. Management regularly utilizes supplemental non-GAAP financial measures
internally to understand, manage and evaluate the Company’s business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods.
The effect of equity-based compensation expenses has been excluded from the non-GAAP measures. Although equity-based compensation is a
key incentive offered
9
to employees, and the Company believes such compensation contributed to the revenues earned during the periods presented and also believes it will contribute to the generation of future period
revenues, the Company continues to evaluate its business performance excluding equity based compensation expenses. Equity-based compensation expenses will recur in future periods.
The effects of amortization of intangible assets have also been excluded from the measures. This item is inconsistent in amount and
frequency and is significantly affected by the timing and size of acquisitions. Investors should note that the use of intangible assets contributed to revenues earned during the periods presented and will contribute to future period revenues as
well. Amortization of intangible assets will recur in future periods and the Company may be required to record additional impairment charges in the future. The Company believes that it is useful for investors to understand the effects of these items
on total operating expenses. For more information about these items, see the Reconciliation and the Company’s Annual Report on Form 20-F filed with the SEC for the year ended December 31, 2012.
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COMPANY CONTACTS:
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Adrian Auman
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Michelle Harnish
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Corporate Vice President Investor Relations
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Marketing Communications Manager
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and Special Projects
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Orbotech, Inc.
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Orbotech Ltd.
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+1-603-289-7937
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+972-8-942-3560
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10
ORBOTECH LTD.
Q1 2013 ORBOTECH EARNINGS CONFERENCE CALL
MAY 6, 2013, 9:00 AM EDT, ORBK
CORPORATE PARTICIPANTS
Adrian Auman
Orbotech Ltd. – Corporate VP, IR & Special Projects
Asher Levy
Orbotech Ltd. – CEO
Doron Abramovitch
Orbotech Ltd. – Corporate VP & CFO
Amichai Steimberg
Orbotech Ltd. – President & COO
CONFERENCE CALL PARTICIPANTS
Mahesh Sanganeria
RBC Capital Markets –
Analyst
Andrew Uerkwitz
Oppenheiemer & Co. – Analyst
Jim Ricchiuti
Oppenheimer & Co. – Analyst
PRESENTATION
Operator
Welcome to the Orbotech Ltd. Q1 2013 conference call. At this time, all parties are in a listen-only mode. (Operator Instructions). Today’s conference call is being recorded. If you have any
objections, you may disconnect at this time. Now, I will turn the meeting over to Mr. Adrian Auman. Sir, you may begin.
Adrian Auman
– Orbotech Ltd. – Corporate VP, IR & Special Projects
Thank you, operator. Good morning. This is
Adrian Auman, Corporate Vice President at Orbotech. Joining me on the call today are Asher Levy, Chief Executive Officer, joining the call from China where he has been invited to join the delegation of Israeli Prime Minister, Mr. Netanyahu, for
his official visit to China this week. Also, on the call, is Amichai Steimberg, President and Chief Operating Officer and Doron Abramovitch, Chief Financial Officer.
Before starting the call, I would like to inform everyone that management will be presenting at the upcoming Oppenheimer 14th Annual Israeli Conference in Tel Aviv on May 12, at the JPMorgan TMT
Conference in Boston on May 16 and at the Barclays Global Technology Media and Telecommunications conference in New York City on May 23. You should have all received a copy of the press release, which was issued earlier today. If you have
not received this release, please refer to Orbotech’s website at www.orbotech.com.
Now before starting the call, I would like to mention
that certain statements that are not historical are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. The words estimate, project, intend, expect, believe and similar expressions are intended to identify
forward-looking statements and these forward-looking statements involve known and unknown risk and some uncertainties. Any factors could cause the actual results, performance or achievements of the Company to be materially different from those that
may be expressed or implied by such forward-looking information. Additional information regarding risk and uncertainties associated with the Company’s business are included in, but not limited to, the Company’s reports filed from time to
time with the SEC. With that said, I would like to turn the call over to Asher Levy.
Asher Levy
– Orbotech Ltd. –
CEO
Hello, everyone and thank you for joining us. As you heard, I am currently in China with the Prime Minister of Israel on a
mission to strengthen strategic business cooperation between China and Israel. As you are aware, Orbotech has been operating in China for over 17 years and today has one of the largest China operations of any Israeli Company. Therefore, Orbotech was
requested by the Prime Minister of Israel to be part of this important delegation.
I also apologize in advance that I will not be able to
participate in the question-and-answer part of this call since I will be meeting with Chinese officials and businessmen.
We had a strong
opening quarter to the new year. We were cautious last quarter, but conditions are improving and we expect the second quarter to be even better than the first. Besides the improving industry conditions, we are benefiting from the steps we took last
year to reduce our expense structure, improve our balance sheet by paying down debt and by focusing on key areas such as, for example, our service business.
11
We enjoyed significant operating leverage, so even slight improvements had a big benefit. We significantly
reduced our breakeven level and this is clearly reflected in our results. Service revenues are down a bit sequentially, reflecting our beginning of deal negotiations for service agreements in the PCB business and the weakness in the SPD business
last year. But we are still targeting $150 million for the year. Our gross margins improved substantially from the fourth quarter.
And now
for the PCB. PCB had a very good quarter with approximately 20% sequential sales growth. The market continues to be driven by strong demand for complex, sophisticated, personal communications and entertainment devices. After a strong 2012 for our
PCB business in Korea, we continued to experience strong positive momentum in Q1 and expect it to continue into the second quarter. Our results in Korea are partially a reflection of the success of Samsung mobile devices and its surrounding
ecosystem it is enjoying.
The products require sophisticated technologies such as advanced flex printed circuit boards with tight
registration requirements. This basically creates a significant business opportunity for our solutions, specifically for direct imaging. We sold 39 direct imaging systems, a sharp increase over the fourth quarter.
We also see improvement in our ECM business, which is enjoying increasing penetration in the touchscreen market. We see additional opportunities
materializing for ECM in the second quarter. As expected, we see increasing activity in the FPD industry. Many of our clients are returning to profitability and are focusing mainly on high-resolution technologies and LTPS backplanes.
At the same time, OLED manufacturers continue to delay volume release of products due to yield issues. We expect revenues in our flat panel display to be
up sequentially in the second quarter as we begin to deliver multiple systems to China in accordance with new business booked in the first quarter. The trial in Korea is progressing and we expect a decision in a few months.
Looking ahead, we continue to seek opportunities to leverage our existing technology through new products and in new markets in order to generate
incremental growth. In the second quarter, we plan to release a new direct imaging system, which would further strengthen our leadership position in the market.
We will also introduce a new AOI system to help generate additional business in the touchscreen market. And we will be introducing a new ArrayChecker system for the flat panel display in order to satisfy
our customers’ needs for increased throughput and high resolution.
And now for some guidance. Next quarter, we expect revenues of
roughly $105 million plus or minus. In general, we are satisfied with our results, glad that business conditions are improving and pleased to see a result from the steps we took last year to improve our financial and market position. I will now turn
the call over to Doron for a more in-depth discussion of our financials.
Doron Abramovitch
– Orbotech Ltd. – Corporate
VP & CFO
Thank you, Asher and good morning, everyone. Let me start by giving you a short summary of financials.
Revenues for the quarter were $95.5 million, exceeding the guidance we provided. Gross margin for the quarter improved to 42%, a significant improvement from the fourth quarter of last year. Our service revenues for the quarter declined to $33.1
million, but we are still targeting $150 million for all 2013, exceeding the 2012 total of $148 million.
Non-GAAP income of $6.8 million, or
$0.16 per share diluted, and GAAP net income of $5 million, or $0.11 per share diluted. The measures the Company adopted during the fourth quarter designed to realign its infrastructure with current revenue levels and business conditions are
included in the Q1 results.
Now I would like to give the basic numbers for those who may not have the press release in front of them. I want
to remind you of the change in the accounting method that we described last quarter. Basically, Israeli GAAP as of January 1, 2013 that was switched from the proportional to the equity method for investment in foreign clients are 50% interest
with Mentor Graphics for CAM for PCB.
For Q1, we reported present and historical results in the new format. This means that the investment
that had been reflected on various lines and income statements is now presented in one line on the P&L before operating income. Obviously, it did not affect the bottom line.
Revenues totaled $95.5 million compared to $97.1 million in the fourth quarter of 2012 and $96.5 million in the first quarter of 2012. 76% of our sales of equipment in this quarter were to the PCB
industry and totaled $47.4 million compared to 77%, or $46 million in the first quarter of 2012. 21% of our total quarterly sales of equipment were to the FPD industry, totaling $13.2 million compared to 20%, or $11.8 million in the first quarter of
last year.
Service revenues for this first quarter of 2013 were 35% of total revenues, or $33.1 million compared to 38%, or $36.3 million in
the first quarter of 2012. Our service part of the business continues to have a very positive impact to our business; although this quarter, our revenue declined mainly due to timing of finalizing certain service contracts for 2013. We are targeting
to exceed the 2012 total of $148 million.
12
GAAP net income for the first quarter of 2013 was $5 million, or $0.11 per share diluted, compared to GAAP
net income of $1.6 million, or $0.04 per share diluted in the first quarter of 2012.
My remaining comments will focus on the non-GAAP
financials for the first quarter of 2013. The main differences between the GAAP and non-GAAP results for the quarter are stock compensation expenses and amortization and impairment of intangible assets.
Non-GAAP net income was $6.8 million, or $0.16 per share diluted, compared to non-GAAP net income of $7.6 million, or $0.17 per share diluted in the
first quarter of 2012. Gross margins for the quarter were 42%, a significant improvement over the fourth quarter of last year. This increase resulted from the improved revenue mix and the increased utilization of our manufacturing capacity.
Our operating expenses were $33.6 million and we expect them to continue in the $33 million to $34 million range for the next few quarters.
The Company’s expenses relating to the Korean matter were essentially offset by an insurance refund.
Turning now to the balance sheet,
as we previously announced, we strengthened our balance sheet even further by prepaying $32 million of our long-term loan. This will result in a savings of approximately $1.8 million in interest expenses in 2013. We ended the quarter with
approximately $198 million of net cash. While our receivables and DSOs grew at the end of the quarter, our strong collections in April will reduce the DSOs at the end of Q2. We managed to reduce our inventories to $87.4 million as a result of our
ability to monitor them on a daily basis.
As to our share buyback program, which began last December, as of today, we have repurchased
approximately 530,000 shares. The program is up to $30 million by the end of 2013.
I will conclude by reiterating the guidance of
approximately $105 million in revenues for the second quarter. As Asher mentioned, we are benefiting from the steps we took last year to reduce our expense structure, improve our balance sheet and by focusing on key areas. We enjoyed significant
operating leverage, so even slight improvements have a big benefit. We significantly reduced our breakeven level and this is clearly reflected in our results. That concludes my comments and I will now turn the call over to Adrian Auman.
Adrian Auman
– Orbotech Ltd. – Corporate VP, IR & Special Projects
Thank you, Doron. Operator, we will now be ready for questions.
QUESTION AND ANSWER
Operator
(Operator Instructions). Mahesh Sanganeria, Oppenheimer Company.
Mahesh Sanganeria
– RBC Capital Markets – Analyst
Thank you
very much and congratulations on a very good quarter. On the PCB side, definitely are seeing a year-over-year growth. Do you expect for the rest of the year, are we going to continue to grow from here? Is that your expectation on the PCB side?
Amichai Steimberg
– Orbotech Ltd. – President & COO
Hi, this is Amichai. Right now, based on what we are seeing out there, the PCB is strong. Asher mentioned a few elements that make it so strong, for
example, the flex business and the Korea environment. What we see going into the second quarter, we believe that the levels of business — level that we had in the first quarter will continue. It is too soon to see the second half, but based on
the high-level macroeconomic that eventually will impact our PCB business, we believe that we will have a strong year in the PCB.
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Mahesh Sanganeria
– RBC Capital Markets – Analyst
Okay, that is helpful. And on the flat panel side, you said it is going to grow in Q2, but we are coming off a very low level. Do you see an inflection
happening on that business anytime soon? Are you seeing any signs of getting to a more normalized level or in fact, if you can give us an idea what do you think in the normal environment that the run rate could be?
Amichai Steimberg
– Orbotech Ltd. – President & COO
Normal environment is usually when you look backwards. Going forwards, it is more like — we believe that 2013, in terms of levels of overall CapEx in
this industry, will be significantly better than 2012. Not sure it would be as expected going into the year, but it will be definitely more than the 2011 — in ‘12, sorry — and obviously that will impact our business, which right now
we see a better year compared to 2012, which in a way was the trough.
As for the quarters, as we said, I believe, last time, the first
quarter should be the lowest quarter in our FPD business. We said that it will be sequentially up going into the second quarter. We are now working on new expansion or customers are now working on their new expansion for the second half of 2013,
which can easily slide to 2014. When I am saying new expansion, I am referring to investment in China and obviously in the OLED. The magnitude of that is still too soon to quantify, but it will be a better year than 2012.
Mahesh Sanganeria
– RBC Capital Markets – Analyst
Okay. So just a little bit more color, if you can provide, you said something – you did give us that right now the driver is more LTPS. Can you give us some kind of sense on how the whole thing is
split between big size and small size (inaudible) on the FPD spending and how do you see that trending?
Amichai Steimberg
–
Orbotech Ltd. – President & COO
So we can refer to what we know about 2013 and what we hear from customers and
what we see from analysts, technology industry analysts, the new investments in China will be a mix between large flat panel ETV displays and tablet, small, midsize. I don’t know the exact breakdown, but it’s, I would say, roughly 60/40.
Still 60% for the 7.5 and 8 generation and maybe 4,5 and 4.6 where the (inaudible) is right now still for lower glass panel.
Mahesh
Sanganeria
– RBC Capital Markets – Analyst
Okay. And a quick question on — what would be your interest
expense? I guess this should go away after the end of this year, but what is the run rate for the next three months, next three quarters, sorry?
Doron Abramovitch
– Orbotech Ltd. – Corporate VP & CFO
You mean the interest?
Mahesh Sanganeria
– RBC Capital Markets –
Analyst
Interest expense, yes.
Doron Abramovitch
– Orbotech Ltd. – Corporate VP & CFO
Yes, it is a bit complicated. The interest is supposed to be breakeven because we have — we generate interest from the cash that we have and we have some interest on doing the business and the loans.
So basically, it is a breakeven, but, of course, there are some other currencies expenses, etc. that we cannot predict, but the interest, if you mean what we know, is breakeven.
Mahesh Sanganeria
– RBC Capital Markets – Analyst
Okay,
thank you very much.
14
Operator
Andrew Uerkwitz, Oppenheimer Company.
Andrew Uerkwitz
–
Oppenheiemer & Co. – Analyst
Thanks, guys, for taking my questions. The first one, do you have any sense of what
the utilization rates are in the display industry? It seems like our checks are kind of mixed. Some are saying they are fully utilized; others are running fairly low. So do you have any color there?
Amichai Steimberg
– Orbotech Ltd. – President & COO
So I guess we share the same view. The ones that are placing orders are definitely enjoying higher utilization rates. Some of them are working in
overcapacity transferring jobs to other vendors. We see also that and we do see some other fabs that are working on 60%, 70% utilization. Overall, the last quarter, the first quarter, was very positive, maybe for the year. For most of the
manufacturers in the FPD, it was a return to profits and profit obviously comes together with utilization. So the overall trend I think it is positive right now.
Andrew Uerkwitz
– Oppenheiemer & Co. – Analyst
Thank you. And then last question on display, are you booking OLED orders and how much — could you go into a little bit more detail on the activity
that you are seeing there?
Amichai Steimberg
– Orbotech Ltd. – President & COO
We said that also the OLED is not — is still in a very low level in terms of the amount of new investments and so forth. We definitely are out there
working on the opportunities that are available. The magnitude is limited. Manufacturers are still suffering from very low yields, very expensive processes, but we have solutions for the OLED and we believe eventually when the OLED will pick up, we
will be in a very good position.
Andrew Uerkwitz
– Oppenheiemer & Co. – Analyst
Okay. And then last question I had is you guys did a really good job of resetting your expense levels to a much lower breakeven point. What do we need to
see or what do you need to see positively when you start kind of cranking, hiring back up and building the capacity you need to support a larger business?
Doron Abramovitch
– Orbotech Ltd. – Corporate VP & CFO
Andrew, the fact that we managed to reduce, and a breakeven point will help us when revenues will go up, and what we call core expenses to generate, of course, much more profit and I think that you can
see it in these Q1 results versus previous quarters that we managed to take the extra mile. Meaning that they, on the same level of revenues, we generate more profit and when time will come and we’ll gain more profit, of course, it will help us
to gain much more profit on the bottom line.
Andrew Uerkwitz
– Oppenheiemer & Co. – Analyst
Thanks, guys. Good quarter. I appreciate it. Thank you.
Operator
Jim Ricchiuti, Needham & Company.
Jim Ricchiuti
– Oppenheimer & Co. – Analyst
Thanks. I wonder if you can give us a little bit more color on the DI both in terms of the shipments by geography and applications. It was certainly a lot stronger than I was anticipating for Q1,
particularly strong.
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Amichai Steimberg
– Orbotech Ltd. – President & COO
Hi, Jim. This is Amichai. So on the DI, I think there are a few elements that are worth to be mentioned. First, we are back to the 40s,
which last time we were there, I think it was a year ago. The thing is that this is not exactly the same mix where we were when we sold 40 last year — first or second quarter of 2012.
Right now, a big portion of DI is for the rigid flex application, which most of it right now is being done in Korea related to the mobile devices, mainly Samsung mobile devices. We found that our
solution, the DI solution is a very good solution for the flex technology because of the technology that we are using, the laser technology and in fact, roughly speaking, I would say that close to 40% of the DIs that we sold were somehow related to
the rigid flex technology.
And Korea obviously was a key region in that aspect. On top of that, what we call the ECM, which are the
businesses outside of the PCB market, PCB industry, we faced — we are facing an accelerated penetration of the DI for mainly the touchscreen, but not only the touchscreen, also for the IC packaging. So the combination of growing flex
technology, the growing use of the flex and better penetration into the ECM, basically I think is the story behind the DI in the first quarter. And both trends should continue going into the second quarter and hopefully into the second half of 2013.
Andrew Uerkwitz
– Oppenheiemer & Co. – Analyst
Okay, that is helpful. Can you talk at all too about — you have got a fairly aggressive group of new products that you are planning for Q2. What
should we expect for your R&D? You have taken out costs, but is there going to be a bump up in R&D expense as you launch some of these new products in the quarter?
Amichai Steimberg
– Orbotech Ltd. – President & COO
No, you should not expect any major change in the level of investment that we are investing in R&D. We have always introduced new products. I would
say that more than 90% of the products we sell today are products that were introduced to the market in the last two years, more or less. It is true that next quarter we will be introducing three products, as Asher mentioned — one AOI, one DI
and one tester for the FPD.
And I can also share with you that our NPI, new product introduction, roadmap is very populated going forward.
But, again, this is part of our overall investment in the R&D and the timing and the magnitude of those introductions are already embedded in the roadmap of the R&D and the overall expense that we spend on a yearly base on R&D. So, there
is no real connection between these two.
Andrew Uerkwitz
– Oppenheiemer & Co. – Analyst
Okay. And one final question, just on the service revenue. This appears to be a little later than you would normally see with some of the
negotiations with customers. Can you talk a little bit more about that? And your confidence level that we are going to see the kind of sequential growth that can get you to the annual targets?
Amichai Steimberg
– Orbotech Ltd. – President & COO
Right. So, first of all, right now, looking ahead into the year, the next three quarters, we have a confidence in the $150 million and we said that. The confidence derives from what we see out there, the
prices of the contract, our ability to sign up on these annual contracts or it is based on the level of activity that we are seeing out there. Nevertheless, the first-quarter phenomenon was a combination of, as mentioned, late sign-up on some of the
first-quarter contract in the PCB and lower level of business in the FPD that, if you remember, part of our service contract derives from warranty and when you sell less, you see — right away, the impact on the level of service. But still, as I
said, we are right now comfortable with the $150 million of the growth for this year.
Andrew Uerkwitz
–
Oppenheiemer & Co. – Analyst
Okay, thank you. Congratulations on the quarter.
Amichai Steimberg
– Orbotech Ltd. – President & COO
Thank you, Jim.
16
Doron Abramovitch
– Orbotech Ltd. – Corporate VP & CFO
Thank you.
Operator
And there are no further questions at this time. (Operator Instructions).
Adrian Auman
– Orbotech Ltd. – Corporate VP, IR & Special Projects
If there are no further questions, I would like to thank everyone for participating on the call with us. If you require any additional information about Orbotech, please visit our site at
www.orbotech.com. Thank you very much and have a nice day.
Operator
Thank you. That does conclude today’s conference call. Thank you for participating. You may disconnect at this time.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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ORBOTECH LTD.
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(Registrant)
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By:
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/s/ Doron Abramovitch
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Doron Abramovitch
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Corporate Vice President and
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Chief Financial Officer
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