ESI Announces Third Quarter Fiscal 2010 Results

Electro Scientific Industries, a provider of laser-based microengineering systems, announced results for its fiscal 2010 third quarter, ended January 2, which consisted of fourteen weeks.

Financial measures are provided on both a GAAP and non-GAAP basis, which excludes the impact of purchase accounting, equity compensation, restructuring costs, and non-recurring items, according to officials.

Electro Scientific said third quarter revenues were $39.0 million, up 41 percent from the second quarter and up 52 percent from the same quarter one year ago. On a GAAP basis, net loss was $2.4 million or $0.09 per share, compared to a net loss of $6.1 million or $0.22 per share in the prior quarter. Excluding the impact of purchase accounting, equity compensation, and non-recurring items, non-GAAP net loss was $0.9 million or $0.03 per share, compared to a non-GAAP net loss of $3.9 million or $0.14 per share in the second quarter.

"All three of our operating groups showed strong sequential revenue growth. This top line growth led to sequential improvements in gross margin, operating income, and earnings per share," stated Nick Konidaris, ESI president and CEO.

Orders for the third quarter were $61.2 million, up from $29.3 million in the prior quarter and $21.2 million of new business orders in the prior year.

"Our markets continue to improve, with strength across many of our product lines," continued Konidaris. "Our orders more than doubled sequentially, led by a large micro-machining order for our new model ML5900, but also reflecting improved demand in our passive components, LED scribing, and LCD repair businesses.

"In addition, we introduced and received customer orders for a new version of our industry-leading MLCC tester, the model 3500. The 3500 increases throughput by 50 percent and handles a wider range of component sizes and capacitance values.

"Finally, during the quarter we purchased the intellectual property and assets of Applied Photonics. We believe this acquisition, combined with our technology, will enable us to expand our presence in the fast-growing market for glass micromachining."

Third quarter operating expenses on a non-GAAP basis were up sequentially due to the 14-week quarter, expiration of some temporary cost reduction measures, and higher engineering project spending. Konidaris added, "We continue to focus on improving operational efficiency while still investing in the many growth opportunities we see before us. We are pleased that we are approaching breakeven, despite weakness in our memory repair business, which we expect to begin recovering in the second half of calendar 2010."

At quarter end, cash and investments, including restricted cash, totaled $162.8 million, an increase of $8.3 million over last quarter. Restricted cash increased by $8.4 million resulting from the substitution of a letter of credit for the remaining bond associated with legal action in Taiwan to protect the company's intellectual property. Cash flow from operations was almost $1 million as improvements within working capital more than offset losses from operations.

ESI expects revenues for the fourth quarter of fiscal 2010 to be between $50 and $55 million and non-GAAP earnings per share of $0.05 to $0.10 excluding the impact of purchase accounting, equity compensation, restructuring costs, and non-recurring items.

Konidaris concluded, "Our markets appear to be making improvement. While the slope and magnitude of the recovery are still unclear, we are optimistic about market forecasts for the end products driving our demand, such as PCs, smart phones, and HDTVs. In addition, we are excited about customer response to our new products and believe our strategy of expanding our addressable markets will continue to create additional opportunities for growth."

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