Orbotech, Ltd. (ORBK)
Q2 2008 Earnings Call
August 4, 2008 9:00 am ET
Rani Cohen - Chief Executive Officer
Amichai Steinberg - Executive Vice President and Chief Financial Officer
Adrian Auman - Vice President of Finance and Investor Relations
Chuck Murphy - Sidoti & Co.
Jim Ricchiuti - Needham & Co.
Sergey Vastchenok - Oppenheimer & Co.
Andrew Abrams - Avian Securities
Eric Mydukel - Dominick & Dominick
Irit Jakoby - Susquehanna
Ziv Tal - Oscar Gruss
Matt Lipman - Tiedemann & Co
Darice Liu - Maxim Group
Welcome to the Orbotech, Ltd. Q2 2008 conference call. (Operator Instructions) Now I would like to turn the meeting over to Adrian Auman.
Previous Statements by ORBK
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I’d like to take this opportunity to inform everyone that management will be presenting at the upcoming HSBC eighth annual emerging market, Investor Forum in London on September 2, the 2008 Maxim Growth Conference in New York on October 7, and the IMGTMT Forum in New York on October 17. 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 maybe 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 Rani Cohen.
Our second quarter results reflect the challenging global environment in which we all find ourselves. As you know the current economic setting is unsettled and uncertain and Orbotech is not exempt from its effects. Both our PCB and Medical Imaging segments were particularly impacted, although FPD still remains strong reflecting the industry wide expansion. We are making good progress in the acquisition of Photon Dynamics and continue to balance the need to grow and develop our business with fiscal prudence.
Starting as usual with the PCB market, revenues from data and assembled PCB related products were down slightly on a sequential basis and down from last year. As we reported last quarter, we believe the decline in PCB bare board is due to the global environment and not competition. Customers are not canceling expansion plans, but are delaying deployment. Once confidence is restored we expect the market to reflect underlying demand.
During the quarter we introduced the PerFix, our new Automated Optical Repair System an important extension to our PCB bare board product line. The system allows for the automated repair of shorts in very high end PCBs, something that was not possible before. With the introduction of PerFix, Orbotech is creating a new product category, one which offers our customers considerable value. We expect first sales in the third quarter.
Market uncertainty has affected sales of our direct imaging systems, which is a big ticket item, but we believe that our leadership position in the market remains unchanged. In Q2 we sold 15 units. For the full year 2008 we expect to sell about 75 to 80 systems. Sales on Ink Jet printer systems are about flat with last quarter.
We are currently preparing to release the Sprint; our new model which offers significantly improves throughput and performance. We are optimistic about the outlook for these systems. As a reminder our Ink Jet business is the result of our acquisition of New Systems of Italy, a little over a year ago. We are very pleased to be introducing important new products in this time frame.
Turning to FPD; FPD remains strong. As you know the FPD market is driven by long term investment cycles and the continuing demand for flat panels and although there is some anxiety in the market and short term fluctuations in end user demand, the fundamental trend is clearly up with strengthening demand for panels and continuing stabilization in the panel prices.
Our customer’s expansion plans remain on track. We are raising our expectations for FPD revenues to approximately $110 million this year from our previous estimate of $100 million. As you know during the quarter we announced the definitive agreement to acquire Photon Dynamics.
We are excited about this step and optimistic about the synergies between the companies and the opportunity it offers to better serve our customers. It is a natural evolution for both companies. As we have said we expect the deal to be cash accretive immediately and expect the substantial contribution to the bottom line in 2009. We continue to expect the deal to close before the end of 2008.
Medical Imaging; that is 3D which we acquired last year had a disappointing quarter. We believe that the down turn in sales is due to economic uncertainty in the US which is causing private clinics to become very cautious about capital investment. At this point we are targeting sales of $20 million for the year and not the $25 million as previously felt.