ESI Announces Second Quarter Fiscal 2010 Results

Revenues Increase 22% Sequentially

• Press Release
• Source: Electro Scientific Industries, Inc.
• On 4:05 pm EDT, Wednesday October 21, 2009

PORTLAND, Ore.--(BUSINESS WIRE)--Electro Scientific Industries, Inc. (NASDAQ:ESIO - News), a leading provider of world-class photonic and laser microengineering systems, today announced results for its fiscal 2010 second quarter, ended September 26, 2009. 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.

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Symbol	Price	Change
ESIO	9.83	-0.42

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Second quarter revenues were $27.6 million, a 22% increase from the first quarter. On a GAAP basis, net loss was $6.1 million or $0.22 per share, compared to a net loss of $5.5 million or $0.20 per share in the prior quarter. Excluding the impact of purchase accounting, equity compensation, and other non-recurring items, non-GAAP net loss was $3.9 million or $0.14 per share, compared to a non-GAAP net loss of $6.2 million or $0.23 per share in the first quarter.

“We continued to see improvement in our business, with sequential increases in revenue, gross margin, and non-GAAP operating income,” noted Nick Konidaris, ESI president and CEO. Orders of $29.3 million were up from $28.7 million in the prior quarter as increased semiconductor activity was partially offset by lower orders in passive components.

Second quarter operating expenses on a non-GAAP basis declined sequentially and were down over 20% from the prior year. Konidaris added, ”We are pleased with our ability to continue to manage discretionary spending and preserve cash in a difficult environment.”

Balance Sheet and Cash Flow

At quarter end, cash and investments, including restricted cash, totaled $154.5 million, roughly flat with last quarter and up from one year ago. Restricted cash resulted from our substitution of a letter of credit for a portion of the bond associated with legal action in Taiwan to protect our intellectual property. Cash used in operations was $1.2 million as improvements within working capital nearly offset losses from operations.

Q3 2010 Outlook

ESI expects revenues for the third quarter of fiscal 2010 to be between $32 and $37 million and a non-GAAP loss per share of $0.08 to $0.13 excluding the impact of purchase accounting, equity compensation, restructuring costs, and non-recurring items.

Konidaris concluded, "We continue to be encouraged by the improvement in overall business activity. As our customers’ utilization rates improve, we expect second half orders and revenues to be up sequentially from the first half. In addition, our investment in new products and applications should create additional opportunities for growth. Further, our business model should allow earnings to grow faster than sales as revenues increase."

The company will hold a conference call today at 5:00 p.m. EDT. The session will include a review of the financial results, operational performance and business outlook, and also a question and answer period.

The conference call can be accessed by calling 888-419-5570 (domestic participants) or 617-896-9871 (international participants). The conference ID number is 12639188. A live audio webcast can be accessed at www.esi.com. Upon completion of the call, an audio replay will be accessible through October 31, 2009 at 888-286-8010 (domestic participants) or 617-801-6888 (international participants), passcode 35092699. The audio replay will also be available on the ESI Web site.

Discussion of Non-GAAP Financial Measures

In this press release, we have presented financial measures which have not been determined in accordance with generally accepted accounting principles (GAAP) and are therefore non-GAAP financial measures. Non-GAAP financial measures exclude the impact of purchase accounting, equity compensation, restructuring costs, and non-recurring items. We believe that this presentation of non-GAAP financial measures allows investors to better assess the company’s operating performance by comparing it to prior periods on a more consistent basis. We have included a reconciliation of various non-GAAP financial measures to those measures reported in accordance with GAAP. Because our calculation of non-GAAP financial measures may differ from similar measures used by other companies, investors should be careful when comparing our non-GAAP financial measures to those of other companies.

About ESI

ESI is a pioneer and leading supplier of world-class production laser systems that help its microelectronics customers achieve compelling yield and productivity gains. The company's industry-leading, application-specific products enhance electronic-device performance in three key sectors -- semiconductors, passive components and electronic interconnect -- by enabling precision fine-tuning of device micro-features in high-volume manufacturing environments. Founded in 1944, ESI is headquartered in Portland, Ore. More information is available at www.esi.com.

Forward-Looking Statements

This press release includes forward-looking statements about the markets we serve, orders, revenue, growth, earnings growth, and loss per share. These forward-looking statements are based on information available to us on the date of this release and we assume no obligation to update these forward-looking statements for any reason. Actual results may differ materially from those in the forward-looking statements. Risks and uncertainties that may affect the forward-looking statements include: the risk that anticipated growth opportunities may be smaller than anticipated or may not be realized; risks related to the relative strength and volatility of the electronics industry - which is dependent on many factors including component prices, global economic strength and political stability, and overall demand for electronic devices (such as capacitors, semiconductor memory devices and advanced electronic packages) used in wireless telecommunications equipment, computers and consumer and automotive electronics; the health of the financial markets and availability of credit for end customers and related effect on the global economy; the volatility associated with the semiconductor industry which includes the relative level of capacity and demand, and financial strength of the manufacturers; the risk that customer orders may be canceled or delayed; the ability of the company to respond promptly to customer requirements; the ability of the company to develop, manufacture and successfully deliver new products and enhancements; the risk that customer acceptance of new or customized products may be delayed; the ability of the company to achieve anticipated cost reductions and savings; the company's need to continue investing in research and development; the company's ability to hire and retain key employees; the company's ability to create and sustain intellectual property protection around its products; foreign currency fluctuations; the company's ability to utilize recorded deferred tax assets; taxes, interest or penalties resulting from tax audits; changes in tax laws or the interpretation of such tax laws; and future liquidity and valuation of auction rate securities.

ESI
Brian Smith, 503-672-5760