Cascade Microtech Reports Second Quarter 2014 Results

BEAVERTON, OR--(Marketwired - Aug 6, 2014) - Cascade Microtech, Inc. (NASDAQ: CSCD) today reported financial results for the second quarter ended June 30, 2014.

Financial summary

Results for the quarter ended June 30, 2014 were as follows:

• Total revenue of $33.5 million, compared to $33.8 million for Q1 2014 and $30.3 million for Q2 2013. 
  • Systems revenue of $21.8 million, an increase of $0.3 million, or 1.2%, over Q1 2014, and an increase of $2.0 million, or 10.0%, over Q2 2013. 
  • Probes revenue of $11.6 million, a decrease of $0.6 million, or -5.1%, from record high Q1 2014, and an increase of $1.2 million, or 11.2%, over Q2 2013. 
• Gross margin of 50.8%, up from 48.1% in Q1 2014 and 47.1% in Q2 2013. 
  • Q2 2014 represents record gross margin performance overall and for each segment. 
  • Systems gross margin of 46.5%, up from 42.7% in Q1 2014 and 44.1% in Q2 2013.
  • Probes gross margin of 58.9%, up from 57.8% in Q1 2014 and 52.7% in Q2 2013.
• Income from operations of $2.9 million, an increase of $0.3 million, or 12.5%, over Q1 2014, and an increase of $0.4 million, or 16.3%, over Q2 2013.
• GAAP net income of $1.8 million, or $0.11 per diluted share, compared to $1.6 million, or $0.10 per diluted share, for Q1 2014, and $2.2 million, or $0.15 per diluted share, for Q2 2013. 
  • Q2 2014 includes tax expense of $1.1 million, or $0.06 per diluted share, compared to $0.9 million, or $0.06 per diluted share, for Q1 2014, and $0.2 million, or $0.02 per diluted share, for Q2 2013.
• Non-GAAP net income of $0.13 per diluted share, compared to $0.13 per diluted share for Q1 2014, and $0.17 per diluted share for Q2 2013. 
• Depreciation, amortization and stock-based compensation expenses totaled $2.4 million, compared to $2.1 million for Q1 2014 and $1.7 million for Q2 2013. 
• Adjusted EBITDAS of $5.1 million, compared to $4.7 million for Q1 2014 and $4.3 million for Q2 2013.
• Total cash, restricted cash and investments of $30.3 million, an increase of $1.8 million over March 31, 2014.
  • Q2 2014 includes stock repurchases of $0.2 million. 
• Book-to-bill ratio of 0.89 to 1.

"We are very pleased with the continued improvement in both business segments as well as our financial results. In addition to setting record gross margins and validating the key first step to our Success Model, we strengthened our business through the introduction of our strategic partnership initiatives that we call MeasureOne. These initiatives expand our markets while leveraging our sales and service channel. Our leadership position with our customer base continues to be our major focus. This focus will manifest itself in increased investment in research and development to meet our customers request and road-maps. Based upon the engagement with our customers and a strong Q2 behind us, we are optimistic about the rest of 2014," said Michael Burger, President and CEO.

Financial outlook

For the third quarter of 2014 we are projecting revenue in the range of $31.0 million to $34.0 million with diluted GAAP earnings per share in the range of $0.04 to $0.08, and non-GAAP earnings per share in the range of $0.07 to $0.11. Our guidance assumes a tax rate of 37%, consistent foreign currency rates and no significant one-time charges.

We will host a conference call beginning at 2:00 p.m. PDT (5:00 p.m. EDT) on Wednesday, August 6, 2014, to discuss our results for the quarter ended June 30, 2014.

A simultaneous audio cast of the conference call may be accessed online from the investor relations page of www.cascademicrotech.com/investors. If you are interested in participating in the call, the live dial-in number is 866-953-6860, or international 617-399-3484, participant Passcode: 85034028. A replay will be available after 9:00 p.m. EDT at the same internet address. (For a telephone replay available after 9:00 p.m. EDT, dial: 888-286-8010, international: 617-801-6888, Passcode: 99609077).

Forward-Looking Statements

The statements in this release regarding performance to the Success Model, customer demand, investment in research and development, our optimism about the rest of 2014, and statements under "Financial Outlook" regarding projected revenue, GAAP earnings per share, and non-GAAP earnings per share, and other statements identified by terminology such as "will," "should," "expects," "estimates," "predicts," and "continue" or other derivations of these or other comparable terms are "forward-looking" statements within the meaning of the Securities Litigation Reform act of 1995. Such statements are based on current expectations, estimates and projections about the Company's business based in part on assumptions made by management. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including: changes in demand for the Company's products; changes in product mix; potential delays and other factors affecting the timing of new product introductions; the timing of shipments and customer orders; constraints on supplies of components; excess or shortage of production capacity; potential failure of expected market opportunities to materialize; changes in foreign exchange rates; our ability or delay in integrating acquired businesses; and other risks discussed from time to time in the Company's Securities and Exchange Commission filings and reports, including the Company's Annual Report on Form 10-K for the year ended December 31, 2013. In addition, such statements could be affected by general industry and market conditions and growth rates and general domestic and international economic conditions. Such forward-looking statements speak only as of the date on which they are made and the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release.

Non-GAAP Financial Measures

In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (GAAP), the Company's earnings release contains Non-GAAP financial measures which are defined below and reconciled to GAAP financial measures in a table later in this release:

• Non-GAAP net income is defined as GAAP net income before certain items (adjustments) such as restructuring, facility move and project costs, acquisition-related expenses, the amortization of intangibles and discrete tax items that we believe are either not representative of our ongoing operating performance or effect the comparability of results over time. Non-GAAP net income should not be construed as a substitute for net income as defined by GAAP. However, we regard non-GAAP net income as a complement to GAAP net income in assessing our financial performance over time and in the future.
   
• Adjusted EBITDAS is defined as income from continuing operations before depreciation and amortization and stock-based compensation and certain other items (adjustments) such as restructuring, facility move and project costs, and acquisition-related expenses that we believe are not representative of our ongoing operating performance. Adjusted EBITDAS should not be construed as a substitute for net income from continuing operations or net cash provided by (used in) operating activities (all as determined in accordance with GAAP) for the purpose of analyzing our operating performance, financial position and cash flows, as adjusted EBITDAS is not defined by GAAP. However, we regard adjusted EBITDAS as a complement to net income from continuing operations and other GAAP financial performance measures, by including an indirect measure of operating cash flow.

About Cascade Microtech, Inc.

Cascade Microtech, Inc. (NASDAQ: CSCD) is a worldwide leader in precision contact, electrical measurement and test of integrated circuits (ICs), optical devices and other small structures. For technology businesses and scientific institutions that need to evaluate small structures, Cascade Microtech delivers access to electrical data from wafers, ICs, IC packages, circuit boards and modules, MEMS, 3D TSV, LED devices and more. Cascade Microtech's leading-edge stations, probes, probe cards, advanced thermal subsystems and integrated systems deliver precision accuracy and superior performance both in the lab and during production manufacturing of high-speed and high-density semiconductor chips. For more information, visit www.cascademicrotech.com.

CASCADE MICROTECH, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
			Three Months Ended
			June 30,				March 31,				June 30,				Six Months Ended June 30,
			2014				2014				2013				2014				2013
Revenue			$	33,452			$	33,810			$	30,307			$	67,262			$	57,778
Cost of sales				16,466				17,537				16,032				34,003				31,960
Gross profit				16,986				16,273				14,275				33,259				25,818
Operating expenses:
	Research and development			3,428				3,241				2,694				6,669				5,150
	Selling, general and administrative			10,630				10,430				9,064				21,060				17,110
				14,058				13,671				11,758				27,729				22,260
Income from operations				2,928				2,602				2,517				5,530				3,558
Other income (expense):
	Interest income, net			7				2				2				9				22
	Other, net			(56	)			(69	)			(112	)			(125	)			(356	)
				(49	)			(67	)			(110	)			(116	)			(334	)
Income before income taxes				2,879				2,535				2,407				5,414				3,224
Income tax expense (benefit)				1,051				943				221				1,994				291
Net income			$	1,828			$	1,592			$	2,186			$	3,420			$	2,933
Net income per share:
	Basic		$	0.11			$	0.10			$	0.15			$	0.21			$	0.21
	Diluted		$	0.11			$	0.10			$	0.15			$	0.20			$	0.20
Shares used in computing net income per share:
	Basic			16,255				16,242				14,342				16,249				14,283
	Diluted			16,751				16,679				14,652				16,725				14,626

CASCADE MICROTECH, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
				June 30,				December 31,
Assets				2014				2013
Current assets:
	Cash and cash equivalents			$	27,764			$	17,172
	Marketable securities				1,683				4,278
	Restricted cash				825				1,082
	Accounts receivable, net				21,912				26,520
	Inventories				27,095				24,884
	Deferred income taxes				2,273				2,268
	Prepaid expenses and other				3,090				2,147
		Total current assets			84,642				78,351
Fixed assets, net					6,796				6,403
Goodwill					14,361				14,471
Purchased intangible assets, net					15,364				16,937
Deferred income taxes					1,273				1,235
Other assets					1,039				1,114
				$	123,475			$	118,511
Liabilities and Shareholders' Equity
Current liabilities:
	Accounts payable			$	7,405			$	7,229
	Deferred revenue				2,183				2,555
	Accrued liabilities				9,757				8,859
		Total current liabilities			19,345				18,643
Deferred revenue					538				548
Other long-term liabilities					1,877				2,119
		Total liabilities			21,760				21,310
Shareholders' equity:
	Common stock				109,263				108,070
	Accumulated other comprehensive income (loss)				19				118
	Accumulated deficit				(7,567	)			(10,987	)
		Total shareholders' equity			101,715				97,201
				$	123,475			$	118,511

CASCADE MICROTECH, INC.
AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, except per share amounts)
(unaudited)
			Three Months Ended
			June 30,				March 31,				June 30,				Six Months Ended June 30,
Non-GAAP Net Income			2014				2014				2013				2014				2013
GAAP net income			$	1,828			$	1,592			$	2,186			$	3,420			$	2,933
	Adjustments to net income:
	Restructuring			249				-				112				249				112
	Acquisition and acquisition related			(457	)			-				-				(457	)			-
	Amortization of intangibles			780				785				234				1,565				470
	Income tax effect of non-GAAP adjustments			(209	)			(291	)			(30	)			(500	)			(50	)
Non-GAAP net income			$	2,191			$	2,086			$	2,502			$	4,277			$	3,465
GAAP net income per diluted share			$	0.11			$	0.10			$	0.15			$	0.20			$	0.20
Non-GAAP net income per diluted share			$	0.13			$	0.13			$	0.17			$	0.26			$	0.24
Shares used in diluted share calculations				16,751				16,679				14,652				16,725				14,626

			Three Months Ending September 30, 2014
			Low Range Guidance				High Range Guidance
Forward-looking non-GAAP net income
GAAP net income			$	700			$	1,400
Adjustments:
	Amortization of intangibles			780				780
	Income tax effect of non-GAAP adjustments			(289	)			(289	)
Non-GAAP net income			$	1,191			$	1,891
GAAP net income per diluted share			$	0.04			$	0.08
Non-GAAP net income per diluted share			$	0.07			$	0.11
Shares used in diluted share calculations				16,800				16,800

			Three Months Ended
			June 30,				March 31,			June 30,			Six Months Ended June 30,
EBITDAS and Adjusted EBITDAS			2014				2014			2013			2014				2013
GAAP Income from operations			$	2,928			$	2,602		$	2,517		$	5,530			$	3,558
Adjustments:
	Depreciation			799				829			944			1,628				1,906
	Amortization of intangibles			780				785			234			1,565				470
	Stock-based compensation			821				449			537			1,270				872
EBITDAS			$	5,328			$	4,665		$	4,232		$	9,993			$	6,806
Adjustments:
	Restructuring			249				-			112			249				112
	Acquisition and acquisition related			(457	)			-			-			(457	)			-
Adjusted EBITDAS			$	5,120			$	4,665		$	4,344		$	9,785			$	6,918