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Newport (NASDAQ:NEWP)

Q2 2014 Earnings Call

July 30, 2014 5:00 pm ET

Executives

Rob Fink - Vice President of Investor Relations

Robert J. Phillippy - Chief Executive Officer, President and Director

Charles F. Cargile - Chief Financial Officer, Senior Vice President and Treasurer

Analysts

Rob Richardson - Stifel, Nicolaus & Company, Incorporated, Research Division

James Ricchiuti - Needham & Company, LLC, Research Division

Mark Douglass - Longbow Research LLC

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Newport Corporation Second Quarter Earnings Call. [Operator Instructions] I would now like to turn the conference over to Mr. Rob Fink, KCSA Strategic Communications. You may begin.

Rob Fink

Thank you, Hope. And good afternoon, and welcome to Newport's Second Quarter 2014 Conference Call. Hosting today's call are Bob Phillippy, Chief Executive Officer; and Chuck Cargile, Chief Financial Officer. Before we get started, I'd like to remind you that during the course of this conference call, we will be making a number of forward-looking statements that are based on a current expectation and involve various risks and uncertainties that are discussed in our periodic SEC filings. Although we believe that these assumptions underlying these statements are reasonable, any of them could provide inaccurate, and there can be no assurance that these results will be realized.

During this call, we will be discussing certain of our financial results on a non-GAAP basis, excluding items we believe to be outside of our core operating results. We believe that the supplemental presentation of non-GAAP financial information provides insight into core business results, as well as a useful comparison of our financial results between periods. Please refer to the press release we issued today for reconciliation of the results on a GAAP and non-GAAP basis. Also, please be aware that much of the information we are discussing during this call is also included in the press release and Form 8-K we issued earlier today. We encourage you to visit newport.com and specifically, the section titled Company Investor Information, where you can see the presentations that we have made at recent investor conferences, historical financial statements and schedule that detailed historical trends for our sales and others, orders by market and the financial performance of our 3 business segments, schedule showing supplemental non-GAAP financial information and a reconciliation to the corresponding GAAP measures. I also encourage you to follow us on Facebook, Twitter and YouTube and to download our Investor Relations app, which is available for free on iTunes and the Google Play Market.

I will now turn the call over to Bob Phillippy, Newport's President and Chief Executive Officer. Bob, the call is yours.

Robert J. Phillippy

Thanks, Rob. And thanks to everyone for joining us on the call today. The Newport team executed very well on the second quarter, with sales of $153.2 million, representing 14.2% year-over-year growth. Profit leverage on these increased sales was excellent. Our non-GAAP gross margin of 46.4% exceeded our internal target by 140 basis points and was the highest level we have achieved in more than 10 years. On a year-over-year basis, our non-GAAP operating income and EPS grew 56.7% and 70%, respectively.

In addition, we generated $24.2 million in cash from operations and have now reached a net cash positive position. This financial performance was the result of stronger conditions in some of our target markets compared with the prior year, combined with the increasingly successful implementation of our strategic growth initiatives. Technology trends in our targeted markets continue to benefit Newport. As scientists and engineers across the world utilize optical technologies to address their highest precision requirements, they are increasingly calling on us to provide the solution.

In addition to our strong performance in the second quarter, we began Q3 with some important news. On July 24, we announced that we have agreed to acquire V-Gen, a fiber laser company based in Israel. V-Gen was founded in 1998 and has grown into a leading provider of pulsed fiber lasers for micromachining, precision marking and LIDAR applications. Their product portfolio includes fiber lasers with wavelengths from IR to UV and with power levels from 5 to 100 watts. Their innovative product architecture enables highly efficient and precise performance at every -- at a very competitive cost. V-Gen has developed some enabling IP with more than a dozen patents issued or pending and some very proprietary manufacturing techniques. The V-Gen team will become part of Newport's Spectra-Physics laser group, which will enable them to benefit significantly from our strong market presence, business scale, supply chain infrastructure and global sales and service team.

V-Gen's application expertise and product focus are very complementary to those of Spectra-Physics. Together, we will clearly have a leading portfolio of products to serve the highest precision applications for OEM customers in both microelectronics and industrial markets. We expect V-Gen to generate revenues of $15 million to $20 million in the first 12 months after the acquisition closes, which we expect to occur by the end of the third quarter. We look forward to welcoming V-Gen employees to the Newport team and expect to benefit a great deal from their talent, expertise and entrepreneurial spirit.

Now I'd like to turn back to our performance in the second quarter and provide an update on our orders and sales trends, activities and conditions in each of our target markets. Second quarter sales to microelectronics market customers were $40.9 million, representing growth of 40.8% over the second quarter of 2013 and 20.4% sequentially. This increase was driven in large part by our ramp in output to respond to the exceptional demand for our Quasar and Talon lasers and by continued progress on our collaborative development programs for next-generation semiconductor equipment.

As we've discussed on previous calls, we initially introduced Quasar in February of 2013, and since that time, we have significantly expanded and strengthened our product offering for this market by launching Talon and introducing higher power versions of Quasar. We continue to gain traction with these products, particularly in mobile device manufacturing applications, such as glass cutting, PCB cutting and drilling and wafer processing, where several of our OEM customers are now offering systems enabled by these lasers. Our acquisition of V-Gen will further expand our offering of laser solutions to serve the needs of customers in this market.

Orders from microelectronic customers were $35.4 million, essentially flat year-over-year but down 16.9% from the very strong Q1 2014 level. As we discussed in our last call, we had anticipated some near-term softness in demand for existing programs from our semiconductor OEM customers. Also, while we're making rapid progress on our new programs for next-generation equipment, we expect pilot orders for these programs to be a few quarters away.

In the Industrial Manufacturing and Other markets, our orders of $40.5 million were an all-time record, increasing 14.3% sequentially and 14% year-over-year. Sales to these customers were also robust, increasing 15.3% over the second quarter of 2013, but declining slightly compared with the record quarter in the first quarter. The highlight was once again activity for 3D printing applications with orders of $6.7 million for the quarter. We continue to have compelling solutions for the rapidly growing additive manufacturing area. To further enhance our presence in the industrial market, we have recently introduced 2 new very innovative product families that have the potential to significantly improve the productivity of our industrial customers.

The first is our new patent-pending OpticsCage+ system for quick assembly of optical systems. Rapid prototyping has been a very hot topic in manufacturing over the past few years, and as I just mentioned, we're actively participating in the robust growth in this area. OpticsCage+ enables rapid prototyping for the assembly of optical systems by providing the ability to change optical components and mounts in seconds without impacting other elements of the system. This allows our customers to build 3D prototypes of these systems much more quickly than with traditional tools, improving their efficiency and reducing their time to market.

The second new product is Ophir's BeamWatch, the world's first noncontact, high-power laser beam focus and position measurement detector. BeamWatch uses disruptive patent-pending technology to measure laser beams without contacting them. For example, this means that for the first time, the focal plane of high-power fiber laser systems can be monitored in situ in real time. The information gained from BeamWatch allows process engineers to understand the response of the focal plane during the critical early elements of the startup process of a laser process. Also, since the beam is not physically contacted, BeamWatch can theoretically measure lasers with no upper limit of power. We have measured beams of up to 100 kilowatts to date. OpticsCage+ and BeamWatch will help make our industrial customers more productive, and we expect them both to contribute to our combined growth in this market.

In the life and health sciences market, our second quarter sales of $32.4 million grew 3.9% year-over-year but declined 5.5% sequentially. Demand for clinical applications remained strong, particularly for our lasers used in ophthalmic surgery applications. This was offset to some degree by a softer quarter for our lasers deployed in bioimaging applications, following a near-record sales performance in the first quarter. Our pipeline of opportunities in this area is quite robust, and we continue to see strong adoption of our InSight ultrafast laser, which is now qualified at all major microscope OEMs. In addition, we recently released the InSight DeepSee+ with enhanced performance, which will further increase its edge over competitive products.

Orders from life and health sciences customers declined 12.6% sequentially and 17.9% versus the particularly strong second quarter of 2013. This is due to the softer demand in bioimaging applications I just mentioned and the quarter-to-quarter variability we typically experience in the order patterns of our OEM customers that we've discussed on several occasions in the past. As an example of this variability, in the second half of this year, we expect to receive another multiyear order for surgical lasers from an existing customer that will more than offset the decline we experienced in the first half of this year.

Scientific market orders of $32.6 million grew 15.5% sequentially and 6.8% over the second quarter of 2013. Sales of $30.5 million to customers in this market were 4.2% lower sequentially but 1.9% higher year-over-year. Trends in this market are directly correlated with government funding levels. Feedback from our research customers in both the U.S. and Europe indicates that the funding environment has stabilized from last year, which should result in low to mid-single digit growths in these areas for the full year of 2014.

Second quarter order levels reflect this expectation with order increases on both the year-over-year and sequential order -- sequential basis. Scientific research market orders in the Asia-Pacific region increased sequentially but declined year-over-year, with Japan being the biggest contributor to both the increase and the decline.

Orders from scientific research customers in the rest of the world were up double digits on both the year-over-year and sequential basis. This market continues to be a stable segment for us despite the tepid market conditions. Our participation in this market also continues to provide significant benefits by giving us very early visibility to research programs and technology breakthroughs that may create future growth opportunities for Newport.

Defense and security market orders and sales bounced back from what we believe will prove to be low watermark in the first quarter. Sales and orders were both approximately $14.5 million, and both grew more than 25% sequentially in low to mid-single digits year-over-year. However, these levels are still relatively low, especially relative to the size of our opportunity in these markets.

Our close engagement with several key defense contractor customers has continued to increase during the course of the year, and the level of activity on new programs is very high at present. Still, we have not yet seen signals from these customers that indicate meaningful near-term improvement. Our opportunity in this market has a very favorable risk-versus-reward profile. We have substantial upside with very little downside. Some, if not many of the programs we're engaged in, will ultimately be funded and launched, and when they do, we will be well positioned. That said, the timing of a recovery in defense and security market remains uncertain.

Regionally, year-over-year sales grew in all of our major markets for the second quarter in a row, with the largest increase coming from Europe with 19.3% growth, followed by Asia with growth of 18.1%. This was followed by 11% growth in the U.S. and 1.4% growth in the rest of the world.

As mentioned in previous calls, we continue to invest in Asia, both by adding sales, support and service resources and also by developing products that are particularly well suited for Asia-Pacific markets.

Turning to Operations. A few weeks ago, we announced our decision to take our organization streamlining a step further by implementing the full closure of our facility in Stratford, Connecticut. Many of the products manufactured there have already been transferred to other facilities. As a result of these additional streamlining actions, we now expect to achieve approximately $1.4 million in annual savings related to this initiative versus the $1 million we communicated previously. We expect to achieve these savings, starting with full year of 2015. It is important to note that this facility closure does not reduce our product or technical capabilities relating to the Oriel brand of products that were previously developed and manufactured in Stratford. Quite the contrary, by transferring the development, manufacture and support of these products to our facilities in Bozeman, Montana; Wuxi, China; and now, Irvine, California, we are able to better leverage our internal expertise in some critical supporting technologies. For example, our innovative new LED-based Solar Simulator product line, combines the core technology in Oriel light sources products with the expertise of the ILX team in LED light source drivers and temperature controllers.

Now at the halfway point, we are well positioned to have a very successful year in 2014. Our operational execution continues to be crisp, and many of our growth initiatives are on track. We continue to focus on increasing long-term shareholder value by implementing a revenue and profit growth strategy, with both organic growth and growth from acquisitions. This balanced approach is exemplified by our introduction of 49 new products in the first half of 2014 and by our pending acquisition of V-Gen. Consistent with our track record, we expect to achieve excellent returns on both of these types of investments, which, in turn, will help to build a more valuable company for our shareholders, our customers and our employee team.

I will now turn the call over to Chuck to review our financial performance and discuss our outlook for 2014 in more detail. Chuck?

Charles F. Cargile

Thank you, Bob. I'll discuss the results for each of our 3 business groups and key components of our consolidated income statement, balance sheet and cash position. Then I'll discuss our outlook for Q3 and the remainder of 2014.

Our Photonics group's second quarter sales and segment income were the highest they've ever achieved. Their second quarter sales of $63.5 million increased 14.5% year-over-year and 6.7% sequentially. The group's segment income was $14.4 million or 22.7% of sales, marking their second consecutive quarter of record performance. The Photonics group has delivered an exceptional first half of 2014; and a big driver of this excellent performance has been Ophir Photonics, which delivered its third consecutive quarter of record sales and profit in Q2.

Our Spectra-Physics laser group also delivered a strong quarter in Q2. Their sales in the second quarter were $47.1 million, which was slightly higher sequentially and a very healthy 19.5% increase year-over-year. Segment income was $6.1 million or 13% of sales. This $6.1 million is 45.5% higher than the second quarter of 2013. We said at the beginning of this year -- '14, we're even more confident about that now. Spectra-Physics' new product introduction and financial strength will now be positively impacted by the acquisition of V-Gen. V-Gen will increase the served available market for our lasers group, enhance their growth characteristics and add to their profitability. 2014 is indeed an exciting time for Spectra-Physics.

Our Optics group also had a relatively strong quarter. Their sales of $42.7 million were 8.4% higher than the year-ago quarter, and their segment income of $5 million was 2.5x the $1.9 million recorded in the second quarter of 2013. Excluding the prior year's sales of MRSI, which we divested in Q1, the group's Q2 sales increased 16.4% year-over-year. As Bob mentioned, this group continues to make progress in our collaborative development programs for next-generation semiconductor equipment. In short, all 3 of our business groups executed well in the second quarter and have delivered excellent results for the first half of 2014.

Now I'd like to make a few comments about our consolidated financial results for Q2 and our outlook for the third quarter and full year of 2014. Unless otherwise noted, these comments refer to our non-GAAP results. Our consolidated gross margin was 46.4%. This is the second consecutive quarter that we've exceeded 45% and is the highest level we've recorded in over a decade.

Our SG&A expenses in the second quarter were $37.2 million or 24.2% of sales. The SG&A about was $2.3 million higher than the Q1 2014 level. The Q2 expenses included approximately $2.9 million related to employee cash incentive plan. This amount is much larger than normal due to the excellent financial results we recorded for the first half of the year across all of our businesses. Without this extraordinary funding for incentive plan overachievement, our SG&A expenses would have been much closer to the Q1 level.

We also invested $14 million in research and development in the second quarter. This marks our second consecutive quarter of record investment in R&D. We've had great success with a number of our new product launches, and we look forward to continuing to fund the development of innovative products that makes us an industry leader in a wide range of photonics, lasers and optics solutions.

Our operating income of $20 million increased 11.9% sequentially and 56.7% year-over-year. Our earnings per diluted share of $0.34 increased 17.2% or $0.05 sequentially and 70% versus the $0.20 per diluted share we reported in the second quarter of 2013.

In the second quarter, we generated $24.2 million of cash from operations or 15.8% of sales. At the end of the quarter, our total cash balance, which includes restricted cash, cash equivalents and marketable securities, was $77.8 million, and our total debt was $75 million, giving us a positive net cash position for the first time in almost 3 years.

In summary, our financial results for the second quarter and first half of 2014 highlights the strength of our business and the continued successful execution of our strategic plan.

Now I'll discuss our outlook. We believe that the momentum in our business will continue despite uneven and uncertain conditions in many of the markets we serve. We expect our third quarter sales to be in the range of $148 million to $153 million, reflecting an increase of 6.5% to 10% compared with the third quarter of 2013. For the full year, we expect our book-to-bill ratio to be solidly above 1.0, and we anticipate that our total sales for the second half of 2014 will be higher than both the first half of 2014 and the second half of 2013, which would result in all-time record sales for the year. We also continue our track record of generating strong earning and cash flows on increased sales levels.

That concludes our prepared remarks, and we'll now answer any questions that you have.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Patrick Newton with Stifel.

Rob Richardson - Stifel, Nicolaus & Company, Incorporated, Research Division

This is Rob Richardson on for Patrick. A couple questions, Bob. We could start off, just kind of looking at the semi-cap industry. It seems like we've definitely seen a pause for cash in the September quarter by the major players, and consensus numbers have revenue contracting in the December quarter. So it looks like you guys are doing fairly well with microelectronics the last couple of quarters and did perhaps bucked the trend. I just want to get a sense of how comfortable you are with whether or not segment can continue to grow through the remainder of calendar year on either a year-over-year or even sequential basis.

Robert J. Phillippy

This is Bob. Thanks for the question. In microelectronics, historically, our business in this market has tracked pretty closely with the semiconductor equipment industry cycle. Typically, it's had a 1- to 2-quarter lag. However, more recently, it's starting to diverge a bit. Now not to say that we're getting away from semiconductor, we are still the incumbent supplier in a number of programs with Tier-1 semiconductor equipment OEMs, and that part of our business will move in conjunction with the cycle for sure. But on the other hand, much of the momentum that we've developed in our business recently has been related more to our penetration of new application segments, we talked about mobile device manufacturing in the prepared remarks, and collaborative development programs for next-generation equipment. So the rolling part of our business in the microelectronics segment is now more dependent on product adoption and program execution than just the basic demand profile of the industry. As it relates to the industry itself, the most recent announcements and guidance from our customers indicates that Q3 will likely be softer with stronger demand later in the year and into 2015, and our current forecast and guidance reflects those trends. So we're not going to be divergent from the industry in that respect, but the point is that a piece of our business is kind of tracking differently at this point.

Rob Richardson - Stifel, Nicolaus & Company, Incorporated, Research Division

Got you. Great, I appreciate that. And then kind of to piggy back off that, talking about the new applications and the collaborative agreement, just wondering if we can get an update where you stand with your $14 million agreement for the next-gen applications? And what kind of confidence you have as to the timing or magnitude of any follow-on orders?

Robert J. Phillippy

Yes. We're working very closely with our customer. The program is technically challenging, but we're making rapid progress. The project's scope is significant, and so we got a significant amount of resource focused on it. We continue to believe that there's excellent follow-on potential for the program, but any activity related to that is still a few quarters away. So pretty much the same thing we've updated previously, and that is it's a $14 million collaborative development program, which we expect to build out through the course of 2014.

Rob Richardson - Stifel, Nicolaus & Company, Incorporated, Research Division

Got you. I appreciate that. And then, I guess, kind of one last one from me. So Photonics, again, seen some excellent performance and especially coming from Ophir with a third conservative record quarter. Just wondering what kind of room there is for any further operating margin expansion from current levels in that segment.

Charles F. Cargile

The Ophir Photonics and our overall Photonics business have performed very, very well this year, record performance as we said in the remarks. I think our focus with that business now is to drive top line. I think any time you're operating at 22% or 23% operating income, there's not a lot of leverage to squeeze out there. So in order to drive higher profits, we need to grow the top line. And that's our focus now. And in addition, although we just -- did just announce the acquisition of V-Gen that will fit into our laser business, we continue to try and fill our pipeline and looking for acquisitions that would augment the Photonics business. The Photonics business has an impeccable track record of integrating small bolt-on acquisitions and improving the profitability of them. We're seeing that with Ophir. We see it with ILX, that we acquired in 2012. So we'll continue to try and look for acquisitions and grow the top line in order to increase the profits of the Photonics business.

Operator

Your next question comes from the line of Jim Ricchiuti with Needham & Company.

James Ricchiuti - Needham & Company, LLC, Research Division

A question on the orders that you saw in the industrial. Bob, I think you alluded to the additive manufacturing order total being around -- it was -- did you say $6.7 million?

Robert J. Phillippy

Yes.

James Ricchiuti - Needham & Company, LLC, Research Division

So is this typically lumpy business for you where the orders come in intermittently? I don't recall -- I think there was one quarter where you called out orders in that business once before.

Robert J. Phillippy

Yes. Order patterns are going to be lumpy because it is all OEM business. We're basically an OEM supplier of laser and optical systems into 3D printing applications, and so the order patterns are going to be based on the customers' preferences for how they like to do business. But the revenue has continued to be strong and consistent and growing, which is part of the reason why we're seeing this kind of order activity.

James Ricchiuti - Needham & Company, LLC, Research Division

And in terms of the application, is this for stereolithography, SLA?

Robert J. Phillippy

I'm trying to keep it at the level in which I don't get too specific. So 3D printing is probably as close as we want to get, but it certainly is a leading company that is well positioned in that market space.

James Ricchiuti - Needham & Company, LLC, Research Division

Okay. Well, maybe just more broadly, it's not -- obviously, it's not necessarily a metals application. This is for thermoplastics application. Was that fair to say?

Robert J. Phillippy

Definitely, yes. By the way, I should clarify. I talked about $6.7 million in total orders. That's more than one customer.

James Ricchiuti - Needham & Company, LLC, Research Division

Got it. Okay. And if we could just maybe switch gears for a second to V-Gen. I wondered if you could talk a little bit about the -- a relatively small company, the kind of growth it's seen in the past year or so? And maybe just in general, to the extent you can, I realize you haven't closed the acquisition yet, but how we might think of the margin profile? And clearly, this is a competitive market and maybe what from -- attracted you to it in terms of how they differentiate themselves from some of the competition?

Robert J. Phillippy

Yes. As you noted, I won't talk too much about the financial model because we haven't closed the acquisition yet, and we're not putting out any more details at this time. But just to give you a little bit of color on the strategy and V-Gen itself, so it's going to fit really well with the types of acquisitions that we've been pretty successful at executing. I would call it on the same sort of venue as High Q was several years ago, which has been pretty successful for us. And that is as a company with some pretty differentiated technology, we feel some pretty good products, but one that added size -- we sized it as an expectation of $15 million to $20 million worth of revenue on the first year after we closed the acquisition. But at its size, it can benefit from our Spectra-Physics laser group because: we have a globally deployed sales and support organization; we've got better leverage of the supply chain; and we've got a pretty good operations process infrastructure. So all those things, we think, are symbiotic in terms of the way we can work together. In terms of their technology and what attracted us to it is, first of all, it plays into the sweet spot of our application focus. We focus in our laser business and many other parts of the company on high-precision applications, not high-power applications per se. Their product line is 5 watts to 100 watts, and they really have an emerging play in several applications related to mobile device manufacturing. In terms of their technology, they have a very cost-effective, highly efficient architecture, which enables them to produce high-performance products at a very attractive cost point. And that's basically what's put them in a position to have a pretty nice growth profile in their business historically, and we expect to sustain and accelerate that as a part of Spectra-Physics.

Operator

Your next question comes from the line of Mark Douglass with Longbow Research.

Mark Douglass - Longbow Research LLC

The sequential dip in sales in the 3Q guidance, is that principally due to microelectronics being a little soft because of the orders and just the -- what's going on in semi-cap?

Charles F. Cargile

The -- that's part of it. I think in this environment, we're seeing all of our markets are a bit mixed and uneven, so it's hard for us to predict an acceleration in the top line. So our guidance is basically similar to what we had entering Q2. There are some opportunities that could position us to reach the high end of the guidance range, just like we saw and/or like we did in Q2. Conversely, if conditions are a little more sluggish, we're still confident that we'll achieve the low end of the range. And in either event, that would give us a 6.5% to 10% year-over-year increase even if it's a little flat with Q2.

Mark Douglass - Longbow Research LLC

Okay. And then, you talked about having some visibility, at least, for orders in the second half for life licenses. Would any of that be delivered in the second half? Is that also what gives you some confidence, at least, in saying that the second half is going to be higher than the first half?

Robert J. Phillippy

Yes. Mark, this is Bob. So 2 things. Number one, is the comments about life sciences in the second half is consistent with what we've said before. We certainly expect some big orders and, in particular, in life and health sciences in the second half and that's what led to the comments of having an expectation of our book-to-bill being solidly over 1 for the year. As it relates to the specific life and health sciences piece and reorders of existing run rate products, it's tough to make a call whether it would start shipping in Q4 or in the first quarter of next year. That kind of depends on the timing of the order and exhausting of current blankets when we're talking about orders from existing customers. Overall, we expect some of the strength in the fourth quarter to come from a combination of a little bit of a seasonal uptick that we see in some markets, as well as progress on some of our collaborative development agreements, as well as strength in some of the OEM activities.

Mark Douglass - Longbow Research LLC

Okay, that's helpful. And then, Chuck, on the cash incentives, is that a onetime cash-out in 2Q? So that -- is it fair to assume that doesn't repeat in SG&A in 3Q?

Charles F. Cargile

The -- it does pay out in August. We have a midyear -- we have a 6-month incentive plan cycle, so the second quarter ended that cycle. Targets get reset for the second half of the year. So the incremental amount that we highlighted was for the overachievement. So in Q3 and Q4, there would still be a standard expense, but it would be quite a bit less than what we expensed in Q2.

Mark Douglass - Longbow Research LLC

Okay. So -- but all of that expense was in Q2. It doesn't bleed into 3Q.

Charles F. Cargile

They'll still be expensed for incentive plans but not at the level that it was in Q2.

Mark Douglass - Longbow Research LLC

Because it's reset.

Charles F. Cargile

Correct.

Operator

[Operator Instructions] Your next question comes from the line of Mike Mark [ph] with Mark Capital Management.

Unknown Analyst

Just 2 relatively quick questions. One, you're in a net cash position now and just wondered what your appetite for acquisitions is. And what size you might be looking at? And what -- with the pricy stock market, except for your stock, are they available at decent prices?

Charles F. Cargile

This is Chuck. Thanks for the question. We will continue to look at acquisitions. We're very pleased with being able to sign the agreement to acquire V-Gen. We'll work real hard to get that one closed this quarter. But that doesn't cause us to pause at all in looking for other acquisitions. The -- most of the companies that we look at or that we could -- you'll hear us reference our pipeline, most of the ones that are in the pipeline are not public companies. So there's not a direct correlation to the pricing that you referenced in the market. So we'll -- and then we also will focus on ones in this same type of price range. We talk about bolt-on acquisitions. We generally mean ones that are less than $50 million. And we have available in our current revolver the ability to borrow as much as $155 million now. So we've got -- we are cash positive, but we also have the availability of $150 million of additional borrowing on the revolver. So we still have some powder available for a good strategic bolt-on acquisition if we find one.

Unknown Analyst

Okay, that's very helpful. And then just kind of a clarification. In the various financial sites that have analyst estimates and whatnot, they've got a range of you this year like $0.89 to $1.08 and then -- but if you did $0.60 -- well, you did $0.62 in the first half. You say you're going to have the revenues equal to or exceeding that in the second half. That'd be like a $1.24. So my question is, it looks like you can do a $1.24. The estimates are much lower. Are these estimates in the financial things, are those the GAAP versus the non-GAAP that most people look at?

Charles F. Cargile

Yes. All of the analysts that follow us report the GAAP number and the non-GAAP number. So I don't know which site you're looking at, so maybe some of those sites just pick up the GAAP number or the non-GAAP number or report both. But I believe the current consensus on the non-GAAP basis for 2014 is $1.35.

Operator

And we have no further questions at this time. I would now like to turn the floor back over to Bob Phillippy, CEO.

Robert J. Phillippy

Well, thank you, and thanks, again, for your interest in Newport. If you have any questions or would like additional information related to any of the topics we've discussed today, please don't hesitate to contact us. And for investors interested in learning more about the company, we will be presenting at the Needham Advanced Industrial Technologies Conference in New York City on August 7. And as always, thanks to our Newport team members around the world for enabling the strong financial performance we have achieved. Bye now.

Operator

Thank you. This does conclude today's conference call. You may now disconnect.

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Source: Newport's (NEWP) CEO Robert Phillippy on Q2 2014 Results - Earnings Call Transcript

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