A replay will also be available on the Company’s website at www.rudolphtech.com.

Discussion of Non-GAAP Financial Measures

The Company has provided in this release non-GAAP financial information including non-GAAP gross profit, operating income, net income, and net income per diluted share, as a supplement to the condensed consolidated financial statements, which are prepared in accordance with generally accepted accounting principles (“GAAP”). Management uses these non-GAAP financial measures internally in analyzing the Company’s financial results to assess operational performance. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its performance and when planning, forecasting and analyzing future periods. Further, the Company believes these non-GAAP financial measures are useful to investors because they allow for greater transparency with respect to key financial metrics that the Company uses in making operating decisions and because the Company believes that investors and analysts use them to help assess the health of its business and for comparison to other companies. Non-GAAP results are presented for supplemental informational purposes only for understanding the Company’s operating results. The non-GAAP information should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from non-GAAP measures used by other companies.

The financial statements provided with this release include a reconciliation of the non-GAAP financial measures to those measures reported in accordance with GAAP.

The Company’s non-GAAP financial measures, used in this press release, reflect adjustments based on the following items:

Share-based compensation expense. These expenses relate to employee restricted stock units and employee stock options. The Company excludes stock-based compensation expense from its non-GAAP measures primarily because such expenses are non-cash expenses that the Company does not believe are reflective of ongoing operating results.

Amortization of intangibles. The Company incurs expenses for the amortization of intangible assets acquired in acquisitions. The Company excludes these items because these expenses are not reflective of ongoing operating results in the period incurred. These amounts arise from the Company’s prior acquisitions and have no direct correlation to the operation of the Company’s core business.

Patent litigation fees and income. The Company, from time to time, may incur charges or benefits that are outside of the ordinary course of the Company’s business related to litigation. The Company believes it is useful to exclude such charges or benefits because it does not consider such amounts to be part of the ongoing operation of the Company’s business and because of the singular nature of the claims underlying the matter.

Net tax provision (benefit) adjustments. This line item represents the income tax effects of the non-GAAP items.

About Rudolph Technologies

Rudolph Technologies, Inc. is a leader in the design, development, manufacture and support of defect inspection, lithography, process control metrology, and process control software used by semiconductor and advanced packaging device manufacturers worldwide. Rudolph delivers comprehensive solutions throughout the fab with its families of proprietary products that provide critical yield-enhancing information, enabling microelectronic device manufacturers to drive down costs and time to market of their devices. Headquartered in Wilmington, Massachusetts, Rudolph supports its customers with a worldwide sales and service organization. Additional information can be found on the Company’s website at www.rudolphtech.com.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”) which include Rudolph’s business momentum and future growth; the benefit to customers of Rudolph’s products and customer service; Rudolph’s ability to both deliver products and services consistent with our customers’ demands and expectations and strengthen its market position; Rudolph’s expectations regarding the semiconductor market outlook; Rudolph’s fourth quarter 2018 financial outlook; as well as other matters that are not purely historical data. Rudolph wishes to take advantage of the “safe harbor” provided for by the Act and cautions that actual results may differ materially from those projected as a result of various factors, including risks and uncertainties, many of which are beyond Rudolph’s control. Such factors include, but are not limited to, the Company’s ability to leverage its resources to improve its position in its core markets; its ability to weather difficult economic environments; its ability to open new market opportunities and target high-margin markets; the strength/weakness of the back-end and/or front-end semiconductor market segments; and fluctuations in customer capital spending. Additional information and considerations regarding the risks faced by Rudolph are available in Rudolph’s Form 10-K report for the year ended December 31, 2017 and other filings with the Securities and Exchange Commission. As the forward-looking statements are based on Rudolph’s current expectations, the Company cannot guarantee any related future results, levels of activity, performance or achievements. Rudolph does not assume any obligation to update the forward-looking information contained in this press release.

RUDOLPH TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) - (Unaudited)
		September 30,				December 31,
		2018				2017
						(Audited)
ASSETS
Current assets
Cash and marketable securities		$	194,339			$	177,359
Accounts receivable, net			68,512				65,283
Inventories			91,391				67,521
Prepaid and other assets			12,229				11,919
Total current assets			366,471				322,082
Net property, plant and equipment			16,763				17,342
Intangibles			30,281				31,127
Other assets			16,395				15,371
Total assets		$	429,910			$	385,922
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities		$	30,095			$	26,800
Other current liabilities			15,486				15,507
Total current liabilities			45,581				42,307
Other non-current liabilities			10,173				10,461
Total liabilities			55,754				52,768
Stockholders’ equity			374,156				333,154
Total liabilities and stockholders’ equity		$	429,910			$	385,922

RUDOLPH TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts) - (Unaudited)
		Three Months Ended												Nine Months Ended
		September 30,				June 30,				September 30,				September 30,				September 30,
		2018				2018				2017				2018				2017
Revenue		$	60,432			$	77,476			$	66,920			$	211,004			$	195,017
Cost of revenue			28,978				35,740				31,775				95,393				92,548
Gross profit			31,454				41,736				35,145				115,611				102,469
Operating expenses:
Research and development			12,313				12,733				12,020				36,829				36,176
Selling, general and administrative			11,128				11,946				10,102				35,867				29,880
Amortization			384				383				506				1,147				1,516
Patent litigation income			—				—				(13,000	)			—				(13,000	)
Total operating expenses			23,825				25,062				9,628				73,843				54,572
Operating income			7,629				16,674				25,517				41,768				47,897
Interest income, net			(607	)			(476	)			(244	)			(1,474	)			(658	)
Other expense (income), net			(132	)			(140	)			98				(90	)			533
Income before income taxes			8,368				17,290				25,663				43,332				48,022
Provision for income taxes			1,181				2,593				8,294				6,318				14,309
Net income		$	7,187			$	14,697			$	17,369			$	37,014			$	33,713
Earnings per share:
Basic		$	0.23			$	0.46			$	0.55			$	1.16			$	1.07
Diluted		$	0.22			$	0.45			$	0.54			$	1.14			$	1.05
Weighted average shares outstanding:
Basic			31,901				31,859				31,571				31,807				31,455
Diluted			32,408				32,437				32,170				32,387				32,126

RUDOLPH TECHNOLOGIES, INC.
NON-GAAP FINANCIAL SUMMARY
(In thousands, except percentage and per share amounts) - (Unaudited)
		Three Months Ended												Nine Months Ended
		September 30,				June 30,				September 30,				September 30,				September 30,
		2018				2018				2017				2018				2017
Revenue		$	60,432			$	77,476			$	66,920			$	211,004			$	195,017
Gross profit		$	31,462			$	41,851			$	35,210			$	115,795			$	102,691
Gross margin as percentage of revenue			52.1	%			54.0	%			52.6	%			54.9	%			52.7	%
Operating expenses		$	22,158			$	22,713			$	19,644			$	68,001			$	59,234
Operating income		$	9,304			$	19,138			$	15,566			$	47,794			$	43,457
Operating margin as a percentage of revenue			15.4	%			24.7	%			23.3	%			22.7	%			22.3	%
Net income		$	8,504			$	16,552			$	10,627			$	41,402			$	29,463
Net income per diluted share		$	0.26			$	0.51			$	0.33			$	1.28			$	0.92

RECONCILIATION OF U.S. GAAP GROSS PROFIT,
OPERATING EXPENSES AND OPERATING INCOME TO NON-GAAP
GROSS PROFIT, OPERATING EXPENSES AND OPERATING INCOME
(In thousands, except percentages) - (Unaudited)
		Three Months Ended												Nine Months Ended
		September 30,				June 30,				September 30,				September 30,				September 30,
		2018				2018				2017				2018				2017
U.S. GAAP gross profit		$	31,454			$	41,736			$	35,145			$	115,611			$	102,469
Pre-tax non-GAAP items:
Share-based compensation expense			8				115				65				184				222
Non-GAAP gross profit		$	31,462			$	41,851			$	35,210			$	115,795			$	102,691
U.S. GAAP gross margin as a percentage of revenue			52.0	%			53.9	%			52.5	%			54.8	%			52.5	%
Non-GAAP gross margin as a percentage of revenue			52.1	%			54.0	%			52.6	%			54.9	%			52.7	%
U.S. GAAP operating expenses		$	23,825			$	25,062			$	9,628			$	73,843			$	54,572
Pre-tax non-GAAP items:
Amortization of intangibles			384				383				506				1,147				1,516
Litigation fees			—				—				1,078				—				2,631
Patent litigation income			—				—				(13,000	)			—				(13,000	)
Share-based compensation expense			1,283				1,966				1,400				4,695				4,191
Non-GAAP operating expenses			22,158				22,713				19,644				68,001				59,234
Non-GAAP operating income		$	9,304			$	19,138			$	15,566			$	47,794			$	43,457
GAAP operating margin as a percentage of revenue			12.6	%			21.5	%			38.1	%			19.8	%			24.6	%
Non-GAAP operating margin as a percentage of revenue			15.4	%			24.7	%			23.3	%			22.7	%			22.3	%

RUDOLPH TECHNOLOGIES, INC.
RECONCILIATION OF U.S. GAAP NET INCOME TO
NON-GAAP NET INCOME
(In thousands, except share and per share data) - (Unaudited)
		Three Months Ended												Nine Months Ended
		September 30,				June 30,				September 30,				September 30,				September 30,
		2018				2018				2017				2018				2017
U.S. GAAP net income		$	7,187			$	14,697			$	17,369			$	37,014			$	33,713
Pre-tax non-GAAP items
Amortization of intangibles			384				383				506				1,147				1,516
Litigation fees			—				—				1,078				—				2,631
Patent litigation income			—				—				(13,000	)			—				(13,000	)
Share-based compensation expense			1,291				2,081				1,465				4,879				4,413
Net tax (benefit) expense adjustments			(358	)			(609	)			3,209				(1,638	)			190
Non-GAAP net income		$	8,504			$	16,552			$	10,627			$	41,402			$	29,463
Non-GAAP net income per diluted share		$	0.26			$	0.51			$	0.33			$	1.28			$	0.92

SUPPLEMENTAL INFORMATION - RECONCILIATION OF FOURTH QUARTER 2018
GAAP TO NON-GAAP GUIDANCE (net of tax)
		Low			High
Estimated GAAP net income per diluted share		$	0.20		$	0.27
Estimated non-GAAP items:
Share-based compensation expense			0.03			0.03
Amortization of intangibles			0.01			0.01
Estimated non-GAAP net income per diluted share		$	0.24		$	0.31