Press Releases

Feb 06,2018

Nanometrics Reports Fourth Quarter and Full Year 2017 Financial Results

Record Revenues for Both the Fourth Quarter and the Full Year

MILPITAS, Calif., Feb. 06, 2018 (GLOBE NEWSWIRE) -- Nanometrics Incorporated (NASDAQ:NANO), a leading provider of advanced process control systems, today announced financial results for its fourth quarter and full year ended December 30, 2017.

Fourth Quarter 2017 Highlights:

  • Record Financial Results. All-time record sales into the 3D-NAND market led to record quarterly revenues for the company, along with new five-year highs in quarterly gross margin, operating margin, and earnings per share. The strong fourth quarter capped off a record year for Nanometrics in 2017: the fourth straight year of double-digit revenue growth and increasing gross and operating margins.
  • Expanded Position in Integrated Metrology for 3D-NAND Applications. The company recently announced that its IMPULSE®+ integrated metrology platform has been adopted into key interconnect process control applications by multiple 3D-NAND customers. Having already been broadly deployed for 3D-NAND memory cell control, these recent wins expand Nanometrics’ position into advanced interconnect control. With this expansion, the IMPULSE+ with NanoDiffract® software is supporting high-volume manufacturing across all key steps in 3D-NAND production at multiple customers and factories.
  • Gross Margin Improvements Ahead of Schedule.  Nanometrics reported fourth-quarter gross margins of over 56%, exceeding the high end of guidance. While there were a couple of key factors driving this outperformance that were unique to the fourth quarter, normalized margins of approximately 55% for the period indicate the company is ahead of schedule in achieving its gross margin targets at these revenue volumes.
  • More than Half of Stock Repurchase Program Completed by Year-End.  Nanometrics announced a $50 million stock repurchase program on November 15th, and completed $27 million in repurchases before year-end, repurchasing more than 1 million shares, at an average price of $25.33 per share.
GAAP Results
  Q4 2017 Q3 2017 Q4 2016 FY 2017 FY 2016
Revenues (Millions) $ 78.2   $ 56.7   $ 59.2   $   258.6   $   221.1  
Gross Margin   56.2 %   54.1 %   52.1 %   52.9 %   51.6 %
Operating Margin   24.5 %   13.2 %   15.2 %   16.6 %   13.2 %
Net Income (Millions) $ 10.8   $ 5.8   $ 26.7   $   30.2   $   44.0  
Earnings per Diluted Share $ 0.42   $ 0.22   $ 1.04   $   1.17   $   1.75  
           
Non-GAAP Results
  Q4 2017 Q3 2017 Q4 2016 FY 2017 FY 2016
Gross Margin   56.4 %   54.4 %   52.3 %   53.1 %   52.3 %
Operating Margin   25.3 %   13.9 %   15.4 %   17.3 %   13.8 %
Net Income (Millions) $ 13.6   $ 5.7   $ 8.4   $   31.8   $   27.1  
Earnings per Diluted Share $ 0.53   $ 0.22   $ 0.33   $   1.23   $   1.08  
                               

A reconciliation between GAAP operating results and non-GAAP operating results is provided following the financial statements that are part of this release and on the investor page of Nanometrics' website. Non-GAAP results exclude the impact of amortization of acquired intangibles, severance costs, executive search costs and certain discrete tax items.

“I am pleased to announce strong financial results for the fourth quarter of 2017,” commented Dr. Pierre-Yves Lesaicherre, president and chief executive officer of Nanometrics. “As expected, the revenues delayed from the third quarter were all recognized in the fourth quarter. We experienced some modest upside in high-margin upgrade sales, and also recognized revenue on an evaluation system that had been fully depreciated, which led to gross margins exceeding our guidance, and above normalized levels at these revenue volumes. For the full year, 2017 set new records for the company, and was the fourth straight year of double-digit revenue growth and, importantly, was the fourth straight year of increasing gross and operating margins.

“As we look to a continued positive business environment for 2018, which is expected to witness strong spending from the memory market, our first quarter is expected to be at a similar revenue level to the fourth quarter (after adjusting for the revenue delay), with positive momentum currently indicated for the second quarter. With our current visibility, we expect the first half of 2018 will be significantly stronger than the second half of 2017, as well as the year-ago period. Based on current activity with our leading customers, we also believe 2018 will be a fifth straight year of double-digit revenue growth and expanding gross and operating margins.” Dr. Lesaicherre concluded, “I am very excited to have joined the company in this period of growth and new product development, and look forward to investing in new technologies, delivering on our R&D investments, and introducing new products to drive continued growth and outperformance in the years to come.”

Fourth Quarter 2017 Summary
Revenues for the fourth quarter of 2017 were $78.2 million, up 38% from $56.7 million in the third quarter of 2017, and up 32% from $59.2 million in the fourth quarter of 2016. On a GAAP basis, gross margin was 56.2%, compared to 54.1% in the prior quarter and 52.1% in the year-ago period. Operating income was $19.2 million, compared to $7.5 million in the prior quarter and $9.0 million in the year-ago period. Net income was $10.8 million or $0.42 per diluted share, compared to $5.8 million or $0.22 per diluted share in the prior quarter and $26.7 million or $1.04 per diluted share in the fourth quarter of 2016. Fourth quarter of 2016 included a favorable impact of the change of valuation allowance on certain deferred tax assets.  

On a non-GAAP basis, which excludes amortization of acquired intangible assets and severance costs, gross margin was 56.4%, compared to 54.4% in the prior quarter and 52.3% in the year-ago period. Non-GAAP operating income was $19.8 million, compared to $7.9 million in the prior quarter and $9.1 million in the fourth quarter of 2016. Non-GAAP net income, which also adjusts for certain discrete tax items, was $13.6 million or $0.53 per diluted share, compared to $5.7 million or $0.22 per diluted share in the prior quarter and $8.4 million or $0.33 per diluted share in the fourth quarter of 2016.

Full Year 2017 Summary
Revenues were $258.6 million, up 17% from $221.1 million in 2016.  On a GAAP basis, gross margin was 52.9%, compared to 51.6% in 2016, and operating income was $42.8 million, compared to $29.1 million in 2016.  Net income was $30.2 million or $1.17 per diluted share, compared to $44.0 million or $1.75 per diluted share in 2016.

On a non-GAAP basis, which excludes amortization of acquired intangible assets and severance costs, gross margin was 53.1% compared to 52.3% in 2016.  Non-GAAP operating income, which also excludes executive search costs and severance costs in 2017, was $44.6 million, compared to $30.6 million in 2016. Non-GAAP net income, which also adjusts for certain discrete tax items was $31.8 million or $1.23 per diluted share, compared to $27.1 million or $1.08 per diluted share in 2016 which excludes the impact of the change of valuation allowance on deferred tax assets of $18.4 million.

Business Outlook
Management expects first-quarter 2018 revenues in the range of $69 to $75 million. Gross margin is expected to be approximately 55%, plus or minus 1%, on both a GAAP and non-GAAP basis. Management expects first-quarter operating expenses to range between $24.5 million and $25.5 million on both a GAAP and non-GAAP basis, and earnings in the range of $0.38 to $0.50 per diluted share on both a GAAP and non-GAAP basis. The company’s EPS guidance assumes an improved tax rate of approximately 25%, compared to prior expectations of 30%, and weighted average shares outstanding of approximately 25 million.

Conference Call Details
A conference call to discuss fourth quarter 2017 results will be held today at 4:30 p.m. EST (1:30 p.m. PST). To participate in the conference call, the dial-in numbers are (877) 374-4041 for domestic callers and (253) 237-1156 for international callers. The conference ID is 5497447. A live and recorded webcast and supplemental financial information will be made available on the investor page of the Nanometrics website at www.nanometrics.com.

Use of Non-GAAP Financial Information
The non-GAAP gross profit, gross margin, operating income, operating income margin, net income, net income per share, which exclude certain expenses, charges and special items, and free cash flow, were not prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). Management uses non-GAAP financial results, which exclude amortization of acquired intangibles assets, severance costs, executive search costs and certain discrete tax items, to evaluate the company’s ongoing performance and to enable comparison to other periods that did not include these items. The company believes the presentation of non-GAAP results is useful to investors for analyzing ongoing business trends, comparing performance to prior periods, and enhancing the investor’s ability to view the company’s results from management’s perspective; however, investors are cautioned that other companies may calculate these measures differently than Nanometrics does, which would limit the usefulness of these financial measures. A table presenting a reconciliation of GAAP results to non-GAAP results is included at the end of this press release and is available on the investor page of the Nanometrics website at www.nanometrics.com.

About Nanometrics
Nanometrics is a leading provider of advanced, high-performance process control metrology and inspection systems used primarily in the fabrication of semiconductors and other solid-state devices, including sensors, optoelectronic devices, high-brightness LEDs, discretes and data storage components. Nanometrics’ automated and integrated metrology systems measure critical dimensions, device structures, topography and various thin film properties, including three-dimensional features and film thickness, as well as optical, electrical and material properties. The company’s process control solutions are deployed throughout the fabrication process, from front-end-of-line substrate manufacturing, to high-volume production of semiconductors and other devices, to advanced three-dimensional wafer-level packaging applications. Nanometrics’ systems enable advanced process control for device manufacturers, providing improved device yield at reduced manufacturing cycle time, supporting the accelerated product life cycles in the semiconductor and other advanced device markets. The company maintains its headquarters in Milpitas, California, with sales and service offices worldwide. Nanometrics is traded on NASDAQ Global Select Market under the symbol NANO. Nanometrics’ website is http://www.nanometrics.com.

Forward Looking Statements
Certain statements in this press release, including those found in Dr. Lesaicherre’s quote regarding expected future financial performance, and under the caption “Business Outlook,” are forward-looking statements that involve a number of risks and uncertainties that could cause actual results to differ materially from those described in this release. Although Nanometrics believes that the expectations reflected in the forward-looking statements are reasonable, actual results could differ materially from these expectations due to a variety of factors, including, but not limited to: decreased levels of industry spending; slowing adoption rate of Nanometrics’ new products; Nanometrics’ inability to gain additional market share, increase sales, ship products as scheduled, achieve customer acceptance of new products, or outperform the industry; decreased demand for Nanometrics’ products; shifts in the timing of customer orders and product shipments; technology adoption rates; changes in customer and product mix; changes in market share; changes in operating expenses; and general economic conditions. For additional information and considerations regarding the risks faced by Nanometrics that could cause actual results to differ materially, see its annual report on Form 10-K for the year ended December 31, 2016, as filed with the Securities and Exchange Commission on March 3, 2017 including under the caption “Risk Factors,” as well as other periodic reports filed with the SEC from time to time. Nanometrics disclaims any obligation to update information contained in any forward-looking statement, except as required by law.

NANOMETRICS INCORPORATED  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(In thousands)  
(Unaudited)  
           
    December 30,
2017
  December 31,
2016
 
ASSETS          
Current assets:          
Cash and cash equivalents    $   34,899     $   47,062    
Marketable securities       82,130         82,899    
Accounts receivable, net        62,457         39,457    
Inventories        52,860         38,837    
Inventories-delivered systems        1,534         2,457    
Prepaid expenses and other        6,234         5,667    
Total current assets        240,114         216,379    
           
Property, plant and equipment, net        44,810         44,226    
Goodwill       10,232         8,940    
Intangible assets, net        2,206         412    
Deferred income tax assets       11,924         17,399    
Other assets        413         474    
Total assets    $   309,699     $   287,830    
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable    $   13,857     $   11,342    
Accrued payroll and related expenses        12,901         12,656    
Deferred revenue        7,408         9,168    
Other current liabilities        7,249         8,047    
Income taxes payable        2,680         813    
Total current liabilities        44,095         42,026    
           
Deferred revenue       1,661         816    
Income taxes payable       860         841    
Deferred tax liabilities       179         20    
Other long-term liabilities        521         353    
Total liabilities        47,316         44,056    
           
Stockholders’ equity:          
Common stock       26         25    
Additional paid-in capital        255,368         271,969    
Retained earnings (deficit)       9,113         (22,174 )  
Accumulated other comprehensive income (loss)       (2,124 )       (6,046 )  
Total stockholders’ equity        262,383         243,774    
Total liabilities and stockholders’ equity    $   309,699     $   287,830    
           

 

NANOMETRICS INCORPORATED  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(In thousands except per share amounts)  
(Unaudited)  
                   
    Three Months Ended   Twelve Months Ended  
    December 30,
2017
  December 31,
2016
  December 30,
2017
  December 31,
2016
 
                   
Net revenues:                  
Products    $   67,555     $   48,776     $   214,877     $   185,066    
Service        10,650         10,383         43,744         36,063    
Total net revenues        78,205         59,159         258,621         221,129    
                   
Costs of net revenues:                  
Cost of products        28,746         22,766         100,910         85,391    
Cost of service        5,436         5,446         20,804         20,160    
Amortization of intangible assets       50         143         206         1,454    
Total costs of net revenues        34,232         28,355         121,920         107,005    
Gross profit        43,973         30,804         136,701         114,124    
                   
                   
Operating expenses:                  
Research and development        10,058         7,996         36,716         31,443    
Selling        8,109         7,614         30,839         30,181    
General and administrative        6,644         6,231         26,340         23,381    
Amortization of intangible assets        -          -          -          24    
Total operating expenses       24,811         21,841         93,895         85,029    
Income from operations        19,162         8,963         42,806         29,095    
                   
Other income (expense):                  
Interest income        3         2         8         35    
Interest expense        (9 )       (9 )       (92 )       (285 )  
Other income, net        246         230         576         290    
Total other income, net        240         223         492         40    
                   
Income before income taxes        19,402         9,186         43,298         29,135    
Provision for (benefit from) income taxes        8,604         (17,468 )       13,096         (14,900 )  
Net income   $   10,798     $   26,654     $   30,202     $   44,035    
                   
Net income per share:                  
Basic    $   0.43     $   1.07     $   1.19     $   1.79    
Diluted    $   0.42     $   1.04     $   1.17     $   1.75    
                   
Shares used in per share calculation:                  
Basic        25,378         24,949         25,334         24,655    
Diluted        25,819         25,514         25,919         25,153    
                   

 

NANOMETRICS INCORPORATED  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In thousands)  
(Unaudited)  
           
           
    Twelve Months Ended  
    December 30,
2017
  December 31,
2016
 
Cash flows from operating activities:          
Net income   $   30,202     $   44,035    
Reconciliation of net income to net cash from operating activities:          
Depreciation and amortization       6,920         8,295    
Stock-based compensation       8,819         7,666    
Excess tax benefit from equity awards       -         1,036    
Loss on disposal of fixed assets       631         478    
Inventory write down       2,020         2,110    
Deferred income taxes       6,858         (16,783 )  
Changes in fair value of contingent consideration       -         (1,175 )  
Changes in assets and liabilities:          
Accounts receivable       (19,523 )       (2,707 )  
Inventories       (18,037 )       4,526    
Inventories-delivered systems       923         399    
Prepaid expenses and other       (230 )       905    
Accounts payable, accrued and other liabilities       1,049         2,462    
Deferred revenue       (915 )       (3,634 )  
Income taxes payable       1,886         (1,928 )  
Net cash provided by operating activities       20,603         45,685    
           
Cash flows from investing activities:          
Payment for acquisition of certain assets       (2,000 )       -    
Sales of marketable securities       53,030         5,955    
Maturities of marketable securities       77,250         38,775    
Purchases of marketable securities       (129,766 )       (82,864 )  
Purchase of property, plant and equipment       (5,204 )       (3,999 )  
Net cash used in investing activities       (6,690 )       (42,133 )  
           
Cash flows from financing activities:          
Payments to Zygo Corporation related to acquisition       -         (315 )  
Proceeds from sale of shares under employee stock option and purchase plans     5,576         8,447    
Excess tax benefit from equity awards       -         (1,036 )  
Taxes paid on net issuance of stock awards       (4,135 )       (1,822 )  
Repurchases of common stock under share repurchase plans       (26,999 )       -    
Net cash provided by (used in) financing activities       (25,558 )       5,274    
Effect of exchange rate changes on cash and cash equivalents       (518 )       82    
Net increase (decrease) in cash and cash equivalents       (12,163 )       8,908    
Cash and cash equivalents, beginning of period       47,062         38,154    
Cash and cash equivalents, end of period   $   34,899     $   47,062    
           

 

NANOMETRICS INCORPORATED  
RECONCILIATION OF GAAP TO NON-GAAP RESULTS   
(In thousands, except per share amounts)  
(Unaudited)  
                                           
    Three Months Ended   Twelve Months Ended  
    December 30,
2017
  September 30,
2017
  December 31,
2016
  December 30,
2017
  December 31,
2016
 
Reconciliation of GAAP gross profit and gross margin to non-GAAP gross profit and gross margin                                          
GAAP gross profit and gross margin, respectively   $ 43,973     56.2 %   $ 30,660     54.1 %   $ 30,804     52.1 %   $ 136,701     52.9 %   $ 114,124     51.6 %  
Non-GAAP adjustments:                                          
 Severance included in cost of revenues        77     0.1 %       138     0.2 %       -        -          404     0.1 %          
 Amortization of intangible assets        50     0.1 %       52     0.1 %       143     0.2 %       206     0.1 %       1,454     0.7 %  
 Non-GAAP gross profit and gross margin, respectively    $ 44,100     56.4 %   $ 30,850     54.4 %   $ 30,947     52.3 %   $ 137,311     53.1 %   $ 115,578     52.3 %  
                                           
Reconciliation of GAAP operating income to non-GAAP operating income                                          
GAAP operating income and operating margin, respectively   $ 19,162     24.5 %   $ 7,484     13.2 %   $ 8,963     15.2 %   $ 42,806     16.6 %   $ 29,095     13.2 %  
Non-GAAP adjustments:                                          
 Amortization of intangible assets included in cost of revenues        50     0.1 %       52     0.1 %       143     0.2 %       206     0.1 %       1,454     0.7 %  
 Amortization of intangible assets included in operating expenses        -       -         -      0.0 %       -        -          -        -          24     0.0 %  
 Severance included in cost of revenues        77     0.1 %       138     0.3 %       -        -          404     0.2 %       -        -     
 Severance included in operating expenses        509     0.6 %       68     0.1 %       -        -          845     0.3 %       -        -     
 Executive search costs        -      0.0 %       125     0.2 %       -        -          355     0.1 %       -        -     
 Total non-GAAP adjustments to operating income        636     0.8 %       383     0.7 %       143     0.2 %       1,810     0.7 %       1,478     0.7 %  
 Non-GAAP operating income and operating margin, respectively    $ 19,798     25.3 %   $ 7,867     13.9 %   $ 9,106     15.4 %   $ 44,616     17.3 %   $ 30,573     13.8 %  
                                           
Reconciliation of GAAP net income to non-GAAP net income                                          
GAAP net income    $ 10,798         $ 5,764         $ 26,654         $ 30,202         $ 44,035        
Non-GAAP adjustments:                                          
 Total non-GAAP adjustments to non-GAAP operating income        636             383             143             1,810             1,478        
 Discrete tax items and tax effect of non-GAAP adjustments      (432 )         (491 )                   (2,772 )         (18,443 )      
 Valuation allowance on deferred tax assets and other adjustments        -              -            (18,443 )                          
 Tax Reform        2,569             -              -              2,569             -         
 Non-GAAP net income    $ 13,571         $ 5,656         $ 8,354         $ 31,809         $ 27,070        
                                           
GAAP net income per diluted share   $   0.42         $   0.22         $   1.04         $   1.17         $   1.75        
                                           
Non-GAAP net income per diluted share   $   0.53         $   0.22         $   0.33         $   1.23         $   1.08        
                                           
Shares used in diluted net income per share calculation     25,819           25,932           25,514           25,919           25,153        
                                           
Reconciliation of net cash provided by operating activities to free cash flow                                       
GAAP net cash provided by operating activities   $ 5,219         $ 5,126         $ 11,584         $ 20,603         $ 45,685        
 Purchase of property and equipment      (2,862 )           (806 )           (650 )           (5,204 )           (3,999 )      
 Free cash flow    $ 2,357         $ 4,320         $ 10,934         $ 15,399         $ 41,686        
                                           
Investor Relations Contact:
Claire McAdamsHeadgate Partners LLC
530.265.9899
claire@headgatepartners.com

Company Contact:
Greg Swyt
Vice President, Finance
408.545.6146
gswyt@nanometrics.com

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Source: Nanometrics Incorporated