Press Releases

Oct 30,2018

Nanometrics Reports Third Quarter 2018 Financial Results

Strong Outlook and Revenue Growth Outperformance Continues for Full-Year 2018

MILPITAS, Calif., Oct. 30, 2018 (GLOBE NEWSWIRE) -- Nanometrics Incorporated (NASDAQ: NANO), a leading provider of advanced process control systems, today announced financial results for its third quarter ended September 29, 2018.

Highlights for the Third Quarter and First Nine Months of 2018:

  • Revenue Growth Surpassing Industry, with Strong Year-over-Year Financial Performance.  Nanometrics’ revenue growth continued to exceed the growth rate for the overall wafer fab equipment industry. With revenues of $76.6 million and earnings of $0.47 per diluted share, the third quarter showed significant increases in both sales and profitability year-over-year. For the first nine months of 2018, total revenues increased to $247.5 million, or 37% over the year-ago period, while gross margin and operating margin grew by six percentage points and nine percentage points, respectively, compared to the first nine months of 2017. Strength in the third quarter continued to be driven primarily by the memory market, with total foundry, logic and other devices rebounding strongly quarter-over-quarter to compose 20% of product sales for the quarter.
  • 500th Shipment of IMPULSE® Integrated Metrology System. The company’s flagship integrated optical critical dimension (“OCD”) process control metrology system, the IMPULSE, has been adopted in high-volume production applications serving the latest-generation 3D-NAND, DRAM and logic devices. Celebrating the success of its flagship integrated platform, the company shipped its 500th IMPULSE during the third quarter.
  • Continued Strong Free Cash Flow Generation, Record Cash and Investments.  The third quarter was another strong period of free cash flow generation, with cash flow from operations of $24.4 million and a net increase in cash and investments of $24.2 million. Year-to-date, the company has reported $83.4 million in cash flow from operating activities, and after capital expenditures of $2.9 million, generated $80.5 million in free cash flow for the first nine months of 2018. Since the end of fiscal 2017, the company has added $55.9 million in net cash and investments, after $23.0 million in stock repurchases, and ended the third quarter with a record balance of $172.9 million.
 
GAAP Results
  Q3 2018 Q2 2018 Q3 2017
Revenues (Millions) $76.6 $88.6 $56.7
Gross Margin 57.0% 57.4% 54.1%
Operating Margin 18.6% 23.5% 13.2%
Net Income (Millions) $11.6 $17.7 $5.8
Earnings per Diluted Share $0.47 $0.72 $0.22
       
 
Non-GAAP Results
  Q3 2018 Q2 2018 Q3 2017
Gross Margin 57.0% 57.5% 54.4%
Operating Margin 19.0% 24.2% 13.9%
Net Income (Millions) $11.4 $17.4 $5.7
Earnings per Diluted Share $0.47 $0.71 $0.22
       
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 transition and search costs and certain discrete tax items.

“Strong third-quarter results support our continued outlook for revenue growth significantly outperforming the overall increase in industry spending for the year,” commented Dr. Pierre-Yves Lesaicherre, president and chief executive officer of Nanometrics. “Our financial results to date in 2018 reflect the strong year-over-year increase in memory capital spending, our gains in market share, and significant increases in our profitability. With revenues for the first nine months growing 37% over the same period last year, gross profits have increased by 53% and operating profits have increased over 130%. While we have seen some shifts in expected sales between the third and fourth quarters, our outlook for 2018 revenue growth of at least 20% year-over-year is consistent with our prior forecast. We look forward to delivering our fifth straight year of double-digit revenue growth, with expanding gross and operating margins, increased earnings per share, and significant free cash flow generation.”

Third Quarter 2018 Summary
Revenues for the third quarter of 2018 were $76.6 million, down 14% from $88.6 million in the second quarter of 2018, and up 35% from $56.7 million in the third quarter of 2017.  On a GAAP basis, gross margin was 57.0%, compared to 57.4% in the prior quarter and 54.1% in the year-ago period. Operating income was $14.3 million, compared to $20.8 million in the prior quarter and $7.5 million in the year-ago period.  Net income was $11.6 million or $0.47 per diluted share, compared to $17.7 million or $0.72 per diluted share in the prior quarter and $5.8 million or $0.22 per diluted share in the third quarter of 2017.

On a non-GAAP basis, which excludes amortization of acquired intangible assets and severance included in cost of revenues, gross margin was 57.0%, compared to 57.5% in the prior quarter and 54.4% in the year-ago period.  Non-GAAP operating income also excludes severance and executive search and transition costs and was $14.5 million, compared to $21.4 million in the prior quarter and $7.9 million in the third quarter of 2017. Non-GAAP net income also adjusts for certain discrete tax items and the tax effect of non-GAAP adjustments and was $11.4 million or $0.47 per diluted share, reflecting a non-GAAP tax rate of 22.8%. This compares to non-GAAP net income of $17.4 million or $0.71 per diluted share in the prior quarter and $5.7 million or $0.22 per diluted share in the third quarter of 2017. 

Business Outlook
Management expects fourth quarter 2018 revenues in the range of $69 to $75 million and gross margin is expected to be approximately 56.5%, plus or minus 1%, on both a GAAP and non-GAAP basis. Management expects fourth-quarter operating expenses of approximately $29 million, plus or minus $0.5 million, on both a GAAP and non-GAAP basis, and earnings in the range of $0.33 to $0.45 per diluted share on both a GAAP and non-GAAP basis.

Conference Call Details
A conference call to discuss third quarter 2018 results will be held today at 4:30 p.m. EDT (1:30 p.m. PDT). 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 9599453. 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 and 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 transition and search costs, and certain discrete tax items, and with respect to free cash flow excludes capital expenditures from cash flow from operations, 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
The statements in this press release found in Dr. Lesaicherre’s quote and under the caption “Business Outlook” regarding expected future financial performance 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 press 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, unexpected: decreased levels of industry spending; slowing adoption rate of Nanometrics’ new product; 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 changes in 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 30, 2017, as filed with the Securities and Exchange Commission on February 26, 2018, 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)
       
  September 29,
2018
  December 30,
2017
ASSETS      
Current assets:      
Cash and cash equivalents  $   96,103     $   34,899  
Marketable securities     76,835         82,130  
Accounts receivable, net      50,349         62,457  
Inventories      58,884         52,860  
Inventories-delivered systems      1,858         1,534  
Prepaid expenses and other      7,070         6,234  
Total current assets      291,099         240,114  
       
Property, plant and equipment, net      43,135         44,810  
Goodwill     10,611         10,232  
Intangible assets, net      4,101         2,206  
Deferred income tax assets     7,050         11,924  
Other assets      456         413  
Total assets  $   356,452     $   309,699  
       
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable  $   20,870     $   13,857  
Accrued payroll and related expenses      14,895         12,901  
Deferred revenue      11,698         7,408  
Other current liabilities      8,470         7,249  
Income taxes payable      3,183         2,680  
Total current liabilities      59,116         44,095  
       
Deferred revenue     1,575         1,661  
Income taxes payable     1,003         860  
Deferred tax liabilities     172         179  
Other long-term liabilities      511         521  
Total liabilities      62,377         47,316  
       
Stockholders’ equity:      
Common stock     24         26  
Additional paid-in capital      241,318         255,368  
Retained earnings     55,380         9,113  
Accumulated other comprehensive loss     (2,647 )       (2,124 )
Total stockholders’ equity      294,075         262,383  
Total liabilities and stockholders’ equity  $   356,452     $   309,699  
       

 

 
NANOMETRICS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
               
  Three Months Ended   Nine Months Ended
  September 29,
2018
  September 30,
2017
  September 29,
2018
  September 30,
2017
               
Net revenues:              
Products  $   63,798     $   45,571     $   211,521     $   147,322  
Service      12,792         11,104         35,986         33,094  
Total net revenues      76,590         56,675         247,507         180,416  
               
Costs of net revenues:              
Cost of products      25,589         21,276         85,417         72,014  
Cost of service      7,332         4,549         19,929         15,191  
Amortization of intangible assets     35         52         105         156  
Restructuring     -          138         -          327  
Total costs of net revenues      32,956         26,015         105,451         87,688  
Gross profit      43,634         30,660         142,056         92,728  
               
               
Operating expenses:              
Research and development      12,717         8,825         35,410         26,514  
Selling      8,902         7,553         28,077         22,606  
General and administrative      7,744         6,730         22,950         19,628  
Restructuring     -          68         -          336  
Total operating expenses     29,363         23,176         86,437         69,084  
Income from operations      14,271         7,484         55,619         23,644  
               
Other income (expense):              
Interest income      4         2         8         6  
Interest expense      (108 )       (25 )       (253 )       (84 )
Other income, net      322         59         508         330  
Total other income, net      218         36         263         252  
               
Income before income taxes      14,489         7,520         55,882         23,896  
Provision for income taxes      2,921         1,756         10,258         4,492  
Net income $   11,568     $   5,764     $   45,624     $   19,404  
               
Net income per share:              
Basic  $   0.48     $   0.23     $   1.90     $   0.77  
Diluted  $   0.47     $   0.22     $   1.86     $   0.75  
               
Shares used in per share calculation:              
Basic      24,059         25,494         24,065         25,320  
Diluted      24,466         25,932         24,551         25,933  
               

 

 
NANOMETRICS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
       
       
  Nine Months Ended
  September 29,
2018
  September 30,
2017
Cash flows from operating activities:      
Net income $   45,624     $   19,404  
Reconciliation of net income to net cash from operating activities:      
Depreciation and amortization     4,962         5,219  
Stock-based compensation     8,229         6,775  
Loss on disposal of fixed assets     38         98  
Inventory write down     870         1,412  
Deferred income taxes     4,668         2,153  
Changes in assets and liabilities:      
Accounts receivable     11,520         1,418  
Inventories     (6,351 )       (16,828 )
Inventories-delivered systems     (324 )       (864 )
Prepaid expenses and other     (1,224 )       (3,850 )
Accounts payable, accrued and other liabilities     9,623         709  
Deferred revenue     5,126         (1,204 )
Income taxes payable     647         942  
Net cash provided by operating activities     83,408         15,384  
       
Cash flows from investing activities:      
Payment for acquisition of certain assets     (2,000 )       (2,000 )
Sales of marketable securities     19,776         28,624  
Maturities of marketable securities     32,195         62,923  
Purchases of marketable securities     (46,604 )       (104,984 )
Purchase of property, plant and equipment     (2,942 )       (2,342 )
Net cash provided by (used in) investing activities     425         (17,779 )
       
Cash flows from financing activities:      
Proceeds from sale of shares under employee stock option and purchase plans     3,826         3,678  
Taxes paid on net issuance of stock awards     (3,122 )       (3,838 )
Repurchases of common stock under share repurchase plans     (22,987 )       -   
Net cash used in financing activities     (22,283 )       (160 )
Effect of exchange rate changes on cash and cash equivalents     (346 )       (466 )
Net increase in cash and cash equivalents     61,204         (3,021 )
Cash and cash equivalents, beginning of period     34,899         47,062  
Cash and cash equivalents, end of period $   96,103     $   44,041  
       

 

NANOMETRICS INCORPORATED
RECONCILIATION OF GAAP TO NON-GAAP RESULTS 
(In thousands, except per share amounts)
(Unaudited)
                       
  Three Months Ended
  September 29, 2018   June 30, 2018   September 30, 2017
Reconciliation of GAAP gross profit and gross margin to non-GAAP gross profit and gross margin                      
GAAP gross profit and gross margin, respectively $   43,634     57.0 %   $   50,891     57.4 %   $   30,660     54.1 %
Non-GAAP adjustments:                      
 Severance included in cost of revenues      -      0.0 %       21     0.0 %       138     0.2 %
 Amortization of intangible assets      35     0.0 %       35     0.0 %       52     0.1 %
 Non-GAAP gross profit and gross margin, respectively  $   43,669     57.0 %   $   50,947     57.5 %   $   30,850     54.4 %
                       
Reconciliation of GAAP operating income to non-GAAP operating income                      
GAAP operating income and operating margin, respectively $   14,271     18.6 %   $   20,784     23.5 %   $   7,484     13.2 %
Non-GAAP adjustments:                      
 Amortization of intangible assets included in cost of revenues      35     0.0 %       35     0.0 %       52     0.1 %
 Severance included in cost of revenues      -      0.0 %       21     0.0 %       138     0.2 %
 Severance included in operating expenses      -      0.0 %       339     0.4 %       68     0.1 %
 Executive transition costs      236     0.3 %       236     0.3 %       -      0.0 %
 Executive search costs      -      0.0 %       -      0.0 %       125     0.2 %
 Total non-GAAP adjustments to operating income      271     0.4 %       631     0.7 %       383     0.7 %
 Non-GAAP operating income and operating margin, respectively  $   14,542     19.0 %   $   21,415     24.2 %   $   7,867     13.9 %
                       
Reconciliation of GAAP net income to non-GAAP net income                      
GAAP net income  $   11,568         $   17,675         $   5,764      
Non-GAAP adjustments:                      
 Total non-GAAP adjustments to non-GAAP operating income      271             631             383      
 Discrete tax items and tax effect of non-GAAP adjustments      (448 )           (912 )           (491 )    
 Tax Reform      -              -              -       
 Non-GAAP net income  $   11,391         $   17,394         $   5,656      
                       
GAAP net income per diluted share $   0.47         $   0.72         $   0.22      
                       
Non-GAAP net income per diluted share $   0.47         $   0.71         $   0.22      
                       
Shares used in diluted net income per share calculation     24,466             24,442             25,932      
                       
Reconciliation of net cash provided by operating activities to free cash flow                     
GAAP net cash provided by operating activities $   24,437         $   26,257         $   5,126      
 Purchase of property and equipment      (1,181 )           (442 )           (806 )    
 Free cash flow  $   23,256         $   25,815         $   4,320      
                       


Investor Relations Contact:
Claire McAdamsHeadgate Partners LLC
530.265.9899
claire@headgatepartners.com

Company Contact:
Greg Swyt
Vice President, Finance
408.545.6088
ir@nanometrics.com

Nanometrics Incorporated Logo

Source: Nanometrics Incorporated