November 2, 2010

Nanometrics Reports Third Quarter Financial Results

Continued Growth and Strong Performance; $54M in Revenues and $0.53 EPS

Nanometrics Incorporated (Nasdaq: NANO), a leading provider of advanced process control metrology systems used primarily in the fabrication of semiconductors, high-brightness LEDs, data storage devices and solar photovoltaics, today announced financial results for its fiscal third quarter ended October 2, 2010.

Highlights for the third quarter include:

– Record revenues of $53.9 million;
– Record earnings of $12.3 million;
– Continued positive cash flow added $9.1 million in cash to the balance sheet;
– Increased revenue contribution from overlay and integrated metrology products, and from the data storage and foundry markets; and
– Completion of the remainder of our $4 million stock repurchase program.

Commenting on the third quarter results, president and chief executive officer Dr. Timothy J. Stultz said, “Our results demonstrate another strong quarter for Nanometrics, with continued record levels of revenues and operating profitability. Our operations team once again executed superbly in response to strong customer demand, and our financial performance continues to track well with industry leaders and the stated targets we set out for our company.

“In the first three quarters of 2010, our revenues increased 182% from the comparable period last year, outperforming the sector as a whole. We attribute this outperformance to several factors, including: the increasing importance of process control metrology; the accelerating adoption of non-destructive, optical metrology techniques; the expansion of our served markets into high-growth segments that leverage our worldwide presence and greater scale; and the competitiveness of our products evidenced by key customer wins and strong gross margins.

“Looking forward, we believe our differentiated technology, breadth of products, market leadership and focus on operational excellence will enable Nanometrics to deliver financial performance consistent with being an industry leader.”

Third Quarter 2010 Summary
Revenues were $53.9 million, up 6% from $50.8 million in the second quarter of 2010 and up 109% from $25.8 million in the third quarter of 2009. Gross margin was 54.5%, compared to 55.1% in the second quarter and 54.0% in the year-ago period. Our operating margin was 25.6%, compared to 25.4% in the second quarter and 5.8% in the year-ago period.

Net income was $12.3 million, or $0.53 per diluted share, compared to $11.6 million, or $0.51 per diluted share, in the second quarter of 2010 and $1.6 million, or $0.08 per diluted share, in the third quarter of 2009.

At October 2, 2010, Nanometrics had $64.0 million in cash and cash equivalents and $115.7 million in working capital. Stockholders’ equity, excluding intangible assets, was $6.15 per share based on 22.2 million shares outstanding at quarter end.

View Q3 2010 Tables [pdf]

Conference Call Details
A conference call to discuss second quarter results will be held today at 5:00 p.m. EDT (2:00 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. A live and recorded webcast will be made available on the investor page of the Nanometrics website at

Use of Non-GAAP Financial Information
Financial results such as non-GAAP operating income, which exclude certain expenses, charges and special items, are not in accordance with U.S. Generally Accepted Accounting Principles (GAAP). Management uses non-GAAP operating income, which excludes non-cash expenses including stock-based compensation, depreciation and amortization, as well as asset impairments, restructuring charges and other special items, to evaluate the company’s ongoing performance and cash flow from operations. The company believes the presentation of non-GAAP operating income 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. A table presenting a reconciliation of GAAP results to non-GAAP operating income is included at the end of this press release.

About Nanometrics
Nanometrics is a leading provider of advanced, high-performance process control metrology systems used primarily in the fabrication of semiconductors, high-brightness LEDs, data storage devices and solar photovoltaics. Nanometrics’ automated and integrated metrology systems measure critical dimensions, device structures, overlay registration, topography and various thin film properties, including 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 wafer-scale packaging applications. Nanometrics’ systems enable device manufacturers to improve yields, increase productivity and lower their manufacturing costs. The company maintains its headquarters in Milpitas, California, with sales and service offices worldwide. Nanometrics is traded on NASDAQ Global Market under the symbol NANO. Nanometrics’ website is

Forward Looking Statements
This press release contains forward-looking statements including, but not limited to, statements regarding Nanometrics’ expected results for its most recently completed fiscal quarter, which remain subject to adjustment in connection with the preparation of Nanometrics’ financial statements and periodic report on Form 10-Q for the quarter ended October 2, 2010, the continued adoption and competitiveness of its products, the expansion of the company’s served markets and future revenue growth, profitability, cash flow and whether Nanometrics will outperform the overall sector. Although Nanometrics believes that the expectations reflected in the forward-looking statements are reasonable, actual results could differ materially from the expectations due to a variety of factors including slower-than-anticipated market adoption, changes in product mix, a contraction in current levels of industry spending and increased operating expenses. For additional information and considerations regarding the risks faced by Nanometrics, see its annual report on Form 10-K for the year ended January 2, 2010 as filed with the Securities and Exchange Commission, 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.

Company Contact:
Jim Moniz, CFO
408-545-6145 tel; 408-521-9370 fax

Investor Relations:
Claire McAdams
Headgate Partners LLC
530-265-9899 tel; 530-265-9699 fax

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