July 23, 2015

Nanometrics Reports Second Quarter 2015 Financial Results

MILPITAS, Calif., July 23, 2015 (GLOBE NEWSWIRE) -- Nanometrics Incorporated (NASDAQ:NANO), a leading provider of advanced process control systems, today announced financial results for its second quarter ended June 27, 2015.

Q2 2015 Highlights Include:

  • Recent Competitive Wins Generated Record-High 3D-NAND Sales. Significant new customer account wins in the memory sector drove all-time record high 3D-NAND revenues — reflecting market share gains in both Automated and Integrated metrology.
  • Share Gains Resulted in Significant Sales Growth in Integrated Metrology. Integrated metrology sales increased more than 30% quarter-on-quarter, reflecting market share gains with multiple key customers in the memory market.
  • Continued Strong Foundry Business. Continued strong revenue contribution from pure-play foundry, reflecting multiple tool-of-record positions for our optical critical dimension (OCD) solutions for FinFET devices.
  • Improved Profitability. Both gross margin and operating margin improved sequentially despite slightly lower sales volume.
      
 GAAP Results
 
  Q2 2015Q1 2015Q2 2014 
 Revenues$  48,629 $  50,376 $  48,029  
 Gross Profit$  23,264 $  23,379 $  22,908  
 Income from Operations$  2,509 $  2,241 $  746  
 Net Income$  1,344 $  2,556 $  588  
 Earnings per Diluted Share$  0.06 $  0.11 $  0.02  
      
 Non-GAAP Results
 
  Q2 2015Q1 2015Q2 2014 
 Gross Profit$  23,721 $  24,011 $  23,585  
 Income from Operations$  2,991 $  2,969 $  1,530  
 Net Income$  1,826 $  3,284 $  1,091  
 Earnings per Diluted Share$  0.08 $  0.14 $  0.05  
      
 Non-GAAP results exclude the impact of the following in the indicated period: 
 Amortization of acquired intangibles*** 
 Restructuring charges *  
      

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.

Commenting on the company's results, president and chief executive officer Dr. Timothy J. Stultz said, "Second-quarter results came in at the high end of our guidance range, due primarily to record sales for 3D-NAND and continued strength in spending by our recently-penetrated foundry customers. I'm also pleased to report improved gross margin and operating margin compared to the first quarter.  We continue to operate within a healthy business environment for wafer fab equipment, and our solutions continue to be in high demand for process control of advanced 3D device architectures. As our market share gains continue to bear fruit through the end of 2015 and into 2016, we expect continued outperformance versus the industry, as well as improving profitability coming from the leverage in our business model and the impact of our increased focus on operating performance."

Second Quarter 2015 Summary
Revenues for the second quarter of 2015 were $48.6 million, down 3% from $50.4 million in the first quarter of 2015 due to lower upgrade sales, and up 1% from $48.0 million in the second quarter of 2014.  On a GAAP basis, gross margin was 47.8%, compared to 46.4% in the prior quarter and 47.7% in the year-ago period.  Operating income was $2.5 million, compared to $2.2 million in the prior quarter and $0.7 million in the year-ago period.  Net income was $1.3 million or $0.06 per diluted share, compared to $2.6 million or $0.11 per diluted share in the prior quarter, and $0.6 million or $0.02 per diluted share in the second quarter of 2014.

On a non-GAAP basis, which excludes amortization of acquired intangible assets, gross margin was 48.8% compared to 47.7% in the prior quarter and 49.1% in the year-ago period.  Non-GAAP operating income for the second and first quarters of 2015 was $3.0 million, compared to an operating income of $1.5 million in the second quarter of 2014. Non-GAAP net income, which adjusts for amortization of intangible assets, restructuring charges, and the income tax effect of non-GAAP adjustments, was $1.8 million or $0.08 per diluted share, compared to $3.3 million or $0.14 per diluted share in the prior quarter and $1.1 million or $0.05 per diluted share in the second quarter of 2014.

Business Outlook
Management expects third-quarter 2015 revenues in the range of $43 to $47 million, with GAAP gross margin in the range of 46.5% to 48.0% and non-GAAP gross margin in the range of 47.5% to 49.0%. Management expects third-quarter operating expenses to range between $20.5 million and $21.1 million on a GAAP basis, and between $20.4 million and $21.0 million on a non-GAAP basis. Management expects third-quarter earnings in the range of $(0.02) to $0.04 per share on a GAAP basis, and breakeven to $0.06 per diluted share on a non-GAAP basis.

Conference Call Details
A conference call to discuss second quarter 2015 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. 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
Financial results such as non-GAAP gross profit, gross margin, operating income, net income, and net income per share, which exclude certain expenses, charges and special items, were not prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). Management uses non-GAAP financial results, which exclude acquisition-related expenses such as amortization of acquired intangibles and transaction costs, restructuring charges, and other unusual and infrequent items, to evaluate the company's ongoing performance and to enable comparison to other periods that did not include these unusual and infrequent 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, such as data storage components and discretes including high-brightness LEDs and power management components.  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 advanced process control for device manufacturers, providing improved device yield at reduced manufacturing cycle time, supporting the accelerated product life cycles in the semiconductor market. 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 statements under the caption "Business Outlook," and in Dr. Stultz's quote regarding the company's expectations regarding the high demand for its products, the expectation to outperform the industry, the leverage in its business model and the impact of its focus on operating performance resulting in profitability, are forward-looking statements. 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 outside of Nanometrics' control, including levels of industry spending, demand for our 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 27, 2014, as filed with the Securities and Exchange Commission on February 25, 2015, 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) 
 
          
 June 27,  December 27,  
 2015 2014 
 ASSETS    
Current assets:    
 Cash and cash equivalents $  26,421  $  34,676  
 Marketable securities   48,368     49,286  
 Accounts receivable, net    44,441     26,121  
 Inventories    41,539     35,105  
 Inventories-delivered systems    1,574     1,912  
 Prepaid expenses and other    6,842     9,289  
 Deferred income tax assets    1,427     1,457  
  Total current assets    170,612     157,846  
       
 Property, plant and equipment, net    47,541     49,633  
 Goodwill   9,590     10,494  
 Intangible assets, net    2,886     4,294  
 Deferred income tax assets   387     410  
 Other assets    541     559  
  Total assets $  231,557  $  223,236  
       
  LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
 Accounts payable $  13,358  $  10,199  
 Accrued payroll and related expenses    9,457     8,700  
 Deferred revenue    10,555     10,021  
 Other current liabilities    8,221     8,265  
 Income taxes payable    1,039     1,017  
  Total current liabilities    42,630     38,202  
       
 Deferred revenue   1,479     2,591  
 Income taxes payable   751     701  
 Deferred tax liabilities   1,007     926  
 Other long-term liabilities    1,226     1,279  
  Total liabilities    47,093     43,699  
       
Stockholders' equity:    
 Common stock   24     24  
 Additional paid-in capital    254,143     251,396  
 Accumulated deficit    (65,214)    (69,114) 
 Accumulated other comprehensive income (loss)    (4,489)    (2,769) 
  Total stockholders' equity    184,464     179,537  
  Total liabilities and stockholders' equity $  231,557  $  223,236  
       


NANOMETRICS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
          
   Three Months Ended Six Months Ended
 June 27, June 28, June 27, June 28,
 2015 2014 2015 2014
Net revenues:       
 Products $  38,937  $  39,224  $  77,275  $  82,504 
 Service    9,692     8,805     21,730     17,101 
 Total net revenues    48,629     48,029     99,005     99,605 
          
Costs of net revenues:       
 Cost of products    19,872     19,789     39,863     41,428 
 Cost of service    5,036     4,655     11,410     9,769 
 Amortization of intangible assets   457     677     1,089     1,351 
 Total costs of net revenues    25,365     25,121     52,362     52,548 
 Gross profit    23,264     22,908     46,643     47,057 
          
Operating expenses:       
 Research and development    8,157     9,373     16,316     17,687 
 Selling    7,029     6,681     14,145     14,054 
 General and administrative    5,544     6,001     11,310     12,339 
 Amortization of intangible assets    25     107     64     215 
 Restructuring   -      -      58     -  
 Total operating expenses   20,755     22,162     41,893     44,295 
 Income from operations    2,509     746     4,750     2,762 
          
Other income (expense):       
 Interest income    46     10     56     24 
 Interest expense    (83)    (96)    (165)    (196)
 Other income, net    (311)    (84)    393     168 
Total other income, net    (348)    (170)    284     (4)
          
Income before income taxes      2,161     576     5,034     2,758 
Provision for income taxes    817     (12)    1,134     575 
 Net income  $  1,344  $  588  $  3,900  $  2,183 
          
Net income per share:       
 Basic $  0.06  $  0.02  $  0.16  $  0.09 
 Diluted $  0.06  $  0.02  $  0.16  $  0.09 
          
Shares used in per share calculation:       
 Basic    24,020     23,939     23,943     23,825 
 Diluted    24,285     24,220     24,260     24,217 
          


 NANOMETRICS INCORPORATED 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
 (In thousands) 
 (Unaudited) 
         
         
     Six Months Ended 
     June 27, June 28, 
      2015   2014  
Cash flows from operating activities:    
Net income $  3,900  $  2,183  
 Reconciliation of net income to net cash used in operating activities:    
  Depreciation and amortization   4,555     4,814  
  Stock-based compensation   2,982     3,410  
  Loss on disposal of fixed assets   501     28  
  Inventory write down   1,298     1,527  
  Deferred income taxes   136     490  
  Changes in fair value of contingent consideration   93     66  
  Changes in assets and liabilities:    
   Accounts receivable   (19,030)    (1,909) 
   Inventories   (8,442)    (3,830) 
   Inventories-delivered systems   339     6,543  
   Prepaid expenses and other   2,735     1,251  
   Accounts payable, accrued and other liabilities   4,283     (2,961) 
   Deferred revenue   (579)    (14,978) 
   Income taxes payable   72     (1,203) 
    Net cash used in operating activities   (7,157)    (4,569) 
         
Cash flows from investing activities:    
 Sales of marketable securities   2,383     -   
 Maturities of marketable securities   15,836     17,620  
 Purchases of marketable securities   (17,561)    (19,479) 
 Purchase of property, plant and equipment   (1,043)    (3,813) 
    Net cash used in investing activities   (385)    (5,672) 
         
Cash flows from financing activities:    
 Payments to Zygo Corporation related to acquisition   (417)    (261) 
 Proceeds from sale of shares under employee stock option and purchase plans   2,500     4,201  
 Taxes paid on net issuance of stock awards   (1,015)    (664) 
 Repurchases of common stock   (1,721)    -   
    Net cash (used in) provided by financing activities   (653)    3,276  
Effect of exchange rate changes on cash and cash equivalents   (60)    187  
Net decrease in cash and cash equivalents   (8,255)    (6,778) 
Cash and cash equivalents, beginning of period   34,676     44,765  
Cash and cash equivalents, end of period$  26,421  $  37,987  
         


NANOMETRICS INCORPORATED 
RECONCILIATION OF GAAP TO NON-GAAP RESULTS  
(In thousands, except per share amounts) 
(Unaudited) 
              
   Three Months Ended   
   June 27, Mar 28, June 28,  
    2015
  2015
  2014
   
Reconciliation of GAAP gross profit and gross margin to non-GAAP gross profit and gross margin            
GAAP gross profit and gross margin, respectively $23,264  47.8% $ 23,379  46.4% $ 22,908  47.7%   
Non-GAAP adjustments:            
 Amortization of intangible assets     457  0.9%    632  1.3%    677  1.4%   
    Non-GAAP gross profit and gross margin, respectively  $23,721  48.8% $ 24,011  47.7% $ 23,585  49.1%   
              
Reconciliation of GAAP operating income to non-GAAP operating income            
GAAP operating income $  2,509   $  2,241   $  746     
Non-GAAP adjustments:            
 Amortization of intangible assets included in cost of revenues     457      632      677     
 Amortization of intangible assets included in operating expenses     25      38      107     
 Restructuring included in operating expenses     -       58      -      
  Total non-GAAP adjustments to operating income     482      728      784     
    Non-GAAP operating income  $  2,991   $  2,969   $  1,530     
              
Reconciliation of GAAP net income to non-GAAP net income            
GAAP net income $  1,344   $  2,556   $  588     
Non-GAAP adjustments:            
  Total non-GAAP adjustments to non-GAAP operating income     482      728      784     
  Income tax effect of non-GAAP adjustments     -       -       (281)    
    Non-GAAP net income  $  1,826   $  3,284   $  1,091     
              
GAAP net income per diluted share $  0.06   $  0.11   $  0.02     
              
Non-GAAP net income per diluted share $  0.08   $  0.14   $  0.05     
              
Shares used in diluted net income per share calculation   24,285     24,257     24,220     
              

 

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

Company Contact:
Jeffrey Andreson
CFO
408.545.6143
jandreson@nanometrics.com


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