February 2, 2016

Nanometrics Reports Fourth Quarter and Full Year 2015 Financial Results

MILPITAS, Calif., Feb. 02, 2016 (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 26, 2015.

2015 Highlights and Achievements:

  • Record Foundry Sales. Optical Critical Dimension (OCD) market share gains led to record foundry sales, which were up 74% over 2014 and comprised a record 33% of total product revenues. Taiwan Semiconductor (TSMC), the world's leading foundry, became Nanometrics' largest customer for 2015.
  • Record 3D NAND Sales. Tool-of-record positions won at each of the four leading memory customers for 3D-NAND process control fueled record 3D NAND sales, which were up 50% from 2014.
  • Record Integrated Metrology Sales. Annual Integrated Metrology (IM) sales more than doubled in 2015, following 34% sales growth in the prior year, primarily due to share gains in 3D-NAND.
  • Record Sales to Three Key Customer Accounts. TSMC, Micron and Toshiba each contributed record-high sales to Nanometrics for the year, and were three out of a record five 10% customers for the full year.
  • Improved Financial Performance. Gross margin improved sequentially every quarter through 2015 and, for the full year, over 70% flow-through to operating profit was realized on the incremental revenues over 2014.
      
GAAP Results
 Q4 2015Q3 2015Q4 2014FY 2015FY 2014
Revenues$  42,683 $  45,678 $  39,705 $  187,367 $  166,443 
Gross Profit$  20,804 $  22,219 $  17,349 $  89,667 $  75,822 
Income (Loss) from Operations$  (1,042)$  1,264 $  (3,806)$  4,973 $  (11,653)
Net Income (Loss)$  (1,814)$  818 $  (4,639)$  2,905 $  (31,118)
Earnings per Diluted Share$  (0.07)$  0.03 $  (0.19)$  0.12 $  (1.30)
      
Non-GAAP Results
 Q4 2015Q3 2015Q4 2014FY 2015FY 2014
Gross Profit$  21,273 $  22,687 $  18,033 $  91,693 $  78,545 
Income (Loss) from Operations$  774 $  1,758 $  (2,469)$  8,493 $  (6,244)
Net Income (Loss)$  2 $  1,312 $  (2,999)$  6,425 $  (5,705)
Earnings per Diluted Share$  0.00 $  0.05 $  (0.12)$  0.26 $  (0.24)
      
Non-GAAP results exclude the impact of the following in the indicated period:  
Amortization of acquired intangibles
Restructuring charges 
Non-cash tax items   
      
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, "2015 was another year of solid progress against our strategic initiatives to penetrate and develop key customer accounts, gain market share, and deliver improvements to our financial performance. In 2015, we achieved share gains and record sales at multiple strategic accounts and in multiple strategic markets, while also growing our Integrated Metrology business to record levels. As a result, our total revenue growth of 13% readily outpaced a relatively flat wafer fab equipment (WFE) spending environment. Today, Nanometrics process control solutions are deployed at every advanced technology node, spanning 3D-NAND to FinFET to advanced 3D packaging. While we are pleased with the progress in our market share position, we continue to see significant opportunities to further expand our tool-of-record footprint and gain additional share going forward.

"As we look to 2016, we expect our first-quarter sales will be up from Q4 levels and, with our current visibility, sales are expected to continue to gain momentum from there. We also believe we are well-positioned to once again outperform the industry in revenue growth and deliver further improvements to our financial results and profitability in 2016."

Fourth Quarter 2015 Summary

Revenues for the fourth quarter of 2015 were $42.7 million, down 7% from $45.7 million in the third quarter of 2015 due primarily to lower product and upgrade sales, and up 8% from $39.7 million in the fourth quarter of 2014.  On a GAAP basis, gross margin was 48.7%, compared to 48.6% in the prior quarter and 43.7% in the year-ago period.  The operating loss was $1.0 million, compared to operating income of $1.3 million in the prior quarter and an operating loss of $3.8 million in the year-ago period.  The net loss was $1.8 million or $0.07 per share, compared to net income of $0.8 million or $0.03 per diluted share in the prior quarter, and a net loss of $4.6 million or $0.19 per share in the fourth quarter of 2014.

On a non-GAAP basis, which excludes amortization of acquired intangible assets, gross margin was 49.8%, compared to 49.7% in the prior quarter and 45.4% in the year-ago period, and slightly exceeded our target model at these sales volumes primarily due to favorable product mix.  Non-GAAP operating income also excludes restructuring charges and was $0.8 million compared to $1.8 million in the prior quarter and an operating loss of $2.5 million in the fourth 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 breakeven, compared to net income of $1.3 million or $0.05 per diluted share in the prior quarter and a net loss of $3.0 million or $0.12 per share in the fourth quarter of 2014.

Full Year 2015 Summary

Revenues were $187.4 million, up 13% from $166.4 million in 2014.  On a GAAP basis, gross margin was 47.9%, compared to 45.6% in 2014, and operating income was $5.0 million, compared to an operating loss of $11.7 million in 2014.  Net income was $2.9 million or $0.12 per diluted share, compared to a net loss of $31.1 million or $1.30 per share in 2014.

On a non-GAAP basis, which excludes amortization of acquired intangible assets, gross margin was 48.9% compared to 47.2% in 2014.  Non-GAAP operating income also excludes restructuring charges and was $8.5 million, compared to an operating loss of $6.2 million in 2014. Non-GAAP net income, which also adjusts for the valuation allowance on deferred tax assets and the income tax effect of non-GAAP adjustments, was $6.4 million or $0.26 per diluted share, compared to a non-GAAP net loss of $5.7 million or $0.24 per share in 2014.

Business Outlook

Management expects first-quarter 2016 revenues in the range of $44 to $48 million, with GAAP gross margin in the range of 48.5% to 49.6% and non-GAAP gross margin in the range of 49.5% to 50.5%. Management expects first-quarter operating expenses to range between $20.5 million and $21.0 million on a GAAP and non-GAAP basis. Management expects first-quarter earnings in the range of breakeven to $0.07 per share on a GAAP basis, and $0.01 to $0.09 per share on a non-GAAP basis.

Conference Call Details

A conference call to discuss fourth quarter 2015 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 26782452. 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, 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 statements under the caption "Business Outlook," and in Dr. Stultz's quote regarding opportunities to further expand the company's tool-of-record footprint, gain additional market share, increase sales and the expectation to outperform the industry 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 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 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)
      
    December 26,   December 27, 
   2015   2014 
     
 ASSETS   
    
Current assets:   
 Cash and cash equivalents $  38,154  $  34,676 
 Marketable securities   44,931     49,286 
 Accounts receivable, net    37,832     26,121 
 Inventories    47,749     35,105 
 Inventories-delivered systems    2,856     1,912 
 Prepaid expenses and other    6,592     9,289 
 Deferred income tax assets   -      1,457 
 Total current assets    178,114     157,846 
      
 Property, plant and equipment, net    44,493     49,633 
 Goodwill   9,415     10,494 
 Intangible assets, net    1,867     4,294 
 Deferred income tax assets   1,118     410 
 Other assets    533     559 
 Total assets $  235,540  $  223,236 
      
LIABILITIES AND STOCKHOLDERS' EQUITY   
    
Current liabilities:   
 Accounts payable $  11,675  $  10,199 
 Accrued payroll and related expenses    10,097     8,700 
 Deferred revenue    12,790     10,021 
 Other current liabilities    8,878     8,265 
 Income taxes payable    1,771     1,017 
 Total current liabilities    45,211     38,202 
      
 Deferred revenue   827     2,591 
 Income taxes payable   775     701 
 Deferred tax liabilities   521     926 
 Other long-term liabilities    878     1,279 
 Total liabilities    48,212     43,699 
      
Stockholders' equity:   
 Common stock   24     24 
 Additional paid-in capital    258,715     251,396 
 Accumulated deficit    (66,209)    (69,114)
 Accumulated other comprehensive income (loss)    (5,202)    (2,769)
 Total stockholders' equity    187,328     179,537 
 Total liabilities and stockholders' equity $  235,540  $  223,236 
      

 

NANOMETRICS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
          
   Three Months Ended Twelve Months Ended
   December 26, December 27, December 26, December 27,
   2015   2014   2015   2014 
         
Net revenues:       
Products $  33,255  $  31,598  $  146,945  $  133,589 
Service    9,428     8,107     40,422     32,854 
Total net revenues    42,683     39,705     187,367     166,443 
          
Costs of net revenues:       
Cost of products    17,118     16,647     76,224     68,812 
Cost of service    4,292     5,025     19,450     19,086 
Amortization of intangible assets   469     684     2,026     2,723 
Total costs of net revenues    21,879     22,356     97,700     90,621 
Gross profit    20,804     17,349     89,667     75,822 
          
Operating expenses:       
Research and development    7,806     8,052     32,701     33,776 
Selling    7,150     6,590     28,055     27,033 
General and administrative    5,543     5,860     22,444     23,980 
Amortization of intangible assets    25     102     114     420 
Restructuring   1,322     551     1,380     2,266 
Total operating expenses   21,846     21,155     84,694     87,475 
Income (loss) from operations    (1,042)    (3,806)    4,973     (11,653)
        
Other income (expense):       
Interest income    9     10     71     47 
Interest expense    (38)    (103)    (289)    (389)
Other income, net    73     263     813     374 
Total other income (expense), net    44     170     595     32 
          
Income (loss) before income taxes    (998)    (3,636)    5,568     (11,621)
Provision for income taxes    816     1,003     2,663     19,497 
Net income (loss) $  (1,814) $  (4,639) $  2,905  $  (31,118)
          
Net income (loss) per share:       
Basic $  (0.07) $  (0.19) $  0.12  $  (1.30)
Diluted $  (0.07) $  (0.19) $  0.12  $  (1.30)
          
Shares used in per share calculation:       
Basic    24,203     24,048     24,058     23,958 
Diluted    24,203     24,048     24,375     23,958 
          


  
 NANOMETRICS INCORPORATED
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
        
        
     Twelve Months Ended
     December 26, December 27,
      2015   2014 
Cash flows from operating activities:   
Net income (loss)$  2,905  $  (31,118)
 Reconciliation of net income (loss) to net cash from operating activities:   
  Depreciation and amortization   9,075     9,767 
  Stock-based compensation   6,248     6,752 
  Loss on disposal of fixed assets   1,121     249 
  Inventory write down   2,645     2,897 
  Deferred income taxes   345     17,915 
  Changes in fair value of contingent consideration   (56)    201 
  Changes in assets and liabilities:   
   Accounts receivable   (12,989)    3,861 
   Inventories   (16,478)    (7,173)
   Inventories-delivered systems   (943)    4,988 
   Prepaid expenses and other   3,604     2,303 
   Accounts payable, accrued and other liabilities   4,260     1,790 
   Deferred revenue   1,006     (12,855)
   Income taxes payable   828     (212)
    Net cash provided by (used in) operating activities   1,571     (635)
        
Cash flows from investing activities:   
 Sales of marketable securities   3,383     -  
 Maturities of marketable securities   41,863     38,839 
 Purchases of marketable securities   (41,449)    (41,100)
 Purchase of property, plant and equipment   (1,846)    (5,792)
    Net cash provided by (used in) investing activities   1,951     (8,053)
        
Cash flows from financing activities:   
 Payments to Zygo Corporation related to acquisition   (851)    (587)
 Proceeds from sale of shares under employee stock option and purchase plans   3,974     5,958 
 Taxes paid on net issuance of stock awards   (1,182)    (702)
 Repurchases of common stock   (1,721)    (5,344)
    Net cash provided by (used in) financing activities   220     (675)
Effect of exchange rate changes on cash and cash equivalents   (264)    (726)
Net increase (decrease) in cash and cash equivalents   3,478     (10,089)
Cash and cash equivalents, beginning of period   34,676     44,765 
Cash and cash equivalents, end of period$  38,154  $  34,676 
        

 

 
NANOMETRICS INCORPORATED
RECONCILIATION OF GAAP TO NON-GAAP RESULTS 
(In thousands, except per share amounts)
(Unaudited)
                  
   Three Months Ended  Twelve Months Ended
   December 26, September 27, December 27, December 26, December 27,
    2015   2015   2014    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 $20,804  48.7% $22,219  48.6% $17,349  43.7%  $89,667  47.9% $75,822  45.6%
Non-GAAP adjustments:                
 Amortization of intangible assets  469  1.1%  468  1.1%  684  1.7%   2,026  1.0%  2,723  1.6%
Non-GAAP gross profit and gross margin, respectively $21,273  49.8% $22,687  49.7% $18,033  45.4%  $91,693  48.9% $78,545  47.2%
                  
Reconciliation of GAAP operating income to non-GAAP operating income                
GAAP operating income (loss) $(1,042)  $1,264   $(3,806)   $4,973   $(11,653) 
Non-GAAP adjustments:                
 Amortization of intangible assets included in cost of revenues  469    468    684     2,026    2,723  
 Amortization of intangible assets included in operating expenses  25    26    102     114    420  
 Restructuring included in operating expenses  1,322    -    551     1,380    2,266  
 Total non-GAAP adjustments to operating income (loss)  1,816    494    1,337     3,520    5,409  
Non-GAAP operating income (loss) $774   $1,758   $(2,469)   $8,493   $(6,244) 
                  
Reconciliation of GAAP net income to non-GAAP net income `              
GAAP net income (loss) $(1,814)  $818   $(4,639)   $2,905   $(31,118) 
Non-GAAP adjustments:                
 Total non-GAAP adjustments to non-GAAP operating income (loss)  1,816    494    1,337     3,520    5,409  
 Valuation allowance on deferred tax assets and other non-cash adjustments to tax assets -    -    303     -    21,444  
 Income tax effect of non-GAAP adjustments  -    -    -     -    (1,440) 
Non-GAAP net income (loss) $2   $1,312   $(2,999)   $6,425   $(5,705) 
                  
GAAP net income (loss) per diluted share $(0.07)  $0.03   $(0.19)   $0.12   $(1.30) 
                  
Non-GAAP net income (loss) per diluted share $0.00   $0.05   $(0.12)   $0.26   $(0.24) 
                  
Shares used in diluted net income per share calculation  24,446    24,352    24,048     24,375    23,958  
                  
Investor Relations Contact:
Claire McAdams
Headgate Partners LLC
530.265.9899
claire@headgatepartners.com

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


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