July 26, 2016

Nanometrics Reports Second Quarter 2016 Financial Results

MILPITAS, Calif., July 26, 2016 (GLOBE NEWSWIRE) -- Nanometrics Incorporated (NASDAQ:NANO), a leading provider of advanced process control systems, today announced financial results for its fiscal second quarter ended June 25, 2016.

Q2 2016 Highlights:

  • Record Memory Sales, Driven by 3D-NAND. Following record 3D-NAND bookings in the first quarter, the company achieved record 3D-NAND revenues in the second quarter of 2016, driven by production ramps underway by multiple leading manufacturers. The company's strength in 3D-NAND also led to an all-time quarterly record for revenues from the overall memory market.
  • Record Integrated Metrology Sales. Following 100% year-on-year growth in integrated metrology sales in 2015, second-quarter 2016 integrated metrology sales more than doubled quarter-on-quarter, to a new record high, driven by strength in both OCD and Thin Film solutions for 3D-NAND process control.
  • Strong QoQ and YoY Revenue Growth and Improvement in Profitability. Second-quarter revenues were up 17% quarter-on-quarter and 15% year-on-year, while operating profit improvements exceeded 85% and 160%, respectively, for the comparable periods.
         
 GAAP Results 
   Q2 2016 Q1 2016 Q2 2015 
 Revenues $  55,767  $  47,489  $  48,629  
 Gross Profit $  28,425  $  24,491  $  23,264  
 Income from Operations $  7,336  $  3,730  $  2,509  
 Net Income $  6,031  $  3,467  $  1,344  
 Earnings per Diluted Share $  0.24  $  0.14  $  0.06  
         
 Non-GAAP Results 
   Q2 2016 Q1 2016 Q2 2015 
 Gross Profit $  28,867  $  24,926  $  23,721  
 Income from Operations $  7,778  $  4,189  $  2,991  
 Net Income $  6,473  $  3,926  $  1,826  
 Earnings per Diluted Share $  0.26  $  0.16  $  0.08  
         

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.  

"Our results for the second quarter reflect continued strength in our key customer positions, especially in 3D-NAND, and continued improvements in financial performance," commented Dr. Timothy J. Stultz, president and chief executive officer. "As expected, the second quarter showed solid top-line growth, while improvements in our operational efficiency led to multi-year records in both product gross margin and operating margin. Our outlook for the year is unchanged from last quarter, as we continue to expect the second half of 2016 to be stronger than the first half, driven by increased contributions from the Foundry and DRAM markets. Combined with our strengthened customer footprint and opportunity to expand our positions in integrated and thin-film metrology, we expect 2016 will be another year in which our revenue growth meaningfully outperforms overall spending on wafer fab equipment, with significant year-on-year improvements in gross margin, operating margin and EPS."

Second Quarter 2016 Summary
Revenues for the second quarter of 2016 were $55.8 million, up 17.4% from $47.5 million in the first quarter of 2016, and up 14.7% from $48.6 million in the second quarter of 2015.  On a GAAP basis, gross margin was 51.0%, compared to 51.6% in the prior quarter and 47.8% in the year-ago period.  Operating income was $7.3 million, compared to $3.7 million in the prior quarter and $2.5 million in the year-ago period.  Net income was $6.0 million or $0.24 per diluted share, compared to $3.5 million or $0.14 per diluted share in the prior quarter, and $1.3 million or $0.06 per diluted share in the second quarter of 2015.

On a non-GAAP basis, which excludes amortization of acquired intangible assets, gross margin was 51.8%, compared to 52.5% in the prior quarter and 48.8% in the year-ago period.  Non-GAAP operating income was $7.8 million compared to $4.2 million in the prior quarter and $3.0 million in the second quarter of 2015. Non-GAAP net income, which adjusts for amortization of intangible assets, was $6.5 million or $0.26 per diluted share, compared to $3.9 million or $0.16 per diluted share in the prior quarter and $1.8 million or $0.08 per diluted share in the second quarter of 2015.

Business Outlook
Management expects third-quarter 2016 revenues in the range of $55 to $59 million, with GAAP gross margin in the range of 50.2% to 51.8% and non-GAAP gross margin, which excludes the impact of amortization of acquired intangibles, in the range of 51% to 52.5%. Management expects third-quarter operating expenses to range between $20.6 million and $21.2 million on a GAAP and non-GAAP basis. Management expects third-quarter earnings in the range of $0.21 to $0.29 per diluted share on a GAAP basis, and $0.23 to $0.30 per diluted share on a non-GAAP basis.

Conference Call Details
A conference call to discuss second quarter 2016 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 42453833. 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, 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, 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 in the last two sentences of Dr. Stultz's quote 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; Nanometrics' inability to gain additional market share, increase sales, ship products as scheduled, 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 26, 2015, as filed with the Securities and Exchange Commission on February 24, 2016, 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 25,
 2016
 December 26,
 2015
 
ASSETS     
Current assets:     
Cash and cash equivalents  $  60,032  $  38,154  
Marketable securities    35,952     44,931  
Accounts receivable, net     54,099     37,832  
Inventories     41,111     47,749  
Inventories-delivered systems     9,594     2,856  
Prepaid expenses and other     6,793     6,592  
Total current assets     207,581     178,114  
      
Property, plant and equipment, net     43,484     44,493  
Goodwill    9,680     9,415  
Intangible assets, net     989     1,867  
Deferred income tax assets    1,272     1,118  
Other assets     549     533  
Total assets  $  263,555  $  235,540  
      
LIABILITIES AND STOCKHOLDERS' EQUITY     
Current liabilities:     
Accounts payable  $  11,004  $  11,675  
Accrued payroll and related expenses     10,565     10,097  
Deferred revenue     25,603     12,790  
Other current liabilities     9,333     8,878  
Income taxes payable     608     1,771  
Total current liabilities     57,113     45,211  
      
Deferred revenue    95     827  
Income taxes payable    824     775  
Deferred tax liabilities    645     521  
Other long-term liabilities     878     878  
Total liabilities     59,555     48,212  
      
Stockholders' equity:     
Common stock    25     24  
Additional paid-in capital     264,317     258,715  
Accumulated deficit     (56,711)    (66,209) 
Accumulated other comprehensive income (loss)    (3,631)    (5,202) 
Total stockholders' equity     204,000     187,328  
Total liabilities and stockholders' equity  $  263,555  $  235,540  
      

 

NANOMETRICS INCORPORATED
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
(In thousands except per share amounts)
 
(Unaudited)  
          
  Three Months Ended Six Months Ended 
  June 25,
 2016
 June 27,
 2015
 June 25,
 2016
 June 27,
 2015
 
          
Net revenues:         
Products  $  47,445  $  38,937  $  86,659  $  77,275  
Service     8,322     9,692     16,597     21,730  
Total net revenues     55,767     48,629     103,256     99,005  
          
Costs of net revenues:         
Cost of products     21,736     19,872     39,815     39,863  
Cost of service     5,164     5,036     9,648     11,410  
Amortization of intangible assets    442     457     877     1,089  
Total costs of net revenues     27,342     25,365     50,340     52,362  
Gross profit     28,425     23,264     52,916     46,643  
          
          
Operating expenses:         
Research and development     7,511     8,157     15,579     16,316  
Selling     7,823     7,029     15,072     14,145  
General and administrative     5,755     5,544     11,175     11,310  
Amortization of intangible assets     -      25     24     64  
Restructuring    -      -      -      58  
Total operating expenses    21,089     20,755     41,850     41,893  
Income from operations     7,336     2,509     11,066     4,750  
          
Other income (expense):         
Interest income     12     46     21     56  
Interest expense     (67)    (83)    (184)    (165) 
Other income, net     (394)    (311)    (169)    393  
Total other income (expense), net     (449)    (348)    (332)    284  
          
Income before income taxes     6,887     2,161     10,734     5,034  
Provision for income taxes     856     817     1,236     1,134  
Net income $  6,031  $  1,344  $  9,498  $  3,900  
          
Net income per share:         
Basic  $  0.25  $  0.06  $  0.39  $  0.16  
Diluted  $  0.24  $  0.06  $  0.38  $  0.16  
          
Shares used in per share calculation:         
Basic     24,524     24,020     24,416     23,943  
Diluted     24,927     24,285     24,773     24,260  
          

 

NANOMETRICS INCORPORATED 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
(In thousands) 
(Unaudited) 
      
      
  Six Months Ended 
  June 25,
2016
 June 27,
2015
 
Cash flows from operating activities:     
Net income $  9,498  $  3,900  
Reconciliation of net income to net cash from operating activities:     
Depreciation and amortization    4,305     4,555  
Stock-based compensation    3,432     2,982  
Loss on disposal of fixed assets    128     501  
Inventory write down    1,046     1,298  
Deferred income taxes    (30)    136  
Changes in fair value of contingent consideration    95     93  
Changes in assets and liabilities:     
Accounts receivable    (14,277)    (19,030) 
Inventories    6,457     (8,442) 
Inventories-delivered systems    (6,737)    339  
Prepaid expenses and other    (151)    2,735  
Accounts payable, accrued and other liabilities    (1,511)    4,283  
Deferred revenue    12,080     (579) 
Income taxes payable    (1,115)    72  
Net cash provided by (used in) operating activities    13,220     (7,157) 
      
Cash flows from investing activities:     
Sales of marketable securities    -      2,383  
Maturities of marketable securities    21,816     15,836  
Purchases of marketable securities    (12,880)    (17,561) 
Purchase of property, plant and equipment    (2,528)    (1,043) 
Net cash provided by (used in) investing activities    6,408     (385) 
      
Cash flows from financing activities:     
Payments to Zygo Corporation related to acquisition    (315)    (417) 
Proceeds from sale of shares under employee stock option and purchase plans   3,466     2,500  
Taxes paid on net issuance of stock awards    (1,288)    (1,015) 
Repurchases of common stock    -      (1,721) 
Net cash provided by (used in) financing activities    1,863     (653) 
Effect of exchange rate changes on cash and cash equivalents    387     (60) 
Net increase (decrease) in cash and cash equivalents    21,878     (8,255) 
Cash and cash equivalents, beginning of period    38,154     34,676  
Cash and cash equivalents, end of period $  60,032  $  26,421  
      

 

NANOMETRICS INCORPORATED 
RECONCILIATION OF GAAP TO NON-GAAP RESULTS  
(In thousands, except per share amounts) 
(Unaudited) 
              
  Three Months Ended 
  June 25,
2016
 March 28,
2016
 June 27,
2015
 
Reconciliation of GAAP gross profit and gross margin to non-GAAP gross profit and gross margin            
GAAP gross profit and gross margin, respectively $  28,425   51.0% $  24,491   51.6% $  23,264   47.8% 
Non-GAAP adjustments:             
Amortization of intangible assets     442   0.8%    435   0.9%    457   0.9% 
Non-GAAP gross profit and gross margin, respectively  $  28,867   51.8% $  24,926   52.5% $  23,721   48.8% 
              
Reconciliation of GAAP operating income to non-GAAP operating income             
GAAP operating income and operating margin, respectively $  7,336   13.2% $  3,730   7.9% $  2,509   5.2% 
Non-GAAP adjustments:             
Amortization of intangible assets included in cost of revenues     442   0.7%    435   0.9%    457   0.9% 
Amortization of intangible assets included in operating expenses     -     -     24    -     25   0.1% 
Total non-GAAP adjustments to operating income     442   0.7%    459   0.9%    482   1.0% 
Non-GAAP operating income and operating margin, respectively  $  7,778   13.9% $  4,189   8.8% $  2,991   6.2% 
              
Reconciliation of GAAP net income to non-GAAP net income             
GAAP net income  $  6,031    $  3,467    $  1,344    
Non-GAAP adjustments:             
Total non-GAAP adjustments to non-GAAP operating income     442       459       482    
Non-GAAP net income  $  6,473    $  3,926    $  1,826    
              
GAAP net income per diluted share $  0.24    $  0.14    $  0.06    
              
Non-GAAP net income per diluted share $  0.26    $  0.16    $  0.08    
              
Shares used in diluted net income per share calculation    24,927       24,597       24,285    
              
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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