October 27, 2016

Nanometrics Reports Third Quarter 2016 Financial Results

MILPITAS, Calif., Oct. 27, 2016 (GLOBE NEWSWIRE) -- Nanometrics Incorporated (NASDAQ:NANO), a leading provider of advanced process control systems, today announced financial results for its fiscal third quarter ended September 24, 2016.

Q3 2016 Highlights:

  • Acceptance and Deployment of Atlas® III into High-Volume Manufacturing (HVM). Following the first-quarter launch of our newest flagship system, multiple initial Atlas IIIs achieved successful sign-off for deployment into next-generation HVM DRAM manufacturing.
  • Continued Revenue Growth and Improved Financial Performance. Third-quarter revenues were up 5% quarter-on-quarter and 29% year-on-year, while income from operations increased by over 22% and 400%, respectively, for the comparable periods. Free cash flow generation for the quarter was $20.1 million, with a $22.5 million net increase in cash and investments compared to the previous quarter.
  • Balanced Revenue Profile and End Market Contributions. Third-quarter revenues reflected a strong rebound in DRAM and Foundry investments, while 3D-NAND sales continued to be the largest contributor to revenues. The result was a balanced revenue profile, across multiple key end markets, customers and geographic regions.
         
 GAAP Results 
   Q3 2016 Q2 2016 Q3 2015 
 Revenues $  58,714  $  55,767  $  45,678  
 Gross Profit $  30,404  $  28,425  $  22,219  
 Income from Operations $  9,066  $  7,336  $  1,264  
 Net Income $  7,883  $  6,031  $  818  
 Earnings per Diluted Share $  0.31  $  0.24  $  0.03  
         
 Non-GAAP Results 
   Q3 2016 Q2 2016 Q3 2015 
 Gross Profit $  30,838  $  28,867  $  22,687  
 Income from Operations $  9,500  $  7,778  $  1,758  
 Net Income $  8,317  $  6,473  $  1,312  
 Earnings per Diluted Share $  0.33  $  0.26  $  0.05  
         
 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 third quarter reflect continued investments in 3D-NAND, where we maintain robust market share positions with every major NAND manufacturer, augmented by strengthening contributions from our DRAM and Foundry customers," commented Dr. Timothy J. Stultz, president and chief executive officer. "Our financial performance for the third quarter continued to perform well against our target business model, with operating margins, earnings per share and free cash flow performance each setting new five-year records. We expect that continued investments in 3D-NAND, DRAM and Foundry by our key customers in Q4 will result in second-half revenues that are meaningfully stronger than the first half, and round out the remainder of 2016 to comprise another sequential year in which our revenue growth significantly outperforms overall spending on wafer fab equipment."

Third Quarter 2016 Summary
Revenues for the third quarter of 2016 were $58.7 million, up 5.3% from $55.8 million in the second quarter of 2016, and up 28.5% from $45.7 million in the third quarter of 2015. On a GAAP basis, gross margin was 51.8%, compared to 51.0% in the prior quarter and 48.6% in the year-ago period.  Operating income was $9.1 million, compared to $7.3 million in the prior quarter and $1.3 million in the year-ago period. Net income was $7.9 million or $0.31 per diluted share, compared to $6.0 million or $0.24 per diluted share in the prior quarter, and $0.8 million or $0.03 per diluted share in the third quarter of 2015.

On a non-GAAP basis, which excludes amortization of acquired intangible assets, gross margin was 52.5%, compared to 51.8% in the prior quarter and 49.7% in the year-ago period. Non-GAAP operating income was $9.5 million compared to $7.8 million in the prior quarter and $1.8 million in the third quarter of 2015. Non-GAAP net income, which adjusts for amortization of intangible assets, was $8.3 million or $0.33 per diluted share, compared to $6.5 million or $0.26 per diluted share in the prior quarter and $1.3 million or $0.05 per diluted share in the third quarter of 2015.

Business Outlook
Management expects fourth-quarter 2016 revenues in the range of $54 to $59 million, with GAAP gross margin in the range of 50.7% to 51.8% and non-GAAP gross margin, which excludes the impact of amortization of acquired intangibles, in the range of 51.0% to 52.0%. Management expects fourth-quarter operating expenses to range between $20.8 million and $21.4 million on a GAAP and non-GAAP basis. Management expects fourth-quarter earnings in the range of $0.21 to $0.30 per diluted share on a GAAP basis, and $0.22 to $0.31 per diluted share on a non-GAAP basis.

Conference Call Details
A conference call to discuss third 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 96265081. 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, 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, 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 sentence 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) 
      
  September 24,
 2016
 December 26,
 2015
 
ASSETS     
Current assets:     
Cash and cash equivalents  $  37,421  $  38,154  
Marketable securities    81,106     44,931  
Accounts receivable, net     41,182     37,832  
Inventories     39,260     47,749  
Inventories-delivered systems     4,416     2,856  
Prepaid expenses and other     5,835     6,592  
Total current assets     209,220     178,114  
      
Property, plant and equipment, net     44,324     44,493  
Goodwill    9,665     9,415  
Intangible assets, net     552     1,867  
Deferred income tax assets    1,319     1,118  
Other assets     526     533  
Total assets  $  265,606  $  235,540  
      
LIABILITIES AND STOCKHOLDERS' EQUITY     
Current liabilities:     
Accounts payable  $  8,562  $  11,675  
Accrued payroll and related expenses     11,631     10,097  
Deferred revenue     16,804     12,790  
Other current liabilities     8,630     8,878  
Income taxes payable     278     1,771  
Total current liabilities     45,905     45,211  
      
Deferred revenue    639     827  
Income taxes payable    848     775  
Deferred tax liabilities    709     521  
Other long-term liabilities     866     878  
Total liabilities     48,967     48,212  
      
Stockholders' equity:     
Common stock    25     24  
Additional paid-in capital     268,553     258,715  
Accumulated deficit     (48,828)    (66,209) 
Accumulated other comprehensive income (loss)    (3,111)    (5,202) 
Total stockholders' equity     216,639     187,328  
Total liabilities and stockholders' equity  $  265,606  $  235,540  
      

 

NANOMETRICS INCORPORATED 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
(In thousands except per share amounts)
(Unaudited) 
          
  Three Months Ended Nine Months Ended 
  September 24,
 2016
 September 26,
 2015
 September 24,
 2016
 September 26,
 2015
 
          
Net revenues:         
Products  $  49,631  $  36,414  $  136,290  $  113,689  
Service     9,083     9,264     25,680     30,993  
Total net revenues     58,714     45,678     161,970     144,682  
          
Costs of net revenues:         
Cost of products     22,810     19,242     62,625     59,106  
Cost of service     5,066     3,749     14,714     15,158  
Amortization of intangible assets    434     468     1,311     1,557  
Total costs of net revenues     28,310     23,459     78,650     75,821  
Gross profit     30,404     22,219     83,320     68,861  
          
          
Operating expenses:         
Research and development     7,868     8,579     23,447     24,896  
Selling     7,495     6,760     22,567     20,905  
General and administrative     5,975     5,590     17,150     16,901  
Amortization of intangible assets     -      26     24     89  
Restructuring    -      -      -      56  
Total operating expenses    21,338     20,955     63,188     62,847  
Income from operations     9,066     1,264     20,132     6,014  
          
Other income (expense):         
Interest income     12     7     33     63  
Interest expense     (92)    (86)    (276)    (252) 
Other income, net     229     346     60     740  
Total other income (expense), net     149     267     (183)    551  
          
Income before income taxes     9,215     1,531     19,949     6,565  
Provision for income taxes     1,332     713     2,568     1,847  
Net income $  7,883  $  818  $  17,381  $  4,718  
          
Net income per share:         
Basic  $  0.32  $  0.03  $  0.71  $  0.20  
Diluted  $  0.31  $  0.03  $  0.70  $  0.19  
          
Shares used in per share calculation:         
Basic     24,826     24,145     24,550     24,010  
Diluted     25,282     24,352     24,979     24,347  
          

 

NANOMETRICS INCORPORATED 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
(In thousands) 
(Unaudited) 
      
      
  Nine Months Ended 
  September 24, 2016 September 26, 2015 
Cash flows from operating activities:     
Net income $  17,381  $  4,718  
Reconciliation of net income to net cash from operating activities:     
Depreciation and amortization    6,440     6,826  
Stock-based compensation    5,432     4,664  
Loss on disposal of fixed assets    162     578  
Inventory write down    1,451     1,971  
Deferred income taxes    (14)    173  
Changes in fair value of contingent consideration    158     137  
Changes in assets and liabilities:     
Accounts receivable    (986)    (14,873) 
Inventories    6,652     (15,893) 
Inventories-delivered systems    (1,560)    370  
Prepaid expenses and other    889     4,436  
Accounts payable, accrued and other liabilities    (4,310)    9,634  
Deferred revenue    3,825     (688) 
Income taxes payable    (1,419)    295  
Net cash provided by operating activities    34,101     2,348  
      
Cash flows from investing activities:     
Sales of marketable securities    2,093     2,884  
Maturities of marketable securities    25,461     30,279  
Purchases of marketable securities    (63,840)    (27,298) 
Purchase of property, plant and equipment    (3,349)    (1,365) 
Net cash provided by (used in) investing activities    (39,635)    4,500  
      
Cash flows from financing activities:     
Payments to Zygo Corporation related to acquisition    (315)    (614) 
Proceeds from sale of shares under employee stock option and purchase plans   5,984     3,642  
Taxes paid on net issuance of stock awards    (1,578)    (1,104) 
Repurchases of common stock    -      (1,721) 
Net cash provided by financing activities    4,091     203  
Effect of exchange rate changes on cash and cash equivalents    710     (166) 
Net increase (decrease) in cash and cash equivalents    (733)    6,885  
Cash and cash equivalents, beginning of period    38,154     34,676  
Cash and cash equivalents, end of period $  37,421  $  41,561  
      

 

NANOMETRICS INCORPORATED
RECONCILIATION OF GAAP TO NON-GAAP RESULTS 
(In thousands, except per share amounts)
(Unaudited)
                     
  Three Months Ended Nine Months Ended
  September 24,
2016
 June 25,
2016
 September 26,
2015
 September 24,
2016
 September 26,
2015
Reconciliation of GAAP gross profit and gross margin to non-GAAP gross profit and gross margin                    
GAAP gross profit and gross margin, respectively $  30,404   51.8% $  28,425   51.0% $  22,219   48.6% $  83,320   51.4% $  68,861   47.6%
Non-GAAP adjustments:                    
Amortization of intangible assets     434   0.7%    442   0.8%    468   1.1%    1,311   0.8%    1,557   1.1%
Non-GAAP gross profit and gross margin, respectively  $  30,838   52.5% $  28,867   51.8% $  22,687   49.7% $  84,631   52.2% $  70,418   48.7%
                     
Reconciliation of GAAP operating income to non-GAAP operating income                    
GAAP operating income and operating margin, respectively $  9,066   15.4% $  7,336   13.2% $  1,264   2.7% $  20,132   12.4% $  6,014   4.2%
Non-GAAP adjustments:                    
Amortization of intangible assets included in cost of revenues     434   0.7%    442   0.7%    468   1.1%    1,311   0.8%    1,557   1.1%
Amortization of intangible assets included in operating expenses   -    -     -    -     26   0.0%    24   0.0%    89   0.1%
Restructuring included in operating expenses       -       -   0.0%    -   0.0%        56   0.0%
Total non-GAAP adjustments to operating income     434   0.7%    442   0.7%    494   1.1%    1,335   0.8%    1,702   1.2%
Non-GAAP operating income and operating margin, respectively  $  9,500   16.2% $  7,778   13.9% $  1,758   3.8% $  21,467   13.2% $  7,716   5.4%
                     
Reconciliation of GAAP net income to non-GAAP net income                    
GAAP net income  $  7,883    $  6,031    $  818    $  17,381    $  4,718   
Non-GAAP adjustments:                    
Total non-GAAP adjustments to non-GAAP operating income     434       442       494       1,335       1,702   
Non-GAAP net income  $  8,317    $  6,473    $  1,312    $  18,716    $  6,420   
                     
GAAP net income per diluted share $  0.31    $  0.24    $  0.03    $  0.70    $  0.19   
                     
Non-GAAP net income per diluted share $  0.33    $  0.26    $  0.05    $  0.75    $  0.26   
                     
Shares used in diluted net income per share calculation    25,282       24,927       24,352       24,979       24,347   
                     
Reconciliation of net cash provided by operating activities to free cash flow                   
GAAP net cash provided by operating activities $  20,881    $  12,721    $  9,505    $  34,101    $  2,348   
Purchase of property and equipment     (821)      (1,918)      (322)      (3,349)      (1,365)  
Free cash flow  $  20,060    $  10,803    $  9,183    $  30,752    $  983   
                     

 

 

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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