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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

Source:Nanometrics Incorporated