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CST: 16/09/2019 04:24:22   

Nanometrics Reports First Quarter 2019 Financial Results

138 Days ago

Outlook Strengthens for Revenue Growth and Increased Profitability in the Second Half of the Year

MILPITAS, Calif., April 30, 2019 (GLOBE NEWSWIRE) -- Nanometrics Incorporated (NASDAQ: NANO), a leading provider of advanced process control systems, today announced financial results for its first quarter ended March 30, 2019.

First Quarter 2019 Highlights:

  • Strong Sequential Growth in Foundry/Logic; Outlook Strengthens for Second Half. Revenues of $67.1 million were at the high end of forecast, with service revenues continuing at record levels and product revenues reflecting a balanced contribution from memory and from the foundry, IDM and other device markets, which grew nearly 40% sequentially to contribute 50% to product revenues. During the quarter, the company’s outlook for revenue growth and strong profitability in the second half strengthened, given the expected stabilization of memory revenues, momentum building for a stronger second half in revenues from all other markets, and expectations for gross and operating margins also increasing for the second half.
  • Successful Introduction of Atlas® III+. The company introduced its newest flagship automated optical critical dimension (“OCD”) system, the Atlas III+, which has rapidly gained traction with the world’s leading semiconductor manufacturers, with first-quarter revenues recognized from multiple customers, across both memory and logic applications, and in both development and high-volume production environments. With significant enhancements to the company’s proprietary ellipsometry and reflectometry technologies, the Atlas III+ provides industry-leading metrology performance with increased productivity, sensitivity and accuracy.
  • 4D Technology’s InSpec® XL Wins Prism Award. The company’s 4D InSpec XL defect inspection gauge received the SPIE 2019 Prism Award in the test and measurement category. The Prism Awards for Photonics Innovation event is a leading international competition that honors the best new photonic products in the market. The 4D InSpec XL won the award for its utility and importance in making instant, qualifying, 3D measurements of surface features for manufactured parts.
  • Announcement of $80 Million Stock Repurchase Program. Through 2018, the company had completed $80 million in stock repurchases, and in March 2019 announced a new $80 million plan. Following the company generating over $100 million in cash flow from operating activities last year, the management team and board of directors expressed confidence in the company’s future growth prospects, and a continued commitment to returning capital to stockholders, through this new program.  
  GAAP Results  
    Q1 2019 Q4 2018 Q1 2018  
  Revenues (Millions) $67.1   $77.0   $82.3    
  Gross Margin   50.4%     54.6%     57.7%    
  Operating Margin   5.0%     14.1%     25.0%    
  Net Income (Millions) $3.0   $12.0   $16.4    
  Earnings per Diluted Share $0.12   $0.49   $0.67    
           
  Non-GAAP Results  
    Q1 2019 Q4 2018 Q1 2018  
  Gross Margin   52.5%     55.7%     57.8%    
  Operating Margin   8.5%     16.8%     25.6%    
  Net Income (Millions) $4.7   $13.0   $16.5    
  Earnings per Diluted Share $0.19   $0.53   $0.67    
           

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. Non-GAAP results exclude the impact of amortization of acquired intangibles, acquisition-related charges, severance costs, executive transition and search costs, gain on sale of property, and certain discrete tax and other items.

“Our first quarter results reflect the current shifts underway in industry spending, with strength in the foundry/logic market and significantly curtailed investments in the memory device market,” commented Dr. Pierre-Yves Lesaicherre, president and chief executive officer of Nanometrics. “While first-quarter revenues came in at the high end of our forecast, there were a few late-quarter shifts in product and customer mix that resulted in gross margin at the low end of our expectations. The higher-margin business is instead forecast for the current quarter, resulting in a snap-back in gross margin above our target model range for the expected revenue level.

“We entered the year on a cautious note, given the delays of several planned memory projects by our largest customers and the resulting significant decline in memory capital spending expected in 2019, compared to 2018. During the first quarter, we were very pleased to see continued momentum building for second-half sales to the foundry, IDM and other device markets, while at the same time, we have witnessed stabilization in our memory forecast. In combination, the improving visibility and outlook contribute to our expectations of a significantly stronger second half of 2019, not just in terms of revenues, but margins and profitability as well.” Dr. Lesaicherre concluded, “We expect gross margins within or above our target model ranges for the remainder of the year, which enables us to continue our R&D investments in support of new products that will drive future growth.”

First Quarter 2019 Summary
Revenues for the first quarter of 2019 were $67.1 million, down 12.9% from $77.0 million in the fourth quarter of 2018, and down 18.5% from $82.3 million in the first quarter of 2018.  On a GAAP basis, gross margin was 50.4%, compared to 54.6% in the prior quarter and 57.7% in the year-ago period.  Operating income was $3.3 million, compared to $10.9 million in the prior quarter and $20.6 million in the year-ago period.  Net income was $3.0 million or $0.12 per diluted share, compared to $12.0 million or $0.49 per diluted share in the prior quarter and $16.4 million or $0.67 per diluted share in the first quarter of 2018.

On a non-GAAP basis, which excludes amortization of acquired intangible assets and acquisition-related charges gross margin was 52.5%, compared to 55.7% in the prior quarter and 57.8% in the year-ago period. Non-GAAP operating income, which also excludes amortization of intangible assets and acquisition-related costs included in operating costs, executive search and transition costs, and severance costs, was $5.7 million, compared to $13.0 million in the prior quarter and $21.0 million in the first quarter of 2018. Non-GAAP net income, which also adjusts for a gain on disposal of property and certain discrete tax and other items, was $4.7 million or $0.19 per diluted share, compared to $13.0 million or $0.53 per diluted share in the prior quarter and $16.5 million or $0.67 per diluted share in the first quarter of 2018.

Business Outlook
Management expects second quarter 2019 revenues in the range of $61 to $69 million. Gross margin is expected to be approximately 54%, plus or minus 1%, on a GAAP basis and 55%, plus or minus 1%, on a non-GAAP basis.  Management expects second quarter operating expenses to be in the range of $29.5 million to $30.5 million on a GAAP basis and $29.0 million to $30.0 million on a non-GAAP basis. Earnings per diluted share are expected to be in the range of $0.09 to $0.24 on a GAAP basis and $0.13 to $0.28 on a non-GAAP basis.

Conference Call Details
A conference call to discuss first quarter 2019 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 5877575. 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, acquisition-related charges, severance costs, executive transition and search costs, gain on disposal of property, certain discrete tax items and other discrete adjustments, 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 solutions used primarily in the semiconductor manufacturing industry, as well as in the fabrication of other solid-state devices and components in the optoelectronic, LED and storage industries, and more recently in the industrial, aerospace and scientific research markets. Nanometrics’ process control solutions include automated and integrated metrology systems as well as software and analytics that measure and monitor key elements of device performance and yield, such as critical dimensions, device structures, surface shape and profile, overall topography and various thin film properties, including three-dimensional features and film thickness, as well as the optical, electrical and material properties of various substrates, devices and components. Nanometrics’ solutions 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 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 found in Dr. Lesaicherre’s quote, under the caption “Business Outlook,” and elsewhere regarding expected future financial or operational performance and expected market demand, 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, unexpected: decreased levels of industry spending; Nanometrics’ inability to gain additional market share, increase sales, ship products as scheduled, achieve customer acceptance of new products 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 29, 2018, as filed with the Securities and Exchange Commission on February 25, 2019 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)
         
    March 30,
2019
  December 29,
2018
ASSETS        
Current assets:        
Cash and cash equivalents   $   95,212     $   110,951  
Marketable securities       52,851         40,841  
Accounts receivable, net       45,252         50,854  
Inventories       63,470         61,915  
Inventories-delivered systems       349         180  
Prepaid expenses and other       7,235         6,140  
Total current assets       264,369         270,881  
         
Property, plant and equipment, net       50,532         47,900  
Operating lease - right of use assets, net       11,567         -   
Goodwill       26,372         26,372  
Intangible assets, net       26,572         27,326  
Deferred income tax assets       2,473         2,569  
Other assets       440         582  
Total assets   $   382,325     $   375,630  
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable   $   18,901     $   16,540  
Accrued payroll and related expenses       9,490         21,658  
Deferred revenue       10,641         8,990  
Operating lease liabilities       2,893         -   
Other current liabilities       6,859         9,421  
Income taxes payable       1,623         3,164  
Total current liabilities       50,407         59,773  
         
Deferred revenue       1,505         1,753  
Income taxes payable       1,027         871  
Deferred tax liabilities       166         162  
Operating lease liabilities       8,614         -   
Other long-term liabilities       220         219  
Total liabilities       61,939         62,778  
         
Stockholders’ equity:        
Common stock       25         24  
Additional paid-in capital       251,841         247,983  
Retained earnings       70,375         67,402  
Accumulated other comprehensive loss       (1,855 )       (2,557 )
Total stockholders’ equity       320,386         312,852  
Total liabilities and stockholders’ equity   $   382,325     $   375,630  
         


NANOMETRICS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
         
    Three Months Ended
    March 30, 2019   March 31, 2018
         
Net revenues:        
Products   $   53,855     $   71,019  
Service       13,245         11,294  
Total net revenues       67,100         82,313  
         
Costs of net revenues:        
Cost of products       25,898         28,593  
Cost of service       6,948         6,154  
Amortization of intangible assets       466         35  
Total costs of net revenues       33,312         34,782  
Gross profit       33,788         47,531  
         
         
Operating expenses:        
Research and development       12,987         10,202  
Selling       9,282         9,024  
General and administrative       7,905         7,741  
Amortization of intangible assets       289         -   
Total operating expenses       30,463         26,967  
Income from operations       3,325         20,564  
         
Other income (expense):        
Interest expense, net       (91 )       (93 )
Other income, net       270         352  
Total other income, net       179         259  
         
Income before income taxes       3,504         20,823  
Provision for income taxes       531         4,442  
Net income   $   2,973     $   16,381  
         
Net income per share:        
Basic   $   0.12     $   0.68  
Diluted   $   0.12     $   0.67  
         
Shares used in per share calculation:        
Basic       24,474         24,063  
Diluted       24,783         24,483  
         


NANOMETRICS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
         
         
    Three Months Ended
    March 30,
2019
  March 31,
2018
Cash flows from operating activities:        
Net income   $ 2,973     $ 16,381  
Reconciliation of net income to net cash from operating activities:        
Depreciation and amortization     2,406       1,724  
Stock-based compensation     3,114       2,338  
Disposal of fixed assets     2       45  
Inventory write down     1,747       95  
Deferred income taxes     4       2,062  
Changes in assets and liabilities:        
Accounts receivable     6,604       8,035  
Inventories     (2,864 )     315  
Inventories-delivered systems     (169 )     41  
Prepaid expenses and other     (1,189 )     (454 )
Operating lease - right of use assets     148       -  
Accounts payable, accrued and other liabilities     (13,656 )     (1,474 )
Deferred revenue     1,403       2,172  
Operating lease liabilities     (90 )     -  
Income taxes payable     (1,289 )     1,434  
Net cash provided by (used) in operating activities     (856 )     32,714  
         
Cash flows from investing activities:        
Payment for acquisition of certain assets     -       (1,000 )
Sales of marketable securities     739       17,435  
Maturities of marketable securities     11,450       6,500  
Purchases of marketable securities     (24,021 )     -  
Purchase of property, plant and equipment     (4,132 )     (1,319 )
Net cash provided by (used) in investing activities     (15,964 )     21,616  
         
Cash flows from financing activities:        
Proceeds from sale of shares under employee stock option and purchase plans   1,548       545  
Taxes paid on net issuance of stock awards     (803 )     (476 )
Repurchases of common stock under share repurchase plans     -       (22,987 )
Net cash provided by (used in) financing activities     745       (22,918 )
Effect of exchange rate changes on cash and cash equivalents     336       (399 )
Net increase (decrease) in cash and cash equivalents     (15,739 )     31,013  
Cash and cash equivalents, beginning of period     110,951       34,899  
Cash and cash equivalents, end of period   $ 95,212     $ 65,912  
         


NANOMETRICS INCORPORATED
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(In thousands, except per share amounts)
(Unaudited)
                         
    Three Months Ended
    March 30, 2019   December 29, 2018   March 31, 2018
Reconciliation of GAAP gross profit and gross margin to non-GAAP gross profit and gross margin                        
GAAP gross profit and gross margin, respectively   $ 33,788     50.4 %   $ 42,038     54.6 %   $ 47,531     57.7 %
Non-GAAP adjustments:                        
Acquisition-related charges     957     1.4 %     668     0.9 %     -     0.0 %
Amortization of intangible assets     466     0.7 %     179     0.2 %     35     0.0 %
Total non-GAAP adjustments to gross profit     1,423     2.1 %     847     1.1 %     35     0.0 %
Non-GAAP gross profit and gross margin, respectively   $ 35,211     52.5 %   $ 42,885     55.7 %   $ 47,566     57.8 %
                         
Reconciliation of GAAP operating expenses to non-GAAP operating expenses                    
GAAP Operating Expenses   $ 30,463     45.4 %   $ 31,170     40.5 %   $ 26,967     32.8 %
Non-GAAP adjustments:                        
Amortization of intangible assets included in operating expenses     (289 )   -0.4 %     (96 )   -0.1 %     -     -  
Acquisition-related charges included in operating expenses     (164 )   -0.3 %     (903 )   -1.2 %     -     -  
Severance included in operating expenses     (260 )   -0.4 %     -     -       -     -  
Executive transition     (190 )   -0.3 %     (240 )   -0.3 %     (376 )   -0.5 %
Executive search     -     -       -     -       (46 )   -0.1 %
Total non-GAAP adjustments to operating expenses     (903 )   -1.4 %     (1,240 )   -1.6 %     (422 )   -0.6 %
Non-GAAP operating expenses   $ 29,560     44.0 %   $ 29,931     38.9 %   $ 26,545     32.2 %
                         
Reconciliation of GAAP operating income to non-GAAP operating income                        
                         
                         
GAAP operating income and operating margin, respectively   $ 3,325     5.0 %   $ 10,868     14.1 %   $ 20,564     25.0 %
Non-GAAP adjustments:           .            
Non-GAAP adjustments to gross profit     1,423     2.1 %     847     1.1 %     35     0.0 %
Non-GAAP adjustments to operating expenses     903     1.3 %     1,240     1.6 %     422     0.5 %
Total non-GAAP adjustments to operating income     2,326     3.5 %     2,087     2.7 %     457     0.6 %
Non-GAAP operating income and operating margin, respectively   $ 5,651     8.5 %   $ 12,954     16.8 %   $ 21,021     25.6 %
                         
Reconciliation of GAAP net income to non-GAAP net income                        
GAAP net income   $ 2,973         $ 12,024         $ 16,381      
Non-GAAP adjustments:                        
Total non-GAAP adjustments to non-GAAP operating income     2,326           2,086           457      
Gain on Disposal of Property     -           (874 )         -      
Other Discrete Items     -           89           -      
Discrete tax items and tax effect of non-GAAP adjustments     (612 )         (279 )         (344 )    
Non-GAAP net income   $ 4,687         $ 13,047         $ 16,494      
                         
GAAP net income per diluted share   $ 0.12         $ 0.49         $ 0.67      
                         
Non-GAAP net income per diluted share   $ 0.19         $ 0.53         $ 0.67      
                         
Shares used in diluted net income per share calculation     24,783           24,481           24,483      
                         
    Three Months Ended
    March 30, 2019   December 29, 2018   March 31, 2018
                         
Reconciliation of net cash provided by operating activities to free cash flow                    
GAAP net cash provided by operating activities   $ (856 )       $ 19,928         $ 32,714      
Purchase of property and equipment     (4,132 )         (4,544 )         (1,319 )    
Free cash flow   $ (4,988 )       $ 15,384         $ 31,395      
                         
Investor Relations Contact:
Claire McAdams
Headgate Partners LLC
530.265.9899
claire@headgatepartners.com

Company Contact:
Greg Swyt
Vice President, Finance
408.545.6088
ir@nanometrics.com

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