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Nanometrics Reports First Quarter 2019 Financial Results Nasdaq:NANO




(MENAFN - GlobeNewsWire - Nasdaq) itemprop="articleBody">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 Company Contact: Greg Swyt Vice President, Finance 408.545.6088

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    Nanometrics Reports First Quarter 2019 Financial Results Nasdaq:NANO

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