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Nanometrics Incorporated (Nasdaq:NANO), a leading provider of advanced process control metrology and inspection systems, today announced financial results for its third quarter ended September 28, 2013.
Third Quarter Highlights
- The IMPULSE® integrated metrology platform won the "tool of record" selection for advanced chemical mechanical polishing (CMP) process control of 3D memory production at a leading customer's newest manufacturing location in China. IMPULSE joins the previous pilot line selection of the Atlas® II system for OCD (optical critical dimension) process control, increasing our fab footprint for this production ramp.
- An Atlas II system won its first competitive selection at a global pure-play foundry customer for OCD metrology in critical transistor-level applications at the 2Y and 1X nm device nodes.
- Our first Atlas II system was installed at a leading pure-play foundry customer in Asia, joining the IMPULSE and the UniFire® as the third Nanometrics product platform in their 20nm production environment.
Q3 2013 Q2 2013 Q3 2012
Revenues $ 39,044 $ 34,552 $ 43,938
Gross Profit $ 15,801 $ 14,480 $ 22,152
Income (Loss) from Operations $ (7,242) $ (6,156) $ 3,614
Net Income (Loss) $ (4,554) $ (4,566) $ 1,903
Earnings (Loss) per Diluted Share $ (0.20) $ (0.20) $ 0.08
Q3 2013 Q2 2013 Q3 2012
Gross Profit $ 18,898 $ 15,127 $ 22,781
Income (Loss) from Operations $ (2,210) $ (5,314) $ 4,436
Net Income (Loss) $ (1,307) $ (4,023) $ 2,425
Earnings (Loss) per Diluted Share $ (0.06) $ (0.17) $ 0.10
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 intangible assets and, for Q3 2013, also exclude a restructuring charge as well as an inventory write-off associated with the discontinuation of the Mosaic product line.
Commenting on the company's results, president and chief executive officer Dr. Timothy J. Stultz said, "As expected, we saw continued increases in spending by some of our largest customers during the third quarter. Importantly, we achieved several new competitive wins, increased our penetration of the foundry segment, and received multiple significant orders that will fan out as shipments over the next several quarters. We believe the incremental investments we have made in R&D and applications during the last several quarters have expanded our footprint within our customers' fabs and increased our market share which, along with an acceleration of order activity in the memory segment, will begin to result in significant revenue growth as we enter 2014."
Third Quarter 2013 Summary
Revenues for the third quarter of 2013 were $39.0 million, up 13% from $34.6 million in the second quarter of 2013 and down 11% from $43.9 million in the third quarter of 2012. On a GAAP basis gross margin was 40.5%, compared to 41.9% in the prior quarter and 50.4% in the year-ago period. The operating loss was $7.2 million, compared to an operating loss of $6.2 million in the prior quarter and operating income of $3.6 million in the year-ago period. The net loss was $4.6 million or $0.20 per share, compared to a net loss of $4.6 million or $0.20 per share in the prior quarter and net income of $1.9 million or $0.08 per diluted share in the third quarter of 2012.
On a non-GAAP basis, which excludes the impact of a $2.4 million inventory write-off recorded for the discontinued Mosaic™ product line as well as amortization of acquired intangible assets, gross margin was 48.4% compared to 43.8% in the prior quarter and 51.8% in the year-ago period. The non-GAAP operating loss for the third quarter also excludes a $1.7 million restructuring charge related to the consolidation of operations and facilities for the SPARK™ product line and was $2.2 million, compared to an operating loss of $5.3 million in the prior quarter and operating income of $4.4 million in the third quarter of 2012. The non-GAAP net loss, which also adjusts for the income tax effect of non-GAAP adjustments, was $1.3 million or $0.06 per share, compared to a net loss of $4.0 million or $0.17 per share in the prior quarter and net income of $2.4 million or $0.10 per diluted share in the third quarter of 2012.
Balance Sheet Strength
At September 28, 2013, Nanometrics had $92.9 million in cash, cash equivalents and marketable securities and $140.7 million in working capital. Stockholders' equity, excluding intangible assets, was $183.7 million, or $7.88 per share based on 23.3 million shares outstanding at quarter-end.
Management expects total revenues for the fourth quarter of 2013 to be in the range of $42 to $47 million. While product gross margin is expected to improve on increased sales volume, total gross margin is expected to decline from the third quarter due to lower service and upgrade revenues, with GAAP gross margin in the range of 45% to 47% and non-GAAP gross margin in the range of 46% to 48%. Management expects fourth quarter operating expenses to be $21.5 to $22.1 million and non-GAAP operating expenses to be $21.3 to $21.9 million, with GAAP earnings to range from ($0.10) to $0.01 per share and non-GAAP earnings to range from ($0.08) to $0.03 per share.
Conference Call Details
A conference call to discuss third quarter 2013 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, asset impairments including certain excess and obsolete inventory charges related to a discontinued product line, restructuring charges, legal settlements, certain discrete tax items and the impact of the timing of the approval of elections related to tax treatment of certain foreign subsidiaries, 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. Non-GAAP financial measures for the third quarter of fiscal 2013 exclude a $1.7 million restructuring charge related to the consolidation of operations and facilities for the SPARK™ product line and $2.4 million of inventory write-downs recorded in connection with the final discontinuation of the Mosaic product line. Prior period non-GAAP financial measures do not exclude excess inventory reserves recorded for the Mosaic product line in the ordinary course of business. Excess inventory reserve charges recorded for the Mosaic product line in the second quarter of 2013 were $470,000 and none were recorded in the prior year period. 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. 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 Incorporated
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
The statements in this press release under the caption "Business Outlook" and in Dr. Stultz's quote regarding future shipments and the company's expectations as to revenue growth and financial results 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, including economic conditions, levels of industry spending, shifts in the timing of customer orders, product shipments and acceptance, market adoption rates, changes in product mix and changes in operating expenses. For additional information and considerations regarding the risks faced by Nanometrics, see its annual report on Form 10-K for the year ended December 29, 2012, as filed with the Securities and Exchange Commission on March 12, 2013, 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.
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