MILPITAS, Calif., May 01, 2018 (GLOBE NEWSWIRE) -- Nanometrics Incorporated (NASDAQ:NANO), a leading provider of advanced process control systems, today announced financial results for its first quarter ended March 31, 2018.
First Quarter 2018 Highlights:
- Record Financial Results. Strong positions with key customers and a continued positive business environment, particularly for memory, helped drive record revenues, gross margin, and earnings per share. Revenues of $82.3 million were up 39% from the first quarter of 2017, and up 5% from the fourth quarter of 2017. Record gross margin was higher than forecast, due to the greater revenue volume and an increased contribution of high-margin upgrades, as well as a favorable accrual adjustment.
- Significant Competitive Wins and Increasing Market Share. The company recently announced two significant competitive wins: the selection of the IMPULSE®+ integrated metrology platform by a leading-edge DRAM manufacturer, and the adoption of Nanometrics’ broad portfolio of fab-wide process control solutions by a domestic China 3D-NAND manufacturer. Both of these new positions resulted in increased market share, stronger revenues for the first quarter, and are also contributing to the company’s strengthened outlook for the full year 2018.
- Strong Free Cash Flow Generation. The company reported $32.7 million in cash flow from operating activities, and after capital expenditures of $1.3 million, generated a record $31.4 million in free cash flow. Total cash, cash equivalents and marketable securities increased $6.9 million quarter-over-quarter, after $23.0 million of stock repurchases, to end the quarter with a balance of $123.9 million.
- Completion of $50 Million Stock Repurchase Program. Nanometrics completed the $50 million stock repurchase program announced last November, buying back just under two million shares over the last two quarters at an average price of $25.48 per share.
| GAAP Results | |||||||||||
| Q1 2018 | Q4 2017 | QoQ | Q1 2017 | YoY | |||||||
| Revenues (Millions) | $ | 82.3 | $ | 78.2 | 5% | $ | 59.3 | 39% | |||
| Gross Margin | 57.7% | 56.2% | 150 bps | 48.0% | 970 bps | ||||||
| Operating Margin | 25.0% | 24.5% | 50 bps | 9.3% | 1570 bps | ||||||
| Net Income (Millions) | $ | 16.4 | $ | 10.8 | 52% | $ | 5.4 | 206% | |||
| Earnings per Diluted Share | $ | 0.67 | $ | 0.42 | 60% | $ | 0.21 | 223% | |||
| Non-GAAP Results | |||||||||||
| Q1 2018 | Q4 2017 | QoQ | Q1 2017 | YoY | |||||||
| Gross Margin | 57.8% | 56.4% | 140 bps | 48.3% | 950 bps | ||||||
| Operating Margin | 25.6% | 25.3% | 30 bps | 9.9% | 1570 bps | ||||||
| Net Income (Millions) | $ | 16.5 | $ | 13.6 | 22% | $ | 4.8 | 245% | |||
| Earnings per Diluted Share | $ | 0.67 | $ | 0.53 | 28% | $ | 0.19 | 264% | |||
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, severance costs, executive transition and search costs and certain discrete tax items.
“We are very pleased to report stronger-than-expected financial results for the first quarter, in which we achieved new records in revenue, gross margin, earnings per share, and free cash flow,” commented Dr. Pierre-Yves Lesaicherre, president and chief executive officer of Nanometrics. “Our first-quarter revenues reflected both the strength of the capital spending environment for memory devices, as well as our recently-announced significant market share wins, which were immediately impactful to our product sales. Customer demand from both the NAND and DRAM market segments is reflecting that our customers’ ramp in investments is both faster and stronger than we previously forecast, improving our results for the first quarter as well as our outlook for the full year. Further, our results demonstrate that we are executing well toward our financial model targets. While there were a couple of key factors driving our gross margin outperformance that were unique to the first quarter, normalized margins of approximately 56% for the period indicate the company is ahead of schedule in achieving its gross margin targets.
“Our outlook for 2018 has strengthened since last quarter, both in terms of revenue growth and profitability. Our greater market share, higher revenue volume, and increased gross margin are enabling us to make investments in R&D and our global sales organization in support of future growth, while delivering strong profits and cash flows.” Dr. Lesaicherre concluded, “2018 is off to a very strong start, and we are looking forward to delivering a fifth straight year of double-digit revenue growth, with expanding gross and operating margins, increased earnings per share, and significant free cash flow generation. As we invest in new technologies, we are also excited to deliver on our R&D investments, and introduce new products to drive continued growth and outperformance in the years to come.”
First Quarter 2018 Summary
Revenues for the first quarter of 2018 were $82.3 million, up 5.3% from $78.2 million in the fourth quarter of 2017, and up 38.8% from $59.3 million in the first quarter of 2017. On a GAAP basis, gross margin was 57.7%, compared to 56.2% in the prior quarter and 48.0% in the year-ago period. Operating income was $20.6 million, compared to $19.2 million in the prior quarter and $5.5 million in the year-ago period. Net income was $16.4 million or $0.67 per diluted share, compared to $10.8 million or $0.42 per diluted share in the prior quarter and $5.4 million or $0.21 per diluted share in the first quarter of 2017.
On a non-GAAP basis, which excludes amortization of acquired intangible assets and severance included in cost of revenues, gross margin was 57.8%, compared to 56.4% in the prior quarter and 48.3% in the year-ago period. Non-GAAP operating income also excludes severance included in operating expenses, and executive search and transition costs, and was $21.0 million, compared to $19.8 million in the prior quarter and $5.8 million in the first quarter of 2017. Non-GAAP net income also adjusts for certain discrete tax items and the tax effect of non-GAAP adjustments and was $16.5 million or $0.67 per diluted share, compared to $13.6 million or $0.53 per diluted share in the prior quarter and $4.8 million or $0.19 per diluted share in the first quarter of 2017.
Business Outlook
Management expects second quarter 2018 revenues in the range of $82 to $90 million. Gross margin is expected to be approximately 56%, plus or minus 1%, on both a GAAP and non-GAAP basis. Management expects second-quarter operating expenses to range between $27.0 million and $28.0 million on both a GAAP and non-GAAP basis, and earnings in the range of $0.57 to $0.74 per diluted share on both a GAAP and non-GAAP basis. The earnings per share guidance reflects an improved tax rate of 22% to 23%, compared to the 25% estimate previously in guidance.
Conference Call Details
A conference call to discuss first quarter 2018 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 4785405. 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, severance costs, executive transition and search costs, and certain discrete tax items, 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 found in Dr. Lesaicherre’s quote, under the caption “Business Outlook,” and elsewhere regarding expected future financial performance, 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; slowing adoption rate of Nanometrics’ new product; 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 30, 2017, as filed with the Securities and Exchange Commission on February 26, 2018 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 31, 2018 | December 30, 2017 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 65,912 | $ | 34,899 | ||||
| Marketable securities | 57,975 | 82,130 | ||||||
| Accounts receivable, net | 59,034 | 62,457 | ||||||
| Inventories | 53,110 | 52,860 | ||||||
| Inventories-delivered systems | 1,493 | 1,534 | ||||||
| Prepaid expenses and other | 6,905 | 6,234 | ||||||
| Total current assets | 244,429 | 240,114 | ||||||
| Property, plant and equipment, net | 43,795 | 44,810 | ||||||
| Goodwill | 10,611 | 10,232 | ||||||
| Intangible assets, net | 3,171 | 2,206 | ||||||
| Deferred income tax assets | 9,671 | 11,924 | ||||||
| Other assets | 345 | 413 | ||||||
| Total assets | $ | 312,022 | $ | 309,699 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 18,492 | $ | 13,857 | ||||
| Accrued payroll and related expenses | 9,669 | 12,901 | ||||||
| Deferred revenue | 9,029 | 7,408 | ||||||
| Other current liabilities | 7,120 | 7,249 | ||||||
| Income taxes payable | 3,565 | 2,680 | ||||||
| Total current liabilities | 47,875 | 44,095 | ||||||
| Deferred revenue | 1,290 | 1,661 | ||||||
| Income taxes payable | 1,409 | 860 | ||||||
| Deferred tax liabilities | 186 | 179 | ||||||
| Other long-term liabilities | 535 | 521 | ||||||
| Total liabilities | 51,295 | 47,316 | ||||||
| Stockholders’ equity: | ||||||||
| Common stock | 24 | 26 | ||||||
| Additional paid-in capital | 234,793 | 255,368 | ||||||
| Retained earnings | 26,136 | 9,113 | ||||||
| Accumulated other comprehensive income (loss) | (226 | ) | (2,124 | ) | ||||
| Total stockholders’ equity | 260,727 | 262,383 | ||||||
| Total liabilities and stockholders’ equity | $ | 312,022 | $ | 309,699 | ||||
| NANOMETRICS INCORPORATED | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
| (In thousands except per share amounts) | ||||||||
| (Unaudited) | ||||||||
| Three Months Ended | ||||||||
| March 31, 2018 | April 1, 2017 | |||||||
| Net revenues: | ||||||||
| Products | $ | 71,019 | $ | 48,175 | ||||
| Service | 11,294 | 11,139 | ||||||
| Total net revenues | 82,313 | 59,314 | ||||||
| Costs of net revenues: | ||||||||
| Cost of products | 28,593 | 25,478 | ||||||
| Cost of service | 6,154 | 5,337 | ||||||
| Amortization of intangible assets | 35 | 52 | ||||||
| Total costs of net revenues | 34,782 | 30,867 | ||||||
| Gross profit | 47,531 | 28,447 | ||||||
| Operating expenses: | ||||||||
| Research and development | 10,202 | 8,694 | ||||||
| Selling | 9,024 | 7,938 | ||||||
| General and administrative | 7,741 | 6,307 | ||||||
| Amortization of intangible assets | - | - | ||||||
| Total operating expenses | 26,967 | 22,939 | ||||||
| Income from operations | 20,564 | 5,508 | ||||||
| Other income (expense): | ||||||||
| Interest income | 3 | 1 | ||||||
| Interest expense | (96 | ) | (40 | ) | ||||
| Other income, net | 352 | (3 | ) | |||||
| Total other income (expense), net | 259 | (42 | ) | |||||
| Income before income taxes | 20,823 | 5,466 | ||||||
| Provision for income taxes | 4,442 | 114 | ||||||
| Net income | $ | 16,381 | $ | 5,352 | ||||
| Net income per share: | ||||||||
| Basic | $ | 0.68 | $ | 0.21 | ||||
| Diluted | $ | 0.67 | $ | 0.21 | ||||
| Shares used in per share calculation: | ||||||||
| Basic | 24,063 | 25,133 | ||||||
| Diluted | 24,483 | 25,833 | ||||||
| NANOMETRICS INCORPORATED | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (In thousands) | ||||||||
| (Unaudited) | ||||||||
| Three Months Ended | ||||||||
| March 31, 2018 | April 1, 2017 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 16,381 | $ | 5,352 | ||||
| Reconciliation of net income to net cash from operating activities: | ||||||||
| Depreciation and amortization | 1,724 | 1,854 | ||||||
| Stock-based compensation | 2,338 | 2,164 | ||||||
| Loss on disposal of fixed assets | 45 | 63 | ||||||
| Inventory write down | 95 | 406 | ||||||
| Deferred income taxes | 2,062 | (479 | ) | |||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | 8,035 | (6,874 | ) | |||||
| Inventories | 315 | (2,695 | ) | |||||
| Inventories-delivered systems | 41 | (823 | ) | |||||
| Prepaid expenses and other | (454 | ) | (88 | ) | ||||
| Accounts payable, accrued and other liabilities | (1,474 | ) | 970 | |||||
| Deferred revenue | 2,172 | 3,039 | ||||||
| Income taxes payable | 1,434 | 186 | ||||||
| Net cash provided by operating activities | 32,714 | 3,075 | ||||||
| Cash flows from investing activities: | ||||||||
| Payment for acquisition of certain assets | (1,000 | ) | - | |||||
| Sales of marketable securities | 17,435 | 10,181 | ||||||
| Maturities of marketable securities | 6,500 | 24,531 | ||||||
| Purchases of marketable securities | - | (36,514 | ) | |||||
| Purchase of property, plant and equipment | (1,319 | ) | (47 | ) | ||||
| Net cash provided by (used in) investing activities | 21,616 | (1,849 | ) | |||||
| Cash flows from financing activities: | ||||||||
| Proceeds from sale of shares under employee stock option and purchase plans | 545 | 1,217 | ||||||
| Taxes paid on net issuance of stock awards | (476 | ) | (1,755 | ) | ||||
| Repurchases of common stock under share repurchase plans | (22,987 | ) | - | |||||
| Net cash (used in) financing activities | (22,918 | ) | (538 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (399 | ) | (333 | ) | ||||
| Net increase in cash and cash equivalents | 31,013 | 355 | ||||||
| Cash and cash equivalents, beginning of period | 34,899 | 47,062 | ||||||
| Cash and cash equivalents, end of period | $ | 65,912 | $ | 47,417 | ||||
| NANOMETRICS INCORPORATED | |||||||||||||||||||||
| RECONCILIATION OF GAAP TO NON-GAAP RESULTS | |||||||||||||||||||||
| (In thousands, except per share amounts) | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||
| March 31, 2018 | December 30, 2017 | April 1, 2017 | |||||||||||||||||||
| Reconciliation of GAAP gross profit and gross margin to non-GAAP gross profit and gross margin | |||||||||||||||||||||
| GAAP gross profit and gross margin, respectively | $ | 47,531 | 57.7 | % | $ | 43,973 | 56.2 | % | $ | 28,447 | 48.0 | % | |||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||
| Severance included in cost of revenues | - | 0.0 | % | 77 | 0.1 | % | 136 | 0.2 | % | ||||||||||||
| Amortization of intangible assets | 35 | 0.0 | % | 50 | 0.1 | % | 52 | 0.1 | % | ||||||||||||
| Non-GAAP gross profit and gross margin, respectively | $ | 47,566 | 57.8 | % | $ | 44,100 | 56.4 | % | $ | 28,635 | 48.3 | % | |||||||||
| Reconciliation of GAAP operating income to non-GAAP operating income | |||||||||||||||||||||
| GAAP operating income and operating margin, respectively | $ | 20,564 | 25.0 | % | $ | 19,162 | 24.5 | % | $ | 5,508 | 9.3 | % | |||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||
| Amortization of intangible assets included in cost of revenues | 35 | 0.0 | % | 50 | 0.1 | % | 52 | 0.1 | % | ||||||||||||
| Severance included in cost of revenues | - | 0.0 | % | 77 | 0.1 | % | 136 | 0.2 | % | ||||||||||||
| Severance included in operating expenses | - | 0.0 | % | 509 | 0.6 | % | 148 | 0.2 | % | ||||||||||||
| Executive transition costs | 376 | 0.5 | % | - | 0.0 | % | - | 0.0 | % | ||||||||||||
| Executive search costs | 46 | 0.1 | % | - | 0.0 | % | - | 0.0 | % | ||||||||||||
| Total non-GAAP adjustments to operating income | 457 | 0.6 | % | 636 | 0.8 | % | 336 | 0.6 | % | ||||||||||||
| Non-GAAP operating income and operating margin, respectively | $ | 21,021 | 25.6 | % | $ | 19,798 | 25.3 | % | $ | 5,844 | 9.9 | % | |||||||||
| Reconciliation of GAAP net income to non-GAAP net income | |||||||||||||||||||||
| GAAP net income | $ | 16,381 | $ | 10,798 | $ | 5,352 | |||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||
| Total non-GAAP adjustments to non-GAAP operating income | 457 | 636 | 336 | ||||||||||||||||||
| Discrete tax items and tax effect of non-GAAP adjustments | (344 | ) | (432 | ) | (901 | ) | |||||||||||||||
| Tax Reform | - | 2,569 | - | ||||||||||||||||||
| Non-GAAP net income | $ | 16,494 | $ | 13,571 | $ | 4,787 | |||||||||||||||
| GAAP net income per diluted share | $ | 0.67 | $ | 0.42 | $ | 0.21 | |||||||||||||||
| Non-GAAP net income per diluted share | $ | 0.67 | $ | 0.53 | $ | 0.19 | |||||||||||||||
| Shares used in diluted net income per share calculation | 24,483 | 25,819 | 25,833 | ||||||||||||||||||
| Reconciliation of net cash provided by operating activities to free cash flow | |||||||||||||||||||||
| GAAP net cash provided by operating activities | $ | 32,714 | $ | 5,219 | $ | 3,075 | |||||||||||||||
| Purchase of property and equipment | (1,319 | ) | (2,862 | ) | (47 | ) | |||||||||||||||
| Free cash flow | $ | 31,395 | $ | 2,357 | $ | 3,028 | |||||||||||||||