Nanometrics Reports Fourth Quarter and Full Year 2009 Financial Results

Nanometrics Incorporated , a leading supplier of advanced process control metrology systems used primarily in the manufacturing and packaging of semiconductors, solar photovoltaics and high-brightness LEDs, today announced financial results for its fiscal fourth quarter and full year ended January 2, 2010.

Highlights for the fourth quarter include:

* Product revenues increased 23% over the third quarter of 2009

* Total revenues of $26.3 million, up 2% quarter-on-quarter and 29% year-on-year

* Product gross margin improved to a four-year high of 53.3%

* Non-GAAP operating income of $2.8 million

* Completion of an equity offering, with net proceeds to the Company of $23.3 million

* Further customer adoption of Nanometrics’ optical critical dimension (OCD), thin film and overlay metrology solutions

Commenting on the fourth quarter results, president and chief executive officer Dr. Timothy J. Stultz said, “We are pleased to report continued revenue growth and operating profitability in the fourth quarter of 2009. For the third quarter in a row we achieved double-digit growth in product revenues and continued improvement of product gross margin. We believe this speaks directly to the competitiveness of our product offerings and the efficiency of our operations.

“Our business is benefiting from technology wins of our differentiated Atlas®, CaliperTM, LynxTM and NanoCDTM Suite metrology solutions, with leading semiconductor manufacturers over the last few quarters, which in turn have led to increases in multi-system orders for our OCD and thin film systems on a worldwide basis. We have also seen further growth in sales of our HB-LED metrology systems.

“During the quarter, we completed a $33.8 million equity offering, of which 2.3 million shares were issued by the Company and 0.7 million shares were sold by our retired company founder, Vincent Coates. This offering resulted in $23.3 million in net proceeds to the Company, bolstering our balance sheet and providing working capital to fund the future growth we expect in the coming years.

“In the near term, we expect the favorable environment for semiconductor capital spending to continue, and we anticipate that our results for the first quarter of 2010 will show significant revenue growth. Longer term, improvements in the industry combined with market share gains and expanded served markets such as Wafer Scale Packaging should help drive continued revenue growth, positive cash flow and increasing profitability for Nanometrics in the quarters to come.” 

Fourth Quarter 2009 Summary 

Revenues were $26.3 million, up 2% from $25.8 million in the third quarter of 2009 and up 29% from $20.5 million in the fourth quarter of 2008. Product revenues of $20.0 million increased 23% from $16.3 million in the prior quarter and were up 56% from the year-ago period, while service revenues declined 34% and 17%, respectively, as a result of decreased revenues from upgrades for the quarter. Gross margin of 50.7% decreased compared to 54.0% in the prior quarter as a result of a lower contribution of upgrades to service revenue, and increased compared to 42.1% in the year-ago period as a result of higher product sales and improved factory absorption, which contributed to a four-year high product gross margin of 53.3%.

Operating expenses were $12.7 million, up 2% compared to $12.4 million in the third quarter of 2009 and up 5% from $12.1 million in the year-ago period. The sequential increase primarily reflects a reduction in the number of unpaid employee days off, while the year-over-year increase reflects added expenses relating to the acquisition of the Unifire business completed in June 2009, partially offset by ongoing expense reductions throughout the year. 

Net loss was $0.3 million, or $0.01 per diluted share, compared to net income of $1.6 million, or $0.08 per share, in the third quarter of 2009 and a net loss of $2.6 million, or $0.14 per share, in the fourth quarter of 2008. Non-GAAP operating income was $2.8 million, compared to non-GAAP operating income of $4.0 million in the prior quarter and non-GAAP operating loss of $1.2 million in the year-ago period. 

Fiscal Year 2009 Summary

Revenues were $76.7 million, down 25% from $102.1 million in fiscal 2008. Despite the decline in revenues, gross margin increased by 330 basis points, from 43.8% to 47.1%, reflecting product competitiveness and improvements to our cost structure. Excluding restructuring and asset impairment charges, operating expenses of $46.4 million decreased 20% from $58.1 million in fiscal 2008 as a result of company-wide cost reductions. Net loss was $16.3 million, or $0.87 per share, compared to net loss of $82.7 million, or $4.46 per share, for fiscal 2008. Non-GAAP operating loss was $2.2 million, compared to non-GAAP operating loss of $1.1 million in fiscal 2008. 

Conference Call Details 

A conference call to discuss the fourth quarter and full year 2009 results will be held today at 5:00 p.m. EST (2:00 p.m. PST). To participate in the conference call, the dial-in numbers are (866) 543-6405 for domestic callers and (617) 213-8897 for international callers. The passcode is 28711511. A live and recorded webcast 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 operating income, which exclude certain charges and special items, are not in accordance with U.S. Generally Accepted Accounting Principles (GAAP). Management uses non-GAAP operating income, which excludes non-cash expenses including stock-based compensation, depreciation and amortization, asset impairments, restructuring and other special items, to evaluate the company’s ongoing cash-based operating results. The company believes the presentation of non-GAAP operating income 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 operating income is included at the end of this press release.