ONTO INNOVATION INC. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - July 23, 2015

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8-K - 8-K - ONTO INNOVATION INC.a8kq215earningsrelease.htm
Nanometrics Incorporated    Tel: 408.545.6000
1550 Buckeye Drive    Fax: 408.232.5910
Milpitas, CA 95035    www.nanometrics.com

Investor Relations Contact:                            Company Contact:
Claire McAdams                                    Jeffrey Andreson, CFO
Headgate Partners LLC                                Nanometrics Incorporated
530.265.9899                                    408.545.6143
claire@headgatepartners.com                            jandreson@nanometrics.com
            
Nanometrics Reports Second Quarter 2015 Financial Results

MILPITAS, Calif., July 23, 2015 - Nanometrics Incorporated (NASDAQ: NANO), a leading provider of advanced process control systems, today announced financial results for its second quarter ended June 27, 2015.

Q2 2015 Highlights Include:
•
Recent Competitive Wins Generated Record-High 3D-NAND Sales. Significant new customer account wins in the memory sector drove all-time record high 3D-NAND revenues - reflecting market share gains in both Automated and Integrated metrology.
•
Share Gains Resulted in Significant Sales Growth in Integrated Metrology. Integrated metrology sales increased more than 30% quarter-on-quarter, reflecting market share gains with multiple key customers in the memory market.
•
Continued Strong Foundry Business. Continued strong revenue contribution from pure-play foundry, reflecting multiple tool-of-record positions for our optical critical dimension (OCD) solutions for FinFET devices.
•
Improved Profitability. Both gross margin and operating margin improved sequentially despite slightly lower sales volume.
  
GAAP Results
 
 
 
 
 
 
 
 
 
 
Q2 2015
 
Q1 2015
 
Q2 2014
 
 
 
 
 
 
 
Q2 2014
 
Revenues
 
$
48,629

 
$
50,376

 
$
48,029

 
 
 
 
 
 
 
 
 
Gross Profit
 
$
23,264

 
$
23,379

 
$
22,908

 
 
 
 
 
 
 
 
 
Income (Loss) from Operations
 
$
2,509

 
$
2,241

 
$
746

 
 
 
 
 
 
 
 
 
Net Income (Loss)
 
$
1,344

 
$
2,556

 
$
588

 
 
 
 
 
 
 
 
 
Earnings (Loss) per Diluted Share
 
$
0.06

 
$
0.11

 
$
0.02

 
 
Non-GAAP Results
 
 
 
 
 
 
 
 
 
 
Q2 2015
 
Q1 2015
 
Q2 2014
 
 
 
 
 
 
 
 
 
Gross Profit
 
$
23,721

 
$
24,011

 
$
23,585

 
 
 
 
 
 
 
 
 
Income (Loss) from Operations
 
$
2,991

 
$
2,969

 
$
1,530

 
 
 
 
 
 
 
 
 
Net Income (Loss)
 
$
1,826

 
$
3,284

 
$
1,091

 
 
 
 
 
 
 
 
 
Earnings (Loss) per Diluted Share
 
$
0.08

 
$
0.14

 
$
0.05

 
 
Non-GAAP results exclude the impact of the following in the indicated period:
 
Amortization of acquired intangibles
 
●
 
●
 
●
 
Restructuring charges
 
 
 
●
 
 
 
        
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.

Commenting on the company’s results, president and chief executive officer Dr. Timothy J. Stultz said, "Second-quarter results came in at the high end of our guidance range, due primarily to record sales for 3D-NAND and continued strength in spending by our recently-penetrated foundry customers. I’m also pleased to report improved gross margin and operating margin compared to the first quarter. We continue to operate within a healthy business environment for wafer fab equipment, and our solutions continue to be in high demand for process control of advanced 3D device architectures. As our market share gains continue to bear fruit through the end of 2015 and into 2016, we expect continued outperformance versus the industry, as well as improving profitability coming from the leverage in our business model and the impact of our increased focus on operating performance.”
 
Second Quarter 2015 Summary
Revenues for the second quarter of 2015 were $48.6 million, down 3% from $50.4 million in the first quarter of 2015 due to lower upgrade sales, and up 1% from $48.0 million in the second quarter of 2014. On a GAAP basis, gross margin was 47.8%, compared to 46.4% in the prior quarter and 47.7% in the year-ago period. Operating income was $2.5 million, compared to $2.2 million in the

1/6

Nanometrics Incorporated    Tel: 408.545.6000
1550 Buckeye Drive    Fax: 408.232.5910
Milpitas, CA 95035    www.nanometrics.com

prior quarter and $0.7 million in the year-ago period. Net income was $1.3 million or $0.06 per diluted share, compared to $2.6 million or $0.11 per diluted share in the prior quarter, and $0.6 million or $0.02 per diluted share in the second quarter of 2014.

On a non-GAAP basis, which excludes amortization of acquired intangible assets, gross margin was 48.8% compared to 47.7% in the prior quarter and 49.1% in the year-ago period. Non-GAAP operating income for the second and first quarters of 2015 was $3.0 million, compared to an operating income of $1.5 million in the second quarter of 2014. Non-GAAP net income, which adjusts for amortization of intangible assets, restructuring charges, and the income tax effect of non-GAAP adjustments, was $1.8 million or $0.08 per diluted share, compared to $3.3 million or $0.14 per diluted share in the prior quarter and $1.1 million or $0.05 per diluted share in the second quarter of 2014.
Business Outlook
Management expects third-quarter 2015 revenues in the range of $43 to $47 million, with GAAP gross margin in the range of 46.5% to 48.0% and non-GAAP gross margin in the range of 47.5% to 49.0%. Management expects third-quarter operating expenses to range between $20.5 million and $21.1 million on a GAAP basis, and between $20.4 million and $21.0 million on a non-GAAP basis. Management expects third-quarter earnings in the range of $(0.02) to $0.04 per share on a GAAP basis, and breakeven to $0.06 per diluted share on a non-GAAP basis.
Conference Call Details
A conference call to discuss second quarter 2015 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, restructuring charges, 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. 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, 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
Certain statements in this press release, including statements under the caption “Business Outlook,” and in Dr. Stultz’s quote regarding the company’s expectations regarding the high demand for its products, the expectation to outperform the industry, the leverage in its business model and the impact of its focus on operating performance resulting in profitability, 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 outside of Nanometrics’ control, including levels of industry spending, demand for our 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 27, 2014, as filed with the Securities and Exchange Commission on February 25, 2015, 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.

2/6

Nanometrics Incorporated    Tel: 408.545.6000
1550 Buckeye Drive    Fax: 408.232.5910
Milpitas, CA 95035    www.nanometrics.com

NANOMETRICS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited) 

 
June 27,
2015
 
December 27,
2014
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
26,421

 
$
34,676

Marketable securities
48,368

 
49,286

Accounts receivable, net
44,441

 
26,121

Inventories
41,539

 
35,105

Inventories-delivered systems
1,574

 
1,912

Prepaid expenses and other
6,842

 
9,289

Deferred income tax assets
1,427

 
1,457

Total current assets
170,612

 
157,846

 
 
 
 
Property, plant and equipment, net
47,541

 
49,633

Goodwill
9,590

 
10,494

Intangible assets, net
2,886

 
4,294

Deferred income tax assets
387

 
410

Other assets
541

 
559

Total assets
$
231,557

 
$
223,236

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
13,358

 
$
10,199

Accrued payroll and related expenses
9,457

 
8,700

Deferred revenue
10,555

 
10,021

Other current liabilities
8,221

 
8,265

Income taxes payable
1,039

 
1,017

Total current liabilities
42,630

 
38,202

 
 
 
 
Deferred revenue
1,479

 
2,591

Income taxes payable
751

 
701

Deferred tax liabilities
1,007

 
926

Other long-term liabilities
1,226

 
1,279

Total liabilities
47,093

 
43,699

 
 
 
 
Stockholders’ equity:
 
 
 
Common stock
24

 
24

Additional paid-in capital
254,143

 
251,396

Accumulated deficit
(65,214
)
 
(69,114
)
Accumulated other comprehensive income (loss)
(4,489
)
 
(2,769
)
Total stockholders’ equity
184,464

 
179,537

Total liabilities and stockholders’ equity
$
231,557

 
$
223,236



3/6

Nanometrics Incorporated    Tel: 408.545.6000
1550 Buckeye Drive    Fax: 408.232.5910
Milpitas, CA 95035    www.nanometrics.com

NANOMETRICS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited) 

 
Three Months Ended
 
Six Months Ended
 
June 27,
2015
 
June 28,
2014
 
June 27,
2015
 
June 28,
2014
Net revenues:
 
 
 
 
 
 
 
Products
$
38,937

 
$
39,224

 
$
77,275

 
$
82,504

Service
9,692

 
8,805

 
21,730

 
17,101

Total net revenues
48,629

 
48,029

 
99,005

 
99,605

 
 
 
 
 
 
 
 
Costs of net revenues:
 
 
 
 
 
 
 
Cost of products
19,872

 
19,789

 
39,863

 
41,428

Cost of service
5,036

 
4,655

 
11,410

 
9,769

Amortization of intangible assets
457

 
677

 
1,089

 
1,351

Total costs of net revenues
25,365

 
25,121

 
52,362

 
52,548

Gross profit
23,264

 
22,908

 
46,643

 
47,057

 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
Research and development
8,157

 
9,373

 
16,316

 
17,687

Selling
7,029

 
6,681

 
14,145

 
14,054

General and administrative
5,544

 
6,001

 
11,310

 
12,339

Amortization of intangible assets
25

 
107

 
64

 
215

Restructuring
—

 
—

 
58

 
—

Total operating expenses
20,755

 
22,162

 
41,893

 
44,295

Income from operations
2,509

 
746

 
4,750

 
2,762

 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
Interest income
46

 
10

 
56

 
24

Interest expense
(83
)
 
(96
)
 
(165
)
 
(196
)
Other income, net
(311
)
 
(84
)
 
393

 
168

Total other income, net
(348
)
 
(170
)
 
284

 
(4
)
 
 
 
 
 
 
 
 
Income before income taxes
2,161

 
576

 
5,034

 
2,758

Provision for income taxes
817

 
(12
)
 
1,134

 
575

Net income
$
1,344

 
$
588

 
$
3,900

 
$
2,183

 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
Basic
$
0.06

 
$
0.02

 
$
0.16

 
$
0.09

Diluted
$
0.06

 
$
0.02

 
$
0.16

 
$
0.09

Shares used in per share calculation:
 
 
 
 
 
 
 
Basic
24,020

 
23,939

 
23,943

 
23,825

Diluted
24,285

 
24,220

 
24,260

 
24,217



4/6

Nanometrics Incorporated    Tel: 408.545.6000
1550 Buckeye Drive    Fax: 408.232.5910
Milpitas, CA 95035    www.nanometrics.com

NANOMETRICS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
Six Months Ended
 
June 27,
2015
 
June 28,
2014
Cash flows from operating activities:
 
 
 
Net income
$
3,900

 
$
2,183

Reconciliation of net income to net cash used in operating activities:
 
 
 
Depreciation and amortization
4,555

 
4,814

Stock-based compensation
2,982

 
3,410

Loss on disposal of fixed assets
501

 
28

Inventory write-down
1,298

 
1,527

Deferred income taxes
136

 
490

Changes in fair value of contingent consideration
93

 
66

Changes in assets and liabilities:
 
 
 
Accounts receivable
(19,030
)
 
(1,909
)
Inventories
(8,442
)
 
(3,830
)
Inventories-delivered systems
339

 
6,543

Prepaid expenses and other
2,735

 
1,251

Accounts payable, accrued and other liabilities
4,283

 
(2,961
)
Deferred revenue
(579
)
 
(14,978
)
Income taxes payable
72

 
(1,203
)
Net cash used in operating activities
(7,157
)
 
(4,569
)
 
 
 
 
Cash flows from investing activities:
 
 
 
  Sales of marketable securities
2,383

 
—

  Maturities of marketable securities
15,836

 
17,620

  Purchases of marketable securities
(17,561
)
 
(19,479
)
  Purchases of property, plant and equipment
(1,043
)
 
(3,813
)
Net cash used in investing activities
(385
)
 
(5,672
)
 
 
 
 
Cash flows from financing activities:
 
 
 
         Payments to Zygo Corporation related to acquisition
(417
)
 
(261
)
              Proceeds from sale of shares under employee stock option and purchase plans
2,500

 
4,201

         Taxes paid on net issuance of stock awards
(1,015
)
 
(664
)
         Repurchases of common stock
(1,721
)
 
—

Net cash (used in) provided by financing activities
(653
)
 
3,276

Effect of exchange rate changes on cash and cash equivalents
(60
)
 
187

Net decrease in cash and cash equivalents
(8,255
)
 
(6,778
)
Cash and cash equivalents, beginning of period
34,676

 
44,765

Cash and cash equivalents, end of period
$
26,421

 
$
37,987



5/6

Nanometrics Incorporated    Tel: 408.545.6000
1550 Buckeye Drive    Fax: 408.232.5910
Milpitas, CA 95035    www.nanometrics.com


NANOMETRICS INCORPORATED
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(In thousands, except per share amounts)
(Unaudited)

 
 
 
Three Months Ended
 
 
 
June 27,
2015
 
March 28,
2015
 
June 28,
2014
 
 
 
Reconciliation of GAAP gross profit and gross margin to non-GAAP gross profit and gross margin
 
 
 
 
 
 
 
 
 
GAAP gross profit and gross margin, respectively
 
$
23,264

47.8
%
 
$
23,379

46.4
%
 
$
22,908

47.7
%
 
Non-GAAP adjustments:
 
 
 
 
 
 
 
 
 
 
Amortization of intangible assets
 
457

0.9
%
 
632

1.3
%
 
677

1.4
%
 
 Non-GAAP gross profit and gross margin, respectively
 
$
23,721

48.8
%
 
$
24,011

47.7
%
 
$
23,585

49.1
%
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of GAAP operating income to non-GAAP operating income
 
 
 
 
 
 
 
 
 
GAAP operating income
 
$
2,509

 
 
$
2,241

 
 
$
746

 
 
Non-GAAP adjustments:
 
 
 
 
 
 
 
 
 
 
Amortization of intangible assets included in cost of revenues
 
457

 
 
632

 
 
677

 
 
Amortization of intangible assets included in operating expenses
 
25

 
 
38

 
 
107

 
 
Restructuring included in operating expenses
 
—

 
 
58

 
 
—

 
 
Total non-GAAP adjustments to operating income
 
482

 
 
728

 
 
784

 
 
Non-GAAP operating income
 
$
2,991

 
 
$
2,969

 
 
$
1,530

 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of GAAP net income to non-GAAP net income
 
 
 
 
 
 
 
 
 
GAAP net income
 
$
1,344

 
 
$
2,556

 
 
$
588

 
 
Non-GAAP adjustments:
 
 
 
 
 
 
 
 
 
 
Total non-GAAP adjustments to non-GAAP operating income
 
482

 
 
728

 
 
784

 
 
Income tax effect of non-GAAP adjustments
 
—

 
 
—

 
 
(281
)
 
 
Non-GAAP net income
 
$
1,826

 
 
$
3,284

 
 
$
1,091

 
 
 
 
 
 
 
 
 
 
 
 
GAAP net income per diluted share
 
$
0.06

 
 
$
0.11

 
 
$
0.02

 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP net income per diluted share
 
$
0.08

 
 
$
0.14

 
 
$
0.05

 
 
 
 
 
 
 
 
 
 
 
 
Shares used in diluted net income per share calculation
 
24,285

 
 
24,257

 
 
24,220

 


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ONTO INNOVATION INC. Reports