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Nanometrics' CEO Discusses Q2 2012 Results - Earnings Call Transcript

I will now turn over the call over to Tim Stultz. Tim?

Dr. Timothy Stutlz – President and Chief Executive Officer

Thank you, (Claire) and good afternoon everyone. During my prepared remarks today, I will hit on a few of the second quarter performance highlights followed by an update on our long-term business drivers and close with comments on the near-term outlook and our guidance for Q3.

Overall, our second quarter revenues came in as forecasted without any major surprises. We did benefit from stronger than expected upgrade business that gave a boost to our overall gross margin, pushing that above our expectations. This in turn contributed positively to incremental earnings which also exceeded guidance.

As expected product gross margin declined sequentially driven by an increased mix of our Atlas II systems which comprised about a half of all Atlas units sold in the quarter. The good news is that the Atlas II margins are steadily improving, met our objectives for the second quarter and are on track to meet our projection to exit the calendar year with gross margins of 55% or better. This tool continues to be well-received by our customers and is ramping faster than any other product we have previously brought to market.

Another significant highlight for the quarter was that our foundry business hit an all-time high contributing 30% to our overall revenues as we benefited from ongoing investments by existing customers as well as some additional penetration into our key target accounts. On the device side, we saw a significant decrease in DRAM spending, which helped to offset lower spending in logic and flash.

From our customer perspective, we saw a welcome step-up in spending by Hynix. Historically, a stronger account for us, as they resumed their investment and tool needed to support capacities, as well as the development of next generation devices. In spite of these positive trends, however, we did see a sequential decline in revenues of 4%. Our automated systems business was negatively impacted by the well-publicized pause in spending by one of our largest customers.

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