Nanometrics, Inc. Q1 2010 Earnings Call Transcript

Nanometrics, Inc. Q1 2010 Earnings Call Transcript
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Nanometrics, Inc. (NANO)

Q1 2010 Earnings Conference Call

May 6, 2010 5:00 PM ET


Tim Stultz – President and CEO

Jim Moniz – CFO


Mahesh Sanganeria – RBC Capital Markets

Wenge Yang – Oppenheimer & Co.

Weston Twigg – Pacific Crest Securities

Gus Richard – Piper Jaffray

Jacob Strumwasser – Kem Capital

Bill Frerichs – Radnorwood Capital



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Good afternoon and welcome to Nanometrics first quarter 2010 financial results conference call. Before we get started, I would like to call your attention to the following Safe Harbor statement.

This conference call contains certain forward-looking statements, included but not limited to, statements regarding Nanometrics’ expected results for its most recently completed fiscal year, which remains subject to adjustments in connection with the preparation of Nanometrics’ financial statement and periodic report on Form 10-Q for the quarter ended April 3, 2010. The continued adoption and competitiveness of its products, the expansion of the company’s served markets and future revenue growth, profitability and cash flow. Although Nanometrics believes that the expectations reflected in the forward-looking statements are reasonable, actual results could differ materially from the expectations due to a variety of risks, including slower than anticipated market adoption, a contraction in current levels of industry spending, and the addition of risk factors and cautionary statements set forth in the company’s Form 10-K for fiscal year 2009 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 statements.

Leading the call today will be Dr. Timothy Stultz, President and CEO of Nanometrics. A Q&A Session will be held at the end of the call. Until that time, all participants will be in a listen-only mode. I would now like to turn the call over to Dr. Stultz. Please proceed sir.

Tim Stultz

Thank you. Good afternoon everyone and welcome to our first quarter 2010 results conference call. With me today is Jim Moniz our Chief Financial Officer who will be reviewing our financial results following my prepared remarks. In my remarks today, I will discuss the financial and business highlights for the quarter, our view of the current and near-term industry environment and give some perspective on our business outlook for the next few quarters.

With the benefit of having the wind at out back, we are beginning to deliver results that demonstrate the operating leverage and efficiency we have worked hard to put in place. Semiconductor industry capital spending and outlook have dramatically improved and those combined with our strengthened competitive position, expanded served markets and improving financial operational performance have helped us deliver quarterly results with significant revenue growth, strong gross margins and improved profitability.

Financial highlights for the quarter include revenues of $37.2 million, a 41% growth over the previous quarter and 270% growth year-over-year.

GAAP gross margin of 55% and GAAP earnings of $0.26 per share. Bolstered by the receipt of multiple unit orders of standardized products following key customer wins, which in turn lead to improve manufacturing efficiency, we have exceeded our gross margin performance and profitability achieved at prior similar revenue levels.

We are truly pleased to be able to report that we have managed to grow into our business model earlier than we projected and with efficiencies better than planned. On the commercial front, we are highly encouraged by growing adoption of Nanometrics Advanced Optical Metrology products by industry leading customers into an expanding number of high volume in line applications. These include optical critical dimension or OCD, wafer-scale packaging and overlay registration for lithography.

We see growth in each of these areas as our customers continue to focus on shrink, improving yield, increasing productivity and reducing manufacturing costs, all in order to meet the growing demand and competitive environment for their products. In particular, the OCD fab footprint for process control is expanding and continuing to displace CD-SEM for litho control.

Our Atlas product line combined with software intent NanoCD Suite is a driver behind this trend with the latter being highly accretive to our model of gross margins.

Wafer-scale packaging or 3D packaging is presenting new and unique metrology challenges and opportunities in areas of bumps and through silicon vias.

As we reported earlier this quarter, our UniFire platform, which specifically addresses this market, has begun to contribute nicely to our product and revenue mix with multiple system orders and shipments. And advances in lithography technology and techniques are driving the need for new overlay registration tools and solutions, where our Caliper product line continues to be very competitive. We have demonstrated that we can successfully compete in each of these areas and see this market as organic growth drivers for our traditional semiconductor business. For sometime now, we have been sharing our strategies for growth and improved financial performance.

I would like to make a couple of additional comments on those subjects. On the growth side, we have invested in our people, our products and our services strengthen our competitive position and increase our market share.

Our reported business wins and early performance turnaround are key indicators of the success of those efforts.

To complement our organic growth, we’re focused on diversification and leverages our business infrastructure and channels. We have made strategic acquisitions that strengthen our position within existing customers and expand our served markets.

Our growing business in wafer-scale packaging, high-brightness LEDs and solar photovoltaics are a direct result of those acquisitions. We feel very capable and comfortable with the acquisition and integration of new businesses. Consequently, we will continue to pursue inorganic opportunities to meet our overall growth objectives.

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