Zygo Corporation (ZIGO)

F3Q10 (Qtr End 03/31/10) Earnings Call Transcript

May 4, 2010 5:00 pm ET

Executives

Walter Shephard – VP, Finance, CFO and Treasurer

Chris Koliopoulos – Chairman, President & CEO

Analysts

Kelly Anderson – Sidoti & Company

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Zygo third quarter results conference call. During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question and answer session. (Operator Instructions) As a reminder this conference is being recorded Tuesday, May 4th, 2010. I would now like to turn the conference over to Walter Shephard, Chief Financial Officer. Please go ahead, sir.

Walter Shephard

Thank you, Sara. Good afternoon, everyone. I want to thank you for joining us for our third quarter fiscal 2009 conference call. Before I turn the conference call over to Dr. Chris Koliopoulos, Zygo's President and CEO, I would like to remind you that today's call will contain forward-looking statements. Including statements about our financial position, business strategy, plans, anticipated growth rates, market acceptance, objectives of management for future operations and other statements that are not historical facts.

Forward-looking statements can be identified by the use of words such as anticipate, believe, estimate, expect, intend, plans, strategy, project, and other words of similar meanings, in connection with the discussion of future operating or financial performance.

These forward statements represent our predictions and expectations to future events which we believe are reasonable are based on reasonable assumptions. However numerous risks and uncertainties could cause actual results to differ materially from those from those expressed or implied in forward-looking statements.

Information about some of these risks and uncertainties can be found in our earnings release and then our report on file with the Securities and Exchange Commission including our Form 10-K as amended for the fiscal year ended June 30, 2009.

We assume no obligation to revise or update any forward-looking statements. Now I would like to turn the call over to Chris.

Chris Koliopoulos

Thank you, Walter. It's been a hectic quarter at Zygo to say the least. With the organization adjusting to a new CEO Zygo has completed the acquisition of Zemetrics, an optical metrology systems manufacturer based in Tucson, Arizona.

Further synergies created with these merger we are moving on opportunities and surface metrology to expand our product lines to address markets in data storage subsidiaries [ph] and high brightness LED wafers.

I am also pleased that our strong working relationship has developed between the groups and the level of interaction is high on a daily basis.

Much of my time during the quarter has been spent to position Zygo for success going forward. We have been holding sessions to strengthen our core product lines, addressing market needs and increasing our market share with our metrology business.

I am excited about our new product developments as we worked to introduce a range of products to expand our offerings in advanced three dimensional surface metrology and interferometric testing of optical components and optical systems.

Zygo has the standard around the world in optical metrology and we intend to continue to support our customers by providing them with confidence in the measurements they depend on.

Not only do our customers rely on the capability provided by Zygo metrology tools, but we do as well. Our optical components and Electro-Optics Group utilized this state of the art technology to fabricate and assemble optics and optical sub-systems to high degrees of precision. This is an enabling aspect of Zygo's optics business one that leverages our understanding of precision metrology along with our proprietary technologies to provide value to the customer when they purchase these high-precision unique products and services from Zygo.

So with the given core metrology in Optics business of Zygo, we have been working hard to develop an operating business model that is sustainable going forward. We believe that there is a number of factors that assist Zygo in this model.

Zygo will celebrate its fortieth anniversary next month, celebrating these many years of an established customer base with over 10,000 systems delivered and the strong market position in its core business.

Zygo also celebrates its strong patent portfolio with over 300 patents issued. And of course we celebrate all the people at Zygo that have worked to create a power house in optics and optical metrology.

We are pleased with our debt free balance sheet and a growing cash position, which gives us the confidence to drive our opportunities forward. With the cost reductions implemented over the past year, along with improving revenue sources, Zygo's growth margins are increasing to levels not seen for many years, helping to establish an operating model that would drive profitability.

As we continue to drive our operating model going forward, we see improvements in our revenue and profitability for the next quarter assuming global economic conditions are maintained.

Now I will turn the call over to Walter to fill you in with the details of the quarter, Walter?

Walter Shephard

Thank you, Chris. Bookings for the quarter were $27.3 million, which is an increase of 75% from Q3 of fiscal 2009. Although the bookings in the third quarter were down slightly from the second quarter we continue to see very good activities throughout our various business units.

Our Metrology Solutions division accounted for the majority of the bookings recorded at $16.1 million. The Instrument Group accounted for the greatest share of the bookings which is just under $10 million in the quarter, while our PPS group had its best bookings quarter of the year as its two primary customers in lithography market segment finally ordered in quantity.

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