Filing summary
Filing identity: The supplied filing is Nanometrics Incorporated’s unaudited Form 10-Q for the 13-week quarter ended March 30, 2013, not an Onto Innovation filing for 2011 Q1. The company and period in the request metadata do not match the filing.
Business context and reporting period
Nanometrics designs, manufactures, sells, and supports metrology and inspection systems used primarily in semiconductor manufacturing, as well as in solar PV, HB-LED, silicon wafer, and data storage markets. Results below compare the quarter ended March 30, 2013, with the quarter ended March 31, 2012. Amounts are in U.S. dollars.
Financial performance and liquidity
| Metric | Q1 2013 | Q1 2012 |
|---|---|---|
| Revenue | $24.6 million | $55.5 million |
| Gross profit and margin | $10.5 million; 42.7% | $25.1 million; 45.2% |
| Operating income (loss) | $(9.6) million | $4.1 million |
| Net income (loss) | $(5.6) million | $1.7 million |
| Diluted EPS | $(0.24) | $0.07 |
| Cash used in operating activities | $8.5 million | $2.9 million |
| Cash, cash equivalents, and marketable securities at period end | $95.3 million | Not stated for the comparable quarter-end |
Product revenue was $13.1 million and service revenue was $11.5 million. Product gross margin fell to 34.1% from 46.8%; service gross margin increased to 52.5% from 34.9%. The filing reports working capital of $149.7 million at March 30, 2013, versus $158.6 million at December 29, 2012. Total liabilities were $42.3 million, including $5.1 million of debt obligations; the company had no balance drawn on its revolving credit facility and reported $13.4 million of borrowing availability. Cash and cash equivalents declined to $47.3 million from $62.9 million at December 29, 2012.
Material changes versus the prior comparable period
- Revenue decreased 55.8%, driven primarily by lower automated and integrated system sales. Management attributed the decline mainly to reduced demand and capital spending by its three largest customers amid technology refresh cycles and limited memory-capacity expansion.
- Product revenue declined 72.7%, while service revenue rose 50.3%, principally due to a customer’s upgrades of many installed tools. Management noted that upgrade revenue fluctuates with product availability and customer production cycles.
- The company moved from operating and net profit to losses. Lower revenue and product-margin pressure were only partly offset by lower operating expenses and higher-margin service revenue.
- Operating cash use increased to $8.5 million. Inventory increased $5.6 million during the quarter; cash was also used for $5.0 million of share repurchases.
- Revenue was concentrated: Intel represented 29.3% of Q1 2013 revenue, compared with 29.9% in Q1 2012. Samsung represented 40.5% in Q1 2012 and less than 10% in Q1 2013.
Outlook, risks, contingencies, and unusual items
- Management provided no specific revenue or earnings guidance. It stated that cash, investments, and available borrowing were expected to meet needs for at least the next 12 months, subject to operating performance, cash flows, economic conditions, and other factors.
- Management cited semiconductor-equipment cyclicality, customer and industry spending, product mix, new-product adoption, order and shipment timing, customer acceptance, and the ability to secure volume supply agreements as factors that could materially affect results.
- The quarter included a $0.5 million tax benefit related to retroactive reinstatement of the 2012 federal R&D tax credit. A $4.2 million income-tax benefit was recorded overall; the company continued to maintain a valuation allowance against certain deferred tax assets due to realization uncertainties.
- The fair value of contingent consideration related to the Zygo asset acquisition increased by $0.4 million, with $2.7 million payable at quarter end. The filing describes routine intellectual-property indemnities but records no liability for them; it reports no legal proceedings.
- The mortgage balance was $5.1 million and its interest rate was due to reset in August 2013. The revolving credit facility matures April 30, 2014 and has financial covenants; the company reported compliance at quarter end.
- The board’s $20.0 million repurchase authorization had $11.5 million remaining at March 30, 2013. The company repurchased 332,771 shares for $5.0 million during the quarter.
Most important facts for investors to verify
- Confirm the intended issuer and reporting period: the supplied filing is Nanometrics’ Q1 2013 10-Q, not Onto Innovation’s 2011 Q1 filing.
- Track whether system demand recovers after the customer technology-refresh cycle and how customer concentration affects future revenue.
- Assess whether service and upgrade revenue can sustain its elevated level and offset weak product sales and lower product margins.
- Monitor inventory growth, operating cash use, liquidity, and the effect of continued share repurchases.
- Review the mortgage rate reset, credit-facility covenants and availability, deferred-tax-asset valuation allowance, and contingent consideration estimates.