“Our results for the second quarter reflect continued strength in our key customer positions, especially in 3D-NAND, and continued improvements in financial performance,” commented Dr. Timothy J. Stultz, president and chief executive officer. “As expected, the second quarter showed solid top-line growth, while improvements in our operational efficiency led to multi-year records in both product gross margin and operating margin. Our outlook for the year is unchanged from last quarter, as we continue to expect the second half of 2016 to be stronger than the first half, driven by increased contributions from the Foundry and DRAM markets. Combined with our strengthened customer footprint and opportunity to expand our positions in integrated and thin-film metrology, we expect 2016 will be another year in which our revenue growth meaningfully outperforms overall spending on wafer fab equipment, with significant year-on-year improvements in gross margin, operating margin and EPS.”

Second Quarter 2016 Summary
Revenues for the second quarter of 2016 were $55.8 million, up 17.4% from $47.5 million in the first quarter of 2016, and up 14.7% from $48.6 million in the second quarter of 2015.  On a GAAP basis, gross margin was 51.0%, compared to 51.6% in the prior quarter and 47.8% in the year-ago period.  Operating income was $7.3 million, compared to $3.7 million in the prior quarter and $2.5 million in the year-ago period.  Net income was $6.0 million or $0.24 per diluted share, compared to $3.5 million or $0.14 per diluted share in the prior quarter, and $1.3 million or $0.06 per diluted share in the second quarter of 2015.

On a non-GAAP basis, which excludes amortization of acquired intangible assets, gross margin was 51.8%, compared to 52.5% in the prior quarter and 48.8% in the year-ago period.  Non-GAAP operating income was $7.8 million compared to $4.2 million in the prior quarter and $3.0 million in the second quarter of 2015. Non-GAAP net income, which adjusts for amortization of intangible assets, was $6.5 million or $0.26 per diluted share, compared to $3.9 million or $0.16 per diluted share in the prior quarter and $1.8 million or $0.08 per diluted share in the second quarter of 2015.

Business Outlook
Management expects third-quarter 2016 revenues in the range of $55 to $59 million, with GAAP gross margin in the range of 50.2% to 51.8% and non-GAAP gross margin, which excludes the impact of amortization of acquired intangibles, in the range of 51% to 52.5%. Management expects third-quarter operating expenses to range between $20.6 million and $21.2 million on a GAAP and non-GAAP basis. Management expects third-quarter earnings in the range of $0.21 to $0.29 per diluted share on a GAAP basis, and $0.23 to $0.30 per diluted share on a non-GAAP basis.

Conference Call Details
A conference call to discuss second quarter 2016 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. The conference ID is 42453833. 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
The non-GAAP gross profit, gross margin, operating income, operating income margin, 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 amortization of acquired intangibles assets, to evaluate the company’s ongoing performance and to enable comparison to other periods that did not include these 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, including sensors, optoelectronic devices, high-brightness LEDs, discretes and data storage components.  Nanometrics’ automated and integrated metrology systems measure critical dimensions, device structures, topography and various thin film properties, including three-dimensional features and 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 three-dimensional wafer-level 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 and other advanced device markets. 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 those in the last two sentences of Dr. Stultz’s quote and under the caption “Business Outlook” are forward-looking statements that involve a number of risks and uncertainties that could cause actual results to differ materially from those described in this release.  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, including, but not limited to: decreased levels of industry spending; Nanometrics’ inability to gain additional market share, increase sales, ship products as scheduled, or outperform the industry; decreased demand for Nanometrics’ 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 26, 2015, as filed with the Securities and Exchange Commission on February 24, 2016, 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.