Nanometrics Investor Presentation
May 2014
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Forward-Looking Statements
This communication contains forward-looking statements within the meaning of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, including, but not limited to statements regarding Nanometrics’ (“us” “our” or
“the Company”) future financial results, including, but not limited to our market share; industry demand and growth.
These statements are not guarantees of future performance, involve certain risks, uncertainties and assumptions that are
difficult to predict, and are based upon assumptions as to future events that may not prove accurate. Therefore, actual
outcomes and results may differ materially from what is expressed herein. In any forward-looking statement in which
Nanometrics expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith
and believed to have a reasonable basis, but there can be no assurance that the result will be achieved. The risks and
uncertainties include, but are not limited to: our ability to achieve desired product mix and pricing; our ability to achieve
desired market position; growth in target industries; levels of capital expenditures in our target industries; customer
adoption of certain technologies; market acceptance and timing of acceptance of our new products; interruptions or
changes to supply chain; our ability to identify, complete and integrate acquisitions; and other economic, business,
competitive and/or regulatory factors affecting Nanometrics’ businesses generally, including those set forth in
Nanometrics’ filings with the SEC, including its Annual Report on Form 10-K for its most recent fiscal year, its most recent
Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K. All forward-looking statements included in this
communication are based on information available to Nanometrics on the date hereof. We disclaim any intent or
obligation to update publicly any forward-looking statements, whether in response to new information, future events, or
otherwise.
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Flagship Products:
Industry-Leading
and Highly
Differentiated
NANO: Leading Solutions for In-Line Process Control
Non-Destructive, Optical Technologies Ellipsometry Scatterometry Interferometry Photoluminescence Inspection
Atlas / Lynx
Addressing Leading-Edge
Applications and Critical
Technology Inflection Points
SPARK NanoCD UniFire IMPULSE
3D Device Structures: FinFET / V-NAND /
Advanced Packaging
Complex Lithography: Multiple Patterning / EUV
Advanced Materials: High-K / Metal Gates
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2013 Key Initiatives
FinFET OCD Proliferation
V-NAND Penetration
Advanced 3D Packaging Adoption
Increase Foundry Penetration
Selections, Qualifications or Tool-of-Record
Achievements
Expanded to 3 Key Accounts
3 Atlas OCD Accounts
1 IMPULSE Account
Expanded to 7 UniFire Accounts and 2 SPARK Accounts
Expanded to 4 Atlas OCD Accounts and 3 UniFire Accounts
1 IMPULSE Account
Initiatives and Tailwinds Exiting 2013
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Increased Penetration into Pure-Play Foundry
Portion of NANO Foundry Revenues Serving Pure-Play Foundries
FY '11
Pure-Play Foundry
Other Foundry
FY '12
Pure-Play Foundry
Other Foundry Pure-Play
Foundry
Other Foundry
FY '13
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3D Technologies Driving Growth Opportunities
Node Shrinks Continue
FinFET Memory Density Increasing
V-NAND 3-D Device Integration
Advanced Packaging Foundry Penetration
3D on all
Roadmaps
For 16nm
and below
Expanded Role of Integrated Metrology
CMP
Lithography
Etch
Deposition
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V-NAND Transition Drives Increased Demand for Process Control
Samsung – August 2013
Flash Memory Summit
■ Market Drivers
– Scalable bit density
– Lower power consumption
– Higher data rates
– Lower cost/bit
■ Process Implications
– ~20% increase in process
steps over planar favoring:
• Deposition
• Etch
• Process control
– Enabling architecture steps
are OCD-controlled:
• Many layer deposition/etch
• High aspect ratio structures
– Roadmap drives additional
process steps and tool
demand:
• 24 layer – Now
• 32 layer – 2015
• 48 – 100 layers – Future
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All Leading-Edge Logic is Converting to FinFET
■ Market Drivers:
– Improved performance
demands from end users
– Highly competitive foundry
landscape for high volume wins
– Aggressive timing for
technology integration and
launch
■ Process Implications:
– FF process flow is more
complex and extensive than
planar
– 3D architecture poses complex
metrology challenges
– Increasing reliance on OCD for
critical layer process control
Samsung Analyst Day – 2013
ARM TechCon 2013
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NANO is the Leader in OCD Solutions for FinFET
ATLAS II+ – Process Control for
all Critical Steps
– Fab Deployment:
• Transistor
• Lithography
• Contact
• BEOL
10nm: Replacement Channel Future: NanoWire
16/14nm: FinFET
IMPULSE – Integrated Solutions
for Critical Lot and
Wafer-to-Wafer Control
– Fab Deployment:
• CMP
• Track
• Etch Lithograpy: (Track) Gate Etch:
(Critical Etch) Metal CMP:
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Accelerating Adoption of OCD at the Leading Edge
-
50
100
150
200
250
300
350
400
450
500
550
600
650
YE 2009 YE 2010 YE 2011 YE 2012 YE 2013 Q1 2014
NA
NO
Pro
du
cti
on
OC
D R
ecip
es
4X nm 35 %
3X nm 48 %
2X nm 95 %
1X nm 175 %
CAGR by node:
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Device
Type Node
Sampling
Steps/
Parameters
Relative
Intensity
(current node)
Segment
Opportunity/
10K wspm
NAND 1X/1Y 10/5 1.0 $4M - $6M
VNAND 1X 12/5 1.1 $5M - $7M
DRAM 3X/2X 20/5 1.2 $5M - $8M
FOUNDRY 2X/2Y 20/10 1.6 $6M - $10M
FOUNDRY 1X/1Y 25/10 2.0 $8M - $12M
LOGIC 2Y/1X 30/10 2.4 $10M - $15M
OCD: Key Enabling Technology for All Device Types
Source: Company Estimates wspm: wafer starts per month capacity
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Expanding Role of Advanced Process Control (APC)
Metrology Data
Feedback Loop
■ APC Drives Increased
Opportunity for:
– Standalone Systems
– Integrated Thin Film & OCD
– In-Situ Thin Film Systems
Adoption of In-line,
Integrated & In-Situ
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Advanced 3D Packaging – An Emerging Market
■ Market Drivers:
– Higher performance
– Lower power consumption
– Smaller form factor
Interposer / 2.5D
3D Stacked Die
Multi-Die Package
■ Metrology Opportunities:
– High value point in process
sequence requires ~ 100%
inspection – either full wafer or
field-by-field
– UniFire qualified for TSV and
micro-pillar applications
– SPARK qualified for wafer bond
uniformity applications
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TSV Formation
Backside TSV Reveal &
Passivation
Cu Pillar Formation
Wafer Thinning
µBump De-Bonding
SPARK 3D Stacking
UniFire + SPARK: The Complete Solution
– Backside processing
– De-bonding
– Edge trim, glue
dispense
– Temporary bonding
integrity
– Post-thinning
inspection
– De-bonding residuals
Wafer to Carrier
Bonding
UniFire – TSV and µBump
– Via lithography
metrology
– Via etch critical
dimension/depth
– Bump topography
– Wafer-wafer overlay
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Positive Spending Environment for 2014 and 2015
Source: Average WFE estimate from at least 10 industry analysts as of April 2014.
$34.8 $24.0 $13.2 $30.2 $33.7 $28.9 $28.4 $32.0 $33.2 $0
$5
$10
$15
$20
$25
$30
$35
$40
2007 2008 2009 2010 2011 2012 2013 2014 Est. 2015 Est.
Wafer Fab Equipment Spending (WFE) $B
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Strong Multi-Year Cycle Driven by Top Spenders
$-
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
$10.0
$11.0
$12.0
$13.0
$14.0
Samsung Intel TSMC Global Foundries SK Hynix Toshiba / SanDisk Micron Alliance
Semiconductor CapEx by Top Industry Spenders
2011 2012 2013 2014 Est. 2015 Est.
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Rapid Consolidation of Semiconductor Capital Spending
Source: Capex by company obtained from press releases, SEC filings and conference call transcripts. Total Capex for
each period is an average from at least 10 industry analysts as of April 2014.
4%
14% 19% 21% 11%
9%
18% 18%
6%
4%
12%
17%
3%
10%
5%
6%
3%
4%
7%
8% 73%
60%
38%
29%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2007 2011 2014 Est
All Others
Global Foundries
SK Hynix
TSMC
Intel
Samsung
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Process Control Spending Patterns During Investment
Cycle Drive Underperform/Outperform Periods
0%
2%
4%
6%
8%
10%
12%
Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14E
Samsung Qtrly Capex % of Total Spent NANO Revs Rec'd from Samsung as % of 4yr Total
Quarterly Revenues from Samsung and Samsung Capex (Each as a % of Total Across 4 Year Cycle) Calculated as Rolling Average of Current Quarter, Last Quarter, Forward Quarter
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Quarterly Revenues and Gross Margin Performance
$ in
Mill
ion
s
* Midpoint of Q2’14 revenue and non-GAAP gross margin guidance provided as of April 29, 2014. ** Non-GAAP gross margin excludes Amortization of Intangible Assets and, for Q3’13, certain E&O charges. A non-GAAP reconciliation is attached to this presentation and also is available at www.nanometrics.com.
Gro
ss Margin
%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
55%
$-
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
$45.0
$50.0
$55.0
Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Midpoint *
Revenues Non-GAAP GM% **
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Outperformance Period Currently Underway
Strong Growth Trajectory Entering 2014
Significant Achievements and Tailwinds Exiting 2013
Technology Changes Driving Growth Opportunities
OCD Leadership Position and Increasing Industry Adoption
Expanding Penetration into Foundry
Thank You
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Revenue Segmentation Reflects Concentration of Spending
31%
13% 30%
0%
26%
South Korea N. America China EMEA ROW
Total Revenues
by Geography Q1 ’14
24%
33% 14%
30%
South Korea N. America EMEA ROW
66%
13%
5%
16%
Automated Integrated Mat. Char. Service
57%
8%
9%
26%
Automated Integrated Mat. Char. Service
Total Revenues
by Product/Svc
23%
41%
16%
12%
8%
DRAM Flash Logic/IDM Foundry LED/Discrete/Si
18%
21%
32%
17%
12%
DRAM Flash Logic/IDM Foundry LED/Discrete/Si
Product Revenues
by End Market
FY 2013
Mat. Char. = Materials Characterization Metrology Systems
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Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1
Reconciliation of GAAP gross profit to non-GAAP gross profit
GAAP gross profit 25,066$ 24,759$ 22,152$ 11,951$ 83,928$ 10,486$ 14,480$ 15,801$ 21,909$ 62,676$ 24,149$
Inventory write-down - - - - - - - 2,439 - 2,439 -
Amortization of intangible assets 637 637 629 646 2,549 658 647 658 670 2,633 674
Non-GAAP gross profit 25,703$ 25,396$ 22,781$ 12,597$ 86,477$ 11,144$ 15,127$ 18,898$ 22,579$ 67,748$ 24,823$
Reconciliation of GAAP operating income (loss)
to non-GAAP operating income (loss)
GAAP operating income (loss) 4,106$ 4,296$ 3,614$ (6,538)$ 5,478$ (9,603)$ (6,156)$ (7,242)$ 1,292$ (21,709)$ 2,016$
Non-GAAP adjustments to operating income (loss):
Inventory write-down - - - - - - - 2,439 - 2,439 (b) -
Amortization of intangible assets included in cost of revenues 637 637 629 646 2,549 658 647 658 670 2,633 674
Amortization of intangible assets included in operating expenses 192 195 193 196 776 198 195 195 113 701 108
Restructuring - - - - - - - 1,740 - 1,740 (c) -
Total non-GAAP adjustments to operating income (loss) 829 832 822 842 3,325 856 842 5,032 783 7,513 782
Non-GAAP operating income (loss) 4,935$ 5,128$ 4,436$ (5,696)$ 8,803$ (8,747)$ (5,314)$ (2,210)$ 2,075$ (14,196)$ 2,798$
Reconciliation of GAAP net income (loss)
to non-GAAP net income (loss)
GAAP operating income (loss) 4,106$ 4,296$ 3,614$ (6,538)$ 5,478$ (9,603)$ (6,156)$ (7,242)$ 1,292$ (21,709)$ 2,016$
Other income (expense) (392) (280) (355) 168 (859) (161) (822) (445) (428) (1,856) 166
GAAP income (Loss) before income taxes 3,714 4,016 3,259 (6,370) 4,619 (9,764) (6,978) (7,687) 864 (23,565) 2,182
Provision (benefit) for income taxes 2,011 (490) 1,356 (2,723) 154 (4,182) (2,412) (3,133) 308 (9,419) 587
GAAP net income (loss) 1,703$ 4,506$ 1,903$ (3,647)$ 4,465$ (5,582)$ (4,566)$ (4,554)$ 556$ (14,146)$ 1,595$
Non-GAAP adjustments to net income (loss):
Total non-GAAP adjustments to non-GAAP operating income (loss) 829 832 822 842 3,325 856 842 5,032 783 7,513 782
Tax effect of non-GAAP adjustments to operating income (loss) (303) (304) (300) (307) (1,214) (306) (299) (1,785) (317) (2,706) (282)
Discrete tax adjustment 655 (1,955) - - (1,300) (a) - - - - - -
Non-GAAP net income (loss) 2,884$ 3,079$ 2,425$ (3,112)$ 5,276$ (5,032)$ (4,023)$ (1,307)$ 1,022$ (9,339)$ 2,095$
Per share data:
GAAP net income (loss) per diluted share 0.07$ 0.19$ 0.08$ (0.16)$ 0.19$ (0.24)$ (0.20)$ (0.20)$ 0.02$ (0.61)$ 0.07$
Non-GAAP net income (loss) per diluted share 0.12$ 0.13$ 0.10$ (0.13)$ 0.22$ (0.22)$ (0.17)$ (0.06)$ 0.04$ (0.40)$ 0.09$
Shares used in non-GAAP diluted income per share calculation 23,981 23,877 23,760 23,408 23,845 23,341 23,138 23,261 23,913 23,290 24,159
Notes:
Fiscal 2014
(a) Reflects the tax benefit for certain f irst quarter foreign losses related to entity classif ication elections that w ere approved by the IRS in the second quarter. The tax benefit of these f irst quarter losses w as recorded as a decrease to the second quarter
tax provision on a GAAP basis. The discrete tax adjustment for the second quarter also excludes the one-time benefit associate w ith the recognition of deferred tax assets related to the entity classif ication elections, resulting in a combined f irst and second
quarter Non-GAAP tax rate of approximately 36.5%.
(b) Represents charges associated w ith w riting dow n inventory related to a discontinued product line.
(c) Includes severance and RSU modif ication charges accrued in connection w ith the notif ication of future closure of our Nanometrics Germany Inc off ice (Nanda).
NANOMETRICS INCORPORATED
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(In thousands, except per share amounts)
(Unaudited)
Fiscal 2012 Fiscal 2013