Onto Innovation Inc (ONTO) 2010 Q1 法說會逐字稿

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 including, but not limited to, statements regarding Nanometrics' expected results for its most recently completed fiscal year, which remain subject to adjustment 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 additional 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 statement.

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.

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 our 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 strength and 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 improved manufacturing efficiencies, 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 and to an expanding number of high-volume inline 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 shrinks, improving yield, increasing productivity, and reducing manufacturing costs, all in order to meet the growing demand in a 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-intense NanoOCD Suite, is a driver behind this trend, with the latter being highly accretive to our model of gross margins.

Wafer-scale packaging, or 3-D packaging, is presenting new and unique metrology challenges and opportunities in the 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 these markets as organic growth drivers for our traditional semiconductor business.

For some time 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 to strengthen our competitive position and increase our market share. Our reported business wins and early performance turnarounds are key indicators of the success of those efforts.

To complement our organic growth, we have focused on diversification that 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.

Finally, as we have previously reported, we changed our business model and restructured our operations to be more efficient and responsive to the industry and economic environment and provide greater operating leverage during growth cycles. We believe the results over the last few quarters continue to demonstrate our positive trajectory and continued improvements to gross margin, operating cash flow, and profitability. At this juncture, we are pleased to be reporting results that demonstrate our capabilities to compete and to execute.

At the same time, however, we know that we can do better. We believe our strategy and focus are on track and properly aligned, that industry conditions are working with us, and that we can improve further on all of our key financial metrics.

Going forward, we are confident that we will continue to grow profitably, further improve our operational efficiencies and balance sheet management, and deliver performance that exceeds the overall industry.

Now I would like to make some observations about trends and drivers. It is evident that the overall semiconductor industry has entered a healthy recovery period, driven by strong integrated circuit growth, high fab utilization rates, and an improving balance between supply and demand. Of particular note, for the first time in some years, new fab announcements are on the rise, which heralds the transition from technology purchasing to capacity and expansion investments. This transition bodes well for our business, where our products have already been selected as tools of record for many current and next-generation technology nodes.

In addition, driven by the demand to reduce process variations, in order to achieve shrink and yield more good die from a given wafer, spending for process control equipment as a percentage of overall capital spending, or intensity, is expected to increase for the third year in a row.

And finally, although the spending turnaround of the last few quarters has almost exclusively been driven by three companies, we are now seeing meaningful investments in spending from additional first- and second-tier companies in an effort to sustain their competitiveness and market share. These customers by and large tend to make tool selections following the lead of the industry leaders, where we have already proven our ability to win business. We believe these trends and drivers favor our products, services, and business model.

So as we look forward, we see our business outlook continuing to be quite favorable, driven by three key factors. First, our order activity is on the rise and our pipeline is continuing to strengthen. Second, our products are competitive and well positioned in the market. The third, we feel ready and confident in our ability to execute.

With those considerations, we believe we will continue to execute against our stated objective about growing the industry while delivering financial performance which exceeds our previous best.

I will now turn the call over to Jim Moniz, who will review our financial results in more detail. Jim?

Thank you, Tim, and good afternoon, everyone. Nanometrics' press release containing first quarter fiscal 2010 results was sent out by Business Wire today, May 6, around one p.m. Pacific time. The press release may also be found on our website at nanometrics.com. Also on our website are reconciliations to non-GAAP figures referred to in our prepared remarks, such as non-GAAP operating income.

That being said, all the figures referred to in my comments are GAAP unless otherwise noted.

First quarter revenues of $37.2 million were up 41% from the previous quarter and were up 270% from the first quarter of fiscal year 2009. Product revenues of $28.5 million increased 43% quarter on quarter and 478% year on year. Service revenues, which includes both upgrade and core service revenues, were $8.6 million, up 37% from $6.3 million in the prior quarter, and up 68% from $5.1 million in the first quarter of fiscal year 2009.

Revenue by geographic region is based upon the shipped-to, or first-in-use destination. And during the quarter, the breakdown was Korea at 43%, US at 35%, and the rest of the world at 22%. Revenue by product type was automated and integrated metrology at 65%, service and upgrades at 23%, and materials characterization at 12%.

Gross margin in the first quarter was 55.3% compared to 50.7% in the previous quarter and 28.3% in the first quarter of fiscal year 2009. Product gross margins increased to 56.3% compared to 53.3% in the prior quarter as a result of higher sales volume and more favorable factory utilization. Service gross margins came in at 51.9% in Q1 compared to 42.3% in the prior quarter as a result of a more favorable mix of technology upgrades.

Total operating expenses in the first quarter came in at $14.6 million, which was $1.9 million, or 15%, above the prior quarter. This was driven primarily due to the increase in sales volume and improving business conditions.

Our payroll expenses increased as a result of no unpaid days off for our employees and higher variable compensation expenses resulting from the increase in profitability. We also reported higher payroll taxes, which we always see at the beginning of a new calendar year. We also incurred a $344,000 asset impairment charge for the write-off of some accounting software no longer needed.

Operating income was $5.9 million in Q1 compared with $0.7 million in the prior quarter and a loss of $9 million in the first quarter of 2009. Our non-GAAP operating income, which excludes non-cash and non-recurring expenses, was $8.7 million compared to $2.8 million in the prior quarter and a non-GAAP operating loss of $6.6 million in the first quarter of 2009.

Net interest and other expense in the first quarter was a net benefit of $0.1 million, which compares to the prior quarter's expense of $1.1 million. The primary reason for the favorable $1.2 million swing was foreign currency, in that we had $0.5 million in unrealized gains in Q1 compared to $0.4 million in unrealized losses in Q4. Net income in the first quarter was $5.9 million, or $0.26 per share, on a weighted average share count of 22.7 million shares.

Turning to the balance sheet, cash came in at $45.8 million, an increase of $2.3 million above the previous quarter. This number reflects over $8 million in cash generated from the P&L less investments in working capital and a $2 million payment made to Zygo.

Accounts receivable came in at $26 million, which was up $2.9 million from last quarter, driven by higher revenues. DSO is at 63 days, which is down from last quarter's DSO of 79 days. Our target is to achieve DSO below 70 days.

Inventory came in at $35.7 million, which was up $3 million from the prior quarter in order to support our growing revenue as well as to increase demo and evaluation activities with our customers. We took advantage of our strong balance sheet to put tools in front of customers to be able to continue increasing growth in market share. Inventory turns increased to 1.9 times from 1.6 times in the previous quarter.

We ended the March quarter with headcount of 405 employees, a net increase of six from year end 2009.

That concludes our prepared remarks, and now I would like to open up the call for your questions.

(OPERATOR INSTRUCTIONS.) Your first question comes from the line of Mahesh Sanganeria with RBC Capital Markets. Please proceed, sir.

Thank you. A question on your systems and material characterization. Both seems like up more than 40%, and I thought the system benefited from a revenue since last time, but the material characterization is up pretty strongly, too. So can you give some more color on what drove the material characterization that much?

Sure, Mahesh, and thanks for calling in. The primary driver behind the material characterization has been high-brightness LED customers and tools.

High-brightness LED, okay. Is that, going forward, should we look at that as, or there is going to be some lumpiness in the material characterization business?

No, the materials characterization business is, I think it's up about, it's the highest it's been in almost two years. We are seeing a nice contribution to it from LED. Historically, we also used to have a fair amount of business for materials characterization from the bare silicon wafer inspection, and that really hasn't even kicked in yet. So I think what we're seeing is growth on the LED, some contribution from solar, and we look forward to some additional contribution to wafer defect inspection as the capacity and volume continues to increase.

And so on the wafer inspection side, why isn't that business picking up, because I've heard that there is a capacity constraint across the board, and the wafer guys have increased their prices, I've heard, and so do you think there is enough capacity, that's the reason that you're not getting some orders on the wafer side?

Yes, our channel checks indicate that the capacity they put in place in 2007 still has some bandwidth. There may be timing issues that are driving it. Now, we think that's going to be on the near horizon for some benefits, but we put an awful lot of inspection tools out there in the 2006 and 2007 timeframe, and I think they're just getting to the point where they're being close to fully utilized.

And then getting back to the metrology systems, you had the benefit of $3 million from last quarter, so we should take the base as close to $21 million. And I would say that things are still looking up, you're still, if I take the base at $21 million, we should still see growth throughout the year. Is that a simple way to look at things?

This is probably one of the nicest and best business environments I've been in a long time. We see continued strength in the industry, we see continued strength within specific customers. And as I mentioned during my script, we're also very encouraged by the announcement of new fabs. Some of them are greenfield fabs and some of them are going to be extension of existing fabs. But all those are opportunities, either for retooling or new tools being put in place. So we're very optimistic about this year.

Are you beginning to see the orders for the new fabs, and can you talk about some? We talk about 10 fabs and the most closest one is, besides the foundry one, is the IM Flash. Are you beginning to see some of the extended lead time orders from some of those fabs?

We are certainly engaged in conversations about lead time, tools, and population in a number of geographic regions. So they're out there and they're starting to occur.

Okay. I'll ask just one last question, and then I'll be done. So on the service side, upgrade, I'd say that was a pretty healthy level, I guess somewhere between $2 million to $3 million, that would be my guess. And should we see that to go back to more the $1 million to $2 million level next quarter?

As we mentioned in our last call, our upgrade business has been on the order of 6% to 8% of total revenues. It's certainly the most lumpy part of our business, but as our system business grows and our materials characterization business grows, and the service in itself grows, then I think that you're going to see less influence on the overall numbers by the upgrades. And there continue to be good contributions to revenue and nice contributions to margin, but probably aren't going to play as large a swing factor in the actual business numbers when you roll them up.

Okay, thank you. Thank you very much.

You bet.

Your next question comes from the line of Wenge Yang with Oppenheimer and Company. Please proceed, sir.

Hi. Thank you for taking my questions. First question regarding your logic exposure after your successful penetration of some of the large logic accounts, and we assume that your main revenue source will come when the 22-nanometer ramp starts. But you have been listing some of the largest names as your top end customers in the past two quarters, and I assume similar for this quarter. So could you comment on your current status with logic accounts? And which products have you been successfully penetrated, and which products are you engaging with those customers?

Okay, well, let me go back to two things. One is our two 10% customers this quarter were once again Samsung and Intel. And we've talked about that before. That's the third quarter in a row. Logic continues to be a very nice contributor to our revenues. Our thin film tools, our OCD tools, our integrated metrology for C&P tools are all playing a role in those contributions. And we're engaged in a few other areas as well.

Okay, so you mentioned about a UniFire revenue recognition. I would assume it's also from a logic customer, right?

Yes, it is. But we also have--the UniFire has had gaining success, not only in the semiconductor, but also in data storage, which is starting to be a nice market for us with some growing contribution, both in OCD as well as our UniFire area.

Okay, that's helpful. Just continuing on the greenfield, new fab subject. You've been engaging some with major NAND suppliers in terms of market penetration. Could you update us on your status in those penetration efforts?

We can't give you anything customer-specific, but we feel very strong, we reported we've been strong both in the NAND area--clearly, the memory area, which has supported us very well. We're seeing continued benefits from there. And we're also seeing some other memory players come on, start to make commitments and look for tools in the latter part of this year. So we see strength in both sides of NAND and in the DRAM and Flash. We're seeing Flash actually increase now as a portion of the total memory side compared to the last quarter. So I think you're going to see some increased spending on the Flash folks.

Okay. And the last question is regarding your overlay product. It's been discussed several quarters in terms of customer evaluation activities. Is there any revenue stream coming out of that product? And if so, from which segment?

So the answer is yes, the overlay product is contributing with multiple systems going out to multiple customers. We don't give you any more granularity to it than that, but it's a good product that's gaining some nice traction now.

Okay, thank you.

You bet.

Your next question comes from the line of Weston Twigg with Pacific Crest Securities. Please proceed, sir.

Hi. Yes, just a couple of questions on the model. Looking at the gross margin performance, over 55% this quarter is great. But I'm wondering, should we continue to look at a service gross margin above 50%, or do you think it might drop down a bit as maybe some upgrade revenue slows as a percentage of the overall (inaudible) has been 30% on just the service piece alone?

Our core service margins are not as high as that. There's a nice contribution of upgrade. But as we look at it right now, our upgrade business has still got a lot of legs. I think it's going to contribute in the forthcoming quarters, and our core service margins have been steadily improved. They're leveling off right now slightly above our model, so I think that the model that we're presenting here is in general, in terms of the gross margins, are going to stay intact, and we have room for a little more improvement.

Oh, so you think 55% is your baseline gross margin and maybe a little higher moving forward?

We think that there are some opportunities, both in further efficiencies, and if we get increased, if the revenues grow, then we should see some of the benefits on the gross margin line.

Okay. And then just dropping down to R&D, that 4.6 level, is that something you might hold at that level moving forward, or does that increase along with revenue?

We would continue to invest a little bit with the R&D. Actually, when we look at our overall OpEx, we see that will increase a small amount compared to revenues, but will still increase to track with some of the revenue increases that we anticipate.

We had a larger jump this quarter, as Jim pointed out, but some of that had to do with folks going back to work and having a fully engaged workforce. But I think what you're going to see is an awful lot of nice flow-through between incremental revenues, benefits to the gross margin line, and ultimately benefits to the operating line.

Okay. That actually brings me to one more question, which is I'm starting to get a little bit concerned. You've had some nice big wins recently with some big customers, but I'm concerned that there might be some risk to increasing expenses, maybe more than expected, to accommodate higher customer demand, things like accelerated delivery requests or equipment troubleshooting or quality control or meeting purchase-back requirements and so on. And maybe they might have to hire more people. Do you have any concern, or do you see that maybe happening a little bit later this year as some of your larger customers continue to ramp?

The first thing is I want you to get a good night's sleep and let you know that the hiring that we do is actually in support of revenue-driven opportunities. We're not seeing demand that's going to impact our bottom line, and that we're seeing improved efficiencies as we get to work with the same customers but fan out to their other facilities.

Okay. So you would expect to hold a similar OpEx trend, maybe a little bit higher on increasing revenue, but not a big surge at any point as you increase, ramp support for some of these larger customers?

We will manage against surges in OpEx spending, I promise you.

Okay, that sounds good.

Your next question comes from the line of Gus Richard with Piper Jaffray. Please proceed, sir.

Yes, thanks for taking my question. Nice quarter, guys. This is the first quarter you've had an opportunity to recognize revenue from the UniFire product. Could you just give us a sense of the contribution from that product in the quarter?

Yes. In terms of the product, this is the first quarter we've recognized, I can tell you it's accretive at this point.

Right, but what was the revenue size? Was it a few million dollars, was it, can you just quantify how much of the upside and revenue that the UniFire was or what the contribution was?

No, Gus, I'm sorry. We won't break it out quite to that level of detail, but as we announced, there's been multiple systems coming out of that.

Okay, great. And then, obviously, the gross margin performance was good in the quarter, and it sounded like it was primarily volume related and it wasn't driven by mix at all?

Yes, I think the typical thing that we try to pull out is if we've had an extraordinarily strong upgrade quarter that gives us--as we did in Q3--then we like to point out that there may be some artificial component to how good a margin might be. But we're tracking with our normal business mix and our product mix, and we think that this is representative of what we can do.

Okay, so the upside was really a function of volume on the product side?

Yes, volume and the efficiencies. We've been able to, obviously, hold the price, but it's really just efficiency in the operation.

Great. And then the final one for me is as you talk about the broadening out of customers--and clearly, there's only been two or three companies driving spending--is there, beyond the top three or four, are you seeing the second tier come in and become a significant mix of your revenue? Or is it really just the same old guys in the quarter?

No, we're actually starting to see some of the other spending occur. And the quotation activities in the case of what I'd call the other first tier is well within--the second tier, that part of the pipeline is actually picking up, and I wouldn't be surprised if in the coming quarters, we start announcing other 10% customers.

Got it, got it. All right. And just one final one for me. You have no exposure to Greece, correct?

I'm sorry, what?

You have no exposure to Greece, correct?

Yes, that is correct. We don't have any exposure to Greece.

Okay, just checking. Thanks, guys.

Or Citigroup or Citicorp stock trading.

Got it. All right, thanks.

(OPERATOR INSTRUCTIONS.) Your next question comes from the line of Jacob Strumwasser with Kem Capital. Please proceed.

Hi, guys. Congratulations on the great quarter. And also, I didn't get a chance, but last quarter you did a great job explaining the missed analyst numbers and talking about, I think it was the Samsung order, and I really wanted to commend you guys for not taking a discount on that order in order to bring in the number in line with analysts' estimates.

I just wanted to try and understand two things any more clearly than you've already explained, but it might not be possible. One, just talk to me a little bit about the book-to-bill ratio as this continues to ramp. And then two, if you could just be very explicit about where you are on the cycle, because I know I'm beginning to hear people say that you're nearing peak orders, and it will help me better understand what your run rate EPS can be.

So thanks for calling me, and we don't, we obviously--or I shouldn't say "obviously"--but we do not publish book-to-bill numbers. But I did indicate during the script that our pipeline in order activity is very strong and will support our objective of growing quarterly. So I like what we see what's going on in the industry, and we like the activity.

I don't think--I'll step back and try to answer the industry question. There's a lot of folks that have already spoken to this over the last couple of weeks. I think we're still in an early phase of this turnaround with regard to industry spending. There may be some decrease in the rate of new spending in the latter half, only because of the early spending that's occurred and the fact that some of the new fabs that have been announced, they won't be able to populate them until the latter part of the year of next year.

A lot of that's gated, really, by scanners. If you want to look at the opportunity to populate greenfield fabs, it's really the ASML scanners that are going to dictate when new tools start to populate those fabs. But we like what's going on. We think it's healthy.

And I was looking at some of the numbers. This actually was a deeper downturn than the 2001 to 2002 timeframe, because it was compounded by the global economic downturn. So I think that there's a lot of capacity that needs to be put back in place. I think there's a lot of expansion that needs to occur. And I think that those tools that address that, reminding ourselves that there's no wafer size change going on. So these are still 300-millimeter wafers.

And so when you look at where the driving forces are, they're going to be on productivity and yield as opposed to a big shift in the wafer size. And that means that lithography tools, process control tools, or enabling technology tools are the ones that probably will benefit more than some of the traditional capacity tools.

That's really helpful. If I could just ask one follow-up. So basically, it sounds like you're--okay, I guess the one thing that maybe you guys can help make more clear to me is the earnings that we saw this quarter, is that something that could be run rated out and, obviously, with room to improvement? But if we're out of the woods of the downturn of the past couple of years and back into a normal semi-cycle, could we see this number as a baseline run rate for the next elongated period of time? Obviously, we don't know what's going to happen in two years, but you understand what I'm trying to ask.

Yes. Let me, again, walk that fine line. I think the way I'd like to answer that is that I don't think that the spending within the industry has peaked yet.

But is spending in the industry, where it is today, obviously, without looking at the peak, but is it sustainable at this level for an ongoing period of time? Not looking at if it trends higher or trends lower, could this current level trend for the foreseeable future?

You're talking about our performance?

No, not your performance, but basically, your customers. Could your customers continue to spend at current levels for an ongoing period of time, or will they become filled up on their needs and therefore ratchet down? Do you understand? I'm just trying to understand.

Right now you guys are at a run rate of $1.00. Obviously, that could grow and get better. I'm sure that you guys work through. But just as a baseline, because people are going to look back at the past couple of years and say, "Well, it was losing money, whatever, whatever." So I'm just trying to understand where people may look up and say, "NANO's a $1.00 earner in a normal trend environment." That's what I'm trying to--.

Yes. I think the way to try to look at the spending is that for the last two or three quarters, the spending has been totally dominated by three companies--TSMC and Samsung and Intel. And those companies still have some spending to take place, but there's an awful lot of big spenders that haven't even really weighed in yet--Toshiba and Hynix, Micron.

And so what you're going to see is you may see some dipping--and this is totally speculation on my part as an observer of the industry--you may see some slowdown on spending of the top three, although I think there's still spending going to occur, but you're going to see additive spending from those other companies.

And that's why I said I really don't believe that the capital equipment, wafer fab equipment side of the world, that we've seen peak in the spending. And therefore, if we remain competitive, we should benefit accordingly.

That's great. Thank you very much.

Your next question comes from the line of Bill Frerichs with Radnorwood Capital. Please proceed, sir.

Good afternoon. Obviously, a great quarter. Tim, I was wondering, in your engagements, the extent to which the Lynx system architecture has been helpful to you as a differentiator in helping you win business. And if so, might the experience with Lynx drive your M&A philosophy?

Bill, thanks for calling in. Thank you. First of all, we are shipping multiple Lynxes. The Lynxes gained some nice position and traction, and as a differentiated platform, having compatibility with our entire product line really helps us in terms of having a standardized interface.

And you're absolutely, you're spot-on in terms of our interest in inorganic activities and M&As. That's always a key question, is how difficult would it be to make sure it's fully Lynx-compatible, because that drives the model for putting in more tools on a given site and adding a different suite of options to a common platform in a given customer site.

And to carry that thought further, might you have acquisition targets that would be highly attractive, easy to snap onto the Lynx, but relatively small in the purchase price that you would have to pay?

Of course, Bill, you know I'm not going to tell you all the details about my M&A activity, but one of the things that we do have is--there are three things that would suggest that this would be an area of drive and focus. The first one is we have a growing confidence in our ability to find those companies, integrate them, and bring them to an accretive position rapidly. The second thing is, we now have a balance sheet that will support some of the smaller acquisitions on a cash basis and be non-dilutive to our shareholders. And the third is we do have our currency, our equity is also strengthened so that it can be used in the same capacity.

So we think we have both cash and equity that we can use, and we have a management team that knows how to do it, and we have an objective of growing through inorganic acquisition and integration in particular onto the Lynx platform.

Okay, very good. Thanks a lot.

You bet.

(OPERATOR INSTRUCTIONS.) With no further questions in the queue, I would now like to turn the call back over to Dr. Stultz for closing remarks. You may proceed, sir.

Thank you. In closing, we continue to be confident and enthusiastic about the business and business opportunities for Nanometrics in the foreseeable future. We move forward with resolve to distinguish ourselves through management and execution, and we are committed to delivering above-average performance and value to our shareholders. I will reaffirm that every element of our performance is directly tied to the wonderful and talented employees of Nanometrics who continue to work tirelessly, and with passion, to grow a stronger and more competitive Company and one which we are all very proud of.

I want to thank all of you for joining our call, and we look forward to updating you on our second quarter results in early August.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.