Good afternoon, and welcome to the Nanometrics Fourth Quarter and Full Year 2012 Financial Results Conference Call. 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. (Operator Instructions) Please note that this conference call is being recorded today, February 4, 2013. At this time, I would like to turn the call over to your host, Claire McAdams. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to the Nanometrics fourth quarter and full year 2012 financial results conference call. On today’s call are Dr. Timothy Stultz, President and Chief Executive Officer and Ronald Kisling, Chief Financial Officer. Shortly, Tim will provide a recap of the fourth quarter and year and our perspective looking forward. Then Ron will discuss our financial results in more detail after which we will open up the call for Q&A. The press release detailing our financial results was distributed over the wire services shortly after 1:00 PM Pacific this afternoon and is also available on our website at www.nanometrics.com. Today’s conference call contains certain forward looking statements including, but not limited to, financial performance and results including revenue, operating expenses, margins, profitability, and earnings per share, customer concentration and mix, tax rates and technology and product development and adoption. 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 factors including general economic conditions, changes in levels of industry spending, the adoption and competitiveness of our products, industry adoption of new technology and manufacturing processes, customer demand, shift and timing of orders, their product shipments, changes in product mix, our ability to successfully identify, complete, and integrate acquisitions to realize operating efficiencies and to achieve reduced tax rates, and the additional risk factors and cautionary statements set forth in the company’s Form 10-K on file for fiscal year 2011 as well as other periodic reports filed with the SEC from time-to-time. Nanometrics disclaim any obligation to update information contained in any forward-looking statements. I will now turn the call over to Tim Stultz. Tim?

Thank you, Claire. Good afternoon, everyone, and thank you for joining us on the call today. In addition to reporting on our financial results, which Ron will cover in detail shortly, I would like to begin by sharing the progress we are making with our key strategic initiatives, which are the foundation for long-term growth and shareholder value. First off, our Nano’s efforts to penetrate and grow our foundry business; last quarter, we reported that for the first time in Nano’s history, the revenue contribution from our leading pure play foundry customer exceeded 10% of our total revenues. Our engagements with this customer and collaborative work on the most advanced technology nodes are continuing to expand, and once again have resulted in this customer contributing greater than 10% to our quarterly revenues. While we still have a long way to go to meet our objective of achieving business levels and market share consistent with overall spending in the foundry sector, our multiple strategic engagements sets the stage for meaningful revenues beginning in 2014 and we are confident that this business will continue to expand in the years to come. Our next key focus area is to grow our advanced packaging and inspection businesses, driven by penetration and adoption of our UniFire and SPARK platforms. During the quarter we placed Multiple SPARK and UniFire products for the development of advanced lithography process control applications, a key customer side. This is an exciting and critical technology area, and we are optimistic that these placements and cooperative program will lead to an increased use of our tool, and high volume manufacturing. Additionally, we’ve received follow-on business for the UniFire, which has now been selected of the tool record at foundry, memory and logic customers for advanced packaging application such as Through Silicon Via…

Thank you, Tim, and good afternoon. Before I begin my comments, I’d like to remind you the schedule, which summarizes GAAP and non-GAAP financial results as well as revenue segment information provided on this call is available in the Investors section of our website. 2012 was a dynamic year. In the first half, we achieved record revenues for our flagship Atlas systems driven by front-end loaded spending by our key customers. In the second half, a sharp reduction in memory spending and weakness in other end markets including the LED and silicon substrate market led to a decline in second half revenues of 32%, compared to the first half resulting in a full-year decline in revenues of 21% to $183 million. Product revenues decreased 26% from the prior year to $144 million, compared with $195 million in 2011, while service revenues increased 11% over 2011 to $39 million from $35 million on both increased upgrade and core service revenue. Sales of our automated tools were down just 14% from record 2011 sales while materials characterization and integrated products were down 60% and 51% respectively. By end market, we saw memory revenue declined by 45% with declines across both DRAM and Flash as memory contribution to total product revenues dropped from 50% to 37%. Revenue into the logic end market remains fairly strong, only declining 5% and increasing its contribution to revenue from 25% to 32%. Sales into the foundry end market segment increased 85% over 2011 levels increasing from 9% of revenues in 2011 to 23% of revenues in 2012. As we have reported in our previous calls, we have seen declines in sales into the LED, discrete device, and silicon substrate end markets, which declined 64% over the prior year to comprise 7% of product revenues compared to 15%…

Thank you. (Operator Instructions) Our first question comes from Tom Diffely of D.A. Davidson. Your line is now opened. Thomas Diffely – D.A. Davidson & Co.: Hey, good afternoon. First, a couple of questions on just the business trends today. Is there any unusual linearity in the first calendar quarter that you’re seeing, is it post Chinese New Year or little bit of a ramp of how do you see it?

Hi, Tom, this is Tim. So you are asking about linearity within the quarter or against the year? Thomas Diffely – D.A. Davidson & Co.: Yeah, just for the first calendar quarter in particular. I wondered if it starts up super slow in January and ramps up after Chinese New Year or if it’s just fairly lackluster through the quarter?

Thomas Diffely – D.A. Davidson & Co.: Okay. So there’s no one to quantify that the slop you’re seeing now, 60/40 or 40/60 or something like that first half, second half?

No, I wouldn’t quantify yet, but it’s probably going to be stronger than that. Thomas Diffely – D.A. Davidson & Co.: Okay. And then, it makes a lot of sense with the foundries and some of your good work there on the 20-nanometer; but it seems like some your other clients like Intel, Samsung, some of the big guys, they’re fairly even spenders through the year. Are you not seeing those trends this year?

We’re certainly not seeing the trends based on our pipeline, Tom. It’s kind of a strange time there. There’s been a little less transparency in our customer engagements over the last several quarters than I’m used to. I think everybody was caught by surprise with Intel’s public announcement that they were going to raise CapEx by 18% year-on-year. And that really wasn’t completely consistent with what we saw in our product pipeline and now they’re updating us and we’re seeing the changes. So I don’t think it’s going to be linear at Samsung or Intel. Thomas Diffely – D.A. Davidson & Co.: Okay. And then when you look at I guess both of those customers, alleged customers, when you look at those two particular guys going down to the next node, how much reuse of your particular equipment do you see there versus maybe an industry average?

That’s a good question. We have very little if any exposure to reuse and that’s primarily because our tool requisitions were recently established. And since most of our tools are used in just the most recent and last technology nodes, they usually have to skip more than two nodes to go for a full reuse. It’s in fact, reuse means using the same tool – the modest upgrades. So we see very little or almost no exposure for that at all. Thomas Diffely – D.A. Davidson & Co.: Okay. And then on the kind of the back hand side, that’s packaging side, you mentioned that some of the UniFire were used for TSV and some of the 3D packaging. Are you also using the two and half D – more the interposer type for applications or are you mainly a 3D play?

No, in fact a lot of it is the interposer both in the microbumps and the connections between those devices. So the two and half D or the interposer technology as well as the 3D have demand and drop for our tool. Thomas Diffely – D.A. Davidson & Co.: Okay. And it’s finally on the margin front, when you look at the margin for the first quarter, I know it’s hard to tell, but do feel as if your product gross margins have gotten back to kind of normalized levels?

Well, when we frac our margins, we look at our standard margins, that is, the building materials and direct labor and overhead and we don’t take into account factory absorption. Our products are moving along nicely. The Atlas II has joined the family of other products with good margins and once we get some improved factory utilization, I think you’ll see them reflected in the P&L. Thomas Diffely – D.A. Davidson & Co.: Okay, great. Thank you.

Thank you. Our next question comes from Patrick Ho of Stifel Nicolaus. Your line is now open. Patrick Ho – Stifel, Nicolaus & Co., Inc.:

That’s a good question, Patrick, and no, I think we put a lot of energy into our supply chain as I mentioned earlier, both addressed in any potential quality issues, looking adverse capacity, making sure that we’re carrying the right inventory, not just the right amount of inventory, but the correct inventory. And I think that that will play out nicely when we get back into the volumes that allow us to leverage the top end of the P&L. Patrick Ho – Stifel, Nicolaus & Co., Inc.: Okay, great. Looking forward as we go to foundries with their [still type] technology either a 16 nanometer or 40 nanometer node, I guess can you give color in terms of how you’re experienced with Intel and their [still type] technology is going to help you down the road with those technology nodes?

Sure. You could imagine that we consider that one of our strong suites and we certainly are playing that card pretty heavily in our engagement. We bring to the market group of application scientists and successfully launched application, there are pretty detailed across the entire FinFET technology area. And we believe we know how to address them, we know how to model them, we know how to measure them and I think that’s a point of advantage that we have in that competitive environment. Patrick Ho – Stifel, Nicolaus & Co., Inc.: Great, and then the final question from me, do you think that you’re trying to penetrate that customer segment, which it has viable players right now. Have you see any pricing pressure especially from the larger guys given you that that scenario that they want to maintain their relationships at this time?

That’s a good question, actually our primary competitor has a very good and rational business model and we don’t really see a lot of pricing pressures. We certainly see competitive technology issues. So we were always going to compete. They address these products and these application for the same – for also as we do. But we believe we have an edge. We think we’ve got a little more experience. We think our tool has technical advantages and that’s pretty much were the competitive efforts takes place. Patrick Ho – Stifel, Nicolaus & Co., Inc.: Great, thank you very much.

Thank you. Our next question comes from Mahesh Sanganeria of RBC Capital Markets. Your line is now opened. Mahesh Sanganeria – RBC Capital Markets: Thank you very much. Tim, you sounded lot more positive on the memory spending in the second half, then you, well last time I talked to you, are you getting the sense from early read from the customer that they might be spending a little bit more than what they were planning on the memory side of the business?

Yeah, we do see some of that, in fact I feel little more bullish about the forward-looking outlook on our business than I have in the last several weeks it’s not several months, and our engagements for the customers and looking at lead times, and looking at product roadmaps, and looking at when they would need tools on site suggest that we would see improvements both in the memory, foundry, captive logic and advanced logic areas in the second half for us. Mahesh Sanganeria – RBC Capital Markets: And on the memory side, is it both on the DRAM side or the NAND side?

Mahesh Sanganeria – RBC Capital Markets: And on the foundry side, do you expect that your full year revenue, you will have 10% customers on the foundry side for the full year?

I’m not sure about that. We had the first two quarters with that way. There is going to be some pause as they use some of the tools and then it depends on what their spending plans are going into the 20-nanometer and it could bring the year over to 10, but we don’t know. Mahesh Sanganeria – RBC Capital Markets: And can you give us some color on what application you are, where you have got the biggest traction on the foundry side?

Well, fortunately we have engagements in a couple of different areas. In the foundry we’re engaged in advanced packaging, we’re engaged in advanced lithography, and we’re also engaged in some of their OCD, in particular the integrated metrology area. So we’ve got a couple of different points of entry and they’re all starting to play out nicely. Mahesh Sanganeria – RBC Capital Markets: And one last question for me. You talked about that making the investment right now and those are driven by joint development programs. Can you help us a little bit more, can you give us more color into what segment of the business is still in the metrology and is there customer commitment on those projects for which you’re investing today?

I’ll answer the last part first. We seldom get hard and hard and fast customer commitments up on our success. But we know that we get, we have a significant advantage for the ones that they’re developing the products on, their products on when we’re using our tools. And so it’s really been in there and having a relationship. With regard to what we’re working on, we’re working right across the Board. We’re working on customers that are trying to bring FinFET technology into their fabs. We’re working with customers that are going into the three dimensional memory devices. We’re working on customers going into the next generations of shrinks and we’re working in the advanced packaging and advanced lithography area. So we have as large number of engagements, I would say we have the largest number of engagements we’ve ever had with a significant customer pool. They are encouraging us and asking us to put our tools and our people on site to help and develop these. And ultimately, if we do a good job, we’ll translate into more business. Mahesh Sanganeria – RBC Capital Markets: All right, thanks. That’s very helpful.

Okay.

Thank you. Our next question comes from Weston Twigg of Pacific Crest. Your line is now open. Weston Twigg – Pacific Crest: Hi, thanks for taking my question. Just first, I wanted to start off on the OpEx side, just wondering if you can discuss in a little more detail some of the controls you have in place to maybe limit that from growing from here and maybe if you can give us a little more detail on what you’re doing to improve your burst capacity on the supply chain? That would be helpful.

Okay, Wes. Well, so you’re speaking of the control with regard to spending. We have a very deliberate program, very defined activities where we measure customer engagements, JDPs and JDVs. We looked at the opportunity, we look at the resource requirements, we look at the timing necessary to be there because if you’re late, it doesn’t make any difference and it’s betted pretty heavily through the entire management team as well as the applications and R&D groups. So I’m very comfortable. These things are – these are not control issues. These are deliberate investments, deliberate spending increases and taking advantage of the inflection points to make sure we’re there with the right tools, with the right customers at the right time. What was the second part of the question? Weston Twigg – Pacific Crest: The burst capacity of the supply chain, what are you doing there to, I guess improve that or expand that?

Yeah. So we’re working pretty close especially with our leading suppliers. We’re trying to give them updated outlooks against our build plans. We’re talking to them about their own inventory management. We’re looking at putting in tools and support to help them with their own quality assessments to make sure that they can meet our delivery requirements and we also look at commercial benefits and penalties if we’re not able to achieve our burst requirements. Weston Twigg – Pacific Crest: Okay. And then, does that help, I guess improve your margin profile over the long run or are you just seeing sort of as preventing it from degrading anymore?

Yeah, I think, our biggest – our primary focus is making sure we don’t miss a window or we don’t disappoint a customer. The difference between a quoted lead-time and the required lead-time still have a pretty good gap. And we have to take advantage of that whether or not we like it. And so we have to make sure our entire supply chain is ready to support us in that process. The margins will come from – our standard product margins are still very robust now with Atlas II being well improved. And with good factory absorption, then when we get to the right revenue levels, we go from underutilized to actually favorable variances which will also contribute to improve the gross margins. Weston Twigg – Pacific Crest: Okay, got it. And then just finally on the second half improvement, you mentioned I think that you’re expecting new forecasts hopefully by the end of the quarter from new major customers. But I’m just wondering how you can have or if you can give us an idea on how you can have such conviction in the second half rebound if you haven’t seen the forecast yet? Are those based on just customer conversations or just general industry outlook?

No, it’s about the customer conversations. The general industry outlook in the announced CapEx spending by the three biggest splendors actually caught us a little bit by surprise. We’ve had a lot of ongoing conversations now with each of our major customers and they’ve all indicated increases at the latter part of the year. They’ve told us, what kind of tools we will be looking at and what we will be doing between now and the end of the quarter is not only firming up those outlooks, but also negotiating the contracts going into that period. Weston Twigg – Pacific Crest: Okay, definitely helpful. Thank you.

You bet.

Thank you. (Operator Instructions) Our next question comes from Chris Blansett of JPMorgan. Your line is now opened. Chris, please check your mute button? Christopher Blansett – JPMorgan Securities LLC: Hi, Tim, I apologize. You mentioned in the press release, in our comments that the SPARK has now been positioned at a number of customers. And I wasn’t sure if you have a better read on when you would expect to repeat volume over some of these penetrations, or is this just too early to tell?

It’s still fairly early in the game. I mean, we see some follow-on business winding up, but we’ve got multiple friends with the SPARK, we’ve got backside inspection. We are looking at some advanced packaging applications. We think there are multiple tool opportunities, but we’re going through the whole process, one of the tools where the applications get them released as a tool record position and also doing some integration with our current platforms. So it’s a little early for me to give you a good forecast on that. Christopher Blansett – JPMorgan Securities LLC: Are there certain technology nodes we should focus on or think about for when you expect you would think that SPARK would actually be a tool of record?

So when we think about the SPARK, in particular, like, for instance, packaging is not really a technology node driven thing. It’s more about when they adopt that technology and strategy. So as that market evolves, it’s rather node independent. We would expect some nice growth for the SPARK in that area. I think that when we look at some of the other inspection opportunities back to inspection; it’s driven more for the nodes of 20-nanometer and 50 nanometer when you start to, where back side particles have a major impact on the uniformity of the lithography step and that plays an important aspect. And then we have a couple of other ones that are emerging. So it’ll all be advanced with regard to inspection, but packaging is simply kind of an independent market growth question. Christopher Blansett – JPMorgan Securities LLC: And then, I had a follow up on. You obviously indicated a number of times that you’re gaining share at the largest foundry and that started to show in your fourth quarter numbers. I wasn’t sure when, while we move into, say, 2013 versus 2012, what kind of revenue outlook would you expect from this customer? I’m trying to get the reference of what these market share gains are going to mean to your top line numbers?

Yeah, I think the biggest play for us, I mean, we expect some increasing contribution overall. But as I mentioned, on an earlier question, we had two nice quarters with that customer. There is going to be some digestion periods with some of the tools. Their investments patter they’ve announced has been, looks like two thirds, 28 nanometer in the first half one third, 20-nanometer in the second half of the year. Our play is the 20-nanometer in 2016. And so as we look at when we would expect it to really contribute, hopefully we see a nice uptick in the later half the year in the 20, but it’s really a 2014 play when it become material enough that I think it’ll start to become evident the progress we’ve made. Christopher Blansett – JPMorgan Securities LLC: Last question from me, you are increasing your OpEx slightly as you mentioned to support some customers in some new product position. I wasn’t sure if these are very product focused or these are pretty much just increase across the board to support customers who’ve been moved in your tech nodes?

Christopher Blansett – JPMorgan Securities LLC: All right. Thank you. I appreciated, Tim.

You bet.

(Operator Instructions) And now at this time, I’m not showing any further questions on the phone line. So I’d like to turn the call back to Timothy Stultz for any further remarks.

Well, thank you and thank you once again for participating in our call. I close by reminding everyone that the performance at Nano is the direct result of all the efforts of our employees, which I firmly believe is the best team in the industry. We look forward to reporting on the results of our operational financial performance by the first quarter of 2013 this coming April. Thank you.

Ladies and gentlemen thank you for participating in today’s conference. This concludes today’s program. You may all disconnect. Everyone have a great day.