Nova Q1 2025 Earnings Report

Nova EPS Results

• Actual EPS: $2.18
• Consensus EPS: $2.08
• Beat/Miss: Beat by +$0.10
• One Year Ago EPS: $1.39

Nova Revenue Results

• Actual Revenue: $213.36 million
• Expected Revenue: $210.10 million
• Beat/Miss: Beat by +$3.25 million
• YoY Revenue Growth: +50.50%

Nova Announcement Details

• Quarter: Q1 2025
• Date: 5/8/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 8:30AM ET

Nova (NASDAQ:NVMI) designs, develops, produces, and sells process control systems used in the manufacture of semiconductors in Israel, Taiwan, the United States, China, Korea, and internationally. Its product portfolio includes a set of metrology platforms for dimensional, films, and materials and chemical metrology measurements for process control for various semiconductor manufacturing process steps, including lithography, etch, chemical mechanical planarization, deposition, electrochemical plating, and advanced packaging. The company serves various sectors of the integrated circuit manufacturing industry, including logic, foundries, and memory manufacturers, as well as process equipment manufacturers. Nova Ltd. was formerly known as Nova Measuring Instruments Ltd. and changed its name to Nova Ltd. in July 2021. Nova Ltd. was incorporated in 1993 and is headquartered in Rehovot, Israel.

Nova Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Good day, and welcome to the Nova Limited First Quarter twenty twenty five Results Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Miri Segal, CEO of MS IR.

[Operator]

Please go ahead.

[Miri Segal-Scharia, Founder & CEO at MS-IR LLC]

Thank you, and good day, everyone. I would like to welcome all of you to Nova's First Quarter twenty twenty five financial results conference call. With us on the line today are Gabi Weissman, President and CEO and Guy Kisner, CFO. Before we begin, I would like to remind our listeners that certain information provided on this call may contain forward looking statements, and the Safe Harbor statement outlined in today's earnings release also pertains to this call. If you have not received a copy of the release, please view it in the Investor Relations section of the company's website.

[Miri Segal-Scharia, Founder & CEO at MS-IR LLC]

Gabi will begin the call with a business update, followed by Guy with an overview of the financials. We will then open the call for the question and answer session. I'll now turn the call over to Gabi Weissman, Nova's President and CEO. Gabi, please go ahead.

[Gabriel Waisman, President & CEO at Nova]

Thank you, Miri, and thank you all for joining us today. I will start the call by summarizing our first quarter performance highlights. Following my commentary, Guy will review the quarterly financial results in detail. Nova achieved another exceptional quarter with record results in both revenue and profitability. Our revenues grew 50% year over year, exceeded our EPS guidance and increased non GAAP EPS by 56% year over year.

[Gabriel Waisman, President & CEO at Nova]

Our business performance is tightly linked to our executional and operational excellence as well as our inherent ability to adapt to evolving market dynamics. Our performance was driven by Nova's strong standing across market segments, regions, key customers and technologies. This position was validated by the recent release of the annual Gartner Market Share Report, highlighting our growing presence. The report indicates that Nova's market share increased significantly in the thin film and CD metrology segment, solidifying our position as the second largest vendor in this market. Semiconductor manufacturing capacity is in robust growth mode, driven by demand for AI applications.

[Gabriel Waisman, President & CEO at Nova]

This surge has translated into significant revenues for Nova as manufacturers across the globe build their production capacity and adopt the unique value proposition our portfolio offers. Our customers estimate that newly introduced AI models will enhance efficiency and lower the barriers to future AI development, resulting in broader usage and increased adoption of AI, all of which depend on advanced technology nodes. In parallel, the demand we see for mature nodes remains stable with many new customers joining the ranks. As our second quarter guidance suggests, we expect these positive trends to continue. On a global level, macroeconomic uncertainty impacts various sectors and the potential indirect implications of the current international trade climate are still unclear.

[Gabriel Waisman, President & CEO at Nova]

Despite this, we have not observed significant shifts in demand or planned customers' investments and our business remains solid. Now let me turn to some business highlights for the quarter. Adoption of Gate All and Advanced Packaging Solutions lead customers to build capacity and increasingly embrace our portfolio. As a result, we saw a significant increase in revenues from Gate All Around and Advanced Packaging processes, which manifested in several areas of our business. First, we achieved record sales in our standalone solutions led by record revenues from the Prism platform.

[Gabriel Waisman, President & CEO at Nova]

PRISM has successfully completed two more evaluations for advanced packaging and leading edge nodes by a leading logic manufacturer, and it is shaping out to be a best seller for us. The PRISM spectral interferometry technology and unique algorithmic capability bring clear benefits to process control of Frusilicon Via and critical hybrid bonding applications, which our customers appreciate. Second, we also saw record sales of our integrated metrology solutions. This quarter's highlights include a new penetration into two Gatorade Round manufacturers, one of which also adopted the solution for its advanced packaging processes. I'm proud to say that these latest adoptions have been driven by Nova's superior technology, but just as much it is a testament to the power of collaborating with our customers.

[Gabriel Waisman, President & CEO at Nova]

Third, our software business achieved record performance driven by strong sales of our software suite targeting high value applications and improving performance and efficiencies. More specifically, our advanced packaging customers have noted the advantage of using our machine learning capabilities to solve critical challenges and reduce costs in their increasingly complex processes. Fourth, our materials metrology solutions also benefit from this demand. De novo ellipson was recently adopted for gator around processes by a leading IDM that already employs multiple Alexion tools in other areas. In addition, we shipped another Metrion platform for qualification with a new Galer Around customer.

[Gabriel Waisman, President & CEO at Nova]

We also saw the continued adoption of the Nova VERIFLEX four platform by additional customers towards gate all around manufacturing line. We recently introduced some new capabilities platform, which opened a whole new range of layers for advanced three d NAND manufacturing. We will be able to share more details in the future. On the memory side, the majority of demand is coming from DRAM and it is driven by the need to increase capacity in high bandwidth memory production. Notably, we are seeing heightened demand for our chemical metrology solutions.

[Gabriel Waisman, President & CEO at Nova]

Finally, all this growth is also driving our services business forward. This quarter ended with another record in service revenues, which grew more than 30% year over year. Now I want to share some updates on our operations in Germany. During the first quarter, we completed the acquisition of Centronics, and we are progressing well in post merger integration. While the contribution to the first quarter is relatively small, we expect to see our business from this acquisition grow significantly in Q2 as we transition to direct sales in key markets.

[Gabriel Waisman, President & CEO at Nova]

Also, during the first quarter, we moved into our new facility in Badgruach, Germany. The new facility combines state of the art manufacturing with a research and development center focused on chemical metrology. The new site doubles the capacity of Nova's chemical metrology division and fosters collaboration by bringing all the division teams together in one location. The transition to the new facility has been seamless and the next quarter looks very promising for the division. Before I complete my prepared remarks, I wanted to note that we recently published Nova's twenty twenty five Sustainability Insights Report.

[Gabriel Waisman, President & CEO at Nova]

The report highlights significant milestones in various areas, including renewable energy use and reduction in greenhouse gas emissions. The report includes updated KPIs that have been incorporated into our operating model along with a revised set of goals that place greater emphasis on key environmental and social impacts. To summarize my part, Nova had a robust quarter characterized by healthy demand across various nodes, segments and territories. These positive trends continue to underscore the value of our tools and services. As we look ahead to the second quarter, we anticipate similar strong demand patterns.

[Gabriel Waisman, President & CEO at Nova]

The current markets are making visibility more challenging. In the coming months, we expect to gain clear insights and will diligently monitor potential impacts on market demand, managing our business with prudence. Considering our current business momentum, market share opportunities and the anticipated increase in process control intensity at the leading edge, we are confident in our ability to outperform '25. Now for some more details on our financials, let me hand over the call to Guy.

[Guy Kizner, Chief Financial Officer at Nova]

Thanks, Gabi. Good day, everyone, and thank you for joining our first quarter twenty twenty five conference call. I will begin by reviewing our financial achievements for the first quarter of this year and then provide guidance on the second quarter. As a reminder, since the acquisition of Sintronics was finalized at the January 2025, the financial results reported for the first quarter include only a partial contribution from Sintronics, covering the two months following the close of the transaction. Total revenues in the first quarter of twenty twenty five reached a record level of $213,000,000 representing our fourth consecutive quarter of all time high revenues.

[Guy Kizner, Chief Financial Officer at Nova]

This performance reflects a growth of 10% quarter over quarter and 50% year over year. Product revenue breakdown was approximately 75% from logic and foundry and approximately 25% from memory. Product revenues for the quarter included contribution from three customers and three geographic territories, each accounting for 10% or more of total product revenues. In the first quarter, blended gross margins were 57 on a GAAP basis and 59.6% on a non GAAP basis, in the upper end of our updated target model range of 57% to 60%. The high gross margin in the quarter was attributed to a favorable product mix coupled with a higher revenue volume growth.

[Guy Kizner, Chief Financial Officer at Nova]

Operating expenses increased in the first quarter and came in at $59,000,000 on a GAAP basis and $53,500,000 on a non GAAP basis as we continue to ramp up R and D and sales and marketing spending in a targeted manner to advance our product roadmap and unlock future growth opportunities. Operating margins in the first quarter reached 30% on a GAAP basis and 34.5% on a non GAAP basis, surpassing the upper range of our updated target model of 28% to 33%. The effective tax rate in the first quarter was approximately 15%. Earnings per share in the first quarter on a GAAP basis were $2.03 per diluted share and earnings per share on a non GAAP basis were $2.18 per diluted share. With first quarter results exceeding the top end of our guidance, we've now delivered six consecutive quarters of record performance, a milestone that highlights our consistent execution and the value we are delivering to customers and stakeholders alike.

[Guy Kizner, Chief Financial Officer at Nova]

Turning to the balance sheet. We ended the first quarter with $812,000,000 in cash, cash equivalent, bank deposit and marketable securities. This quarter, we deployed $20,000,000 in share buybacks and paid a preliminary amount of $51,700,000 for the acquisition of Sintronics, net of cash acquired. An additional 4,700,000 will be paid in the second quarter as part of the final purchase price adjustment, bringing the total net consideration for the deal to approximately $56,400,000 net of cash acquired. The purchase price allocation of this amount, which remains subject to final audit, was reflected in the company's consolidated balance sheet as of the end of this of the first quarter.

[Guy Kizner, Chief Financial Officer at Nova]

The main elements of the purchase price allocation at the closing date were as follows: Sentronics' net acquired tangible assets were approximately $9,000,000 Sentronics' intangible technology assets were approximately $15,000,000 and are expected to be amortized over a useful life period of five years. Syntronics intangible customer relations assets were approximately $2,500,000 and are expected to be amortized over a useful life period of seven years. Inventory step up approximately 2,300,000 was recorded to reflect fair value adjustments. Roughly half of this amount was amortized through a cost of sales in the first quarter with the remaining portion expected to be recognized in the second quarter. Finally, I would like to share the details of our guidance for the second quarter of twenty twenty five.

[Guy Kizner, Chief Financial Officer at Nova]

We currently expect revenues for the quarter to be between $210,000,000 and $220,000,000 GAAP earnings per diluted share to range from $1.7 to $1.88 non GAAP earnings per diluted share to range from $1.96 to $2.14 At the midpoint of our second quarter twenty twenty five estimates, we anticipate the following: gross margins of approximately 56% on a GAAP basis and approximately 58% on a non GAAP basis operating expenses on a GAAP basis to increase to approximately $61,000,000 operating expenses on a non GAAP basis to increase to approximately $56,000,000 financial income on a non GAAP basis to remain similar to that of the first quarter. Effective tax rate is expected to be approximately 16%. Despite a more complex global trade environment, our second quarter outlook indicates that business conditions are maintaining positive momentum. While recent tariff developments have introduced new variables, we have not seen a significant shift in customer demand. We are staying closely aligned with our customers as they adapt and we are confident in our ability to support them through ongoing collaboration and responsiveness.

[Guy Kizner, Chief Financial Officer at Nova]

One of our structural advantages in our global production footprint with manufacturing facilities located across three key geographies, The U. S, Germany and Israel. This diversification provide us with the flexibility to help mitigate the operational impact of evolving trade dynamics. Based on our current assessment, we estimate that the new tariffs could reduce gross margins by approximately 30 to 50 basis points. That said, the situation remains fluid, and we are actively evaluating mitigation opportunities, including operational adjustments and selective pricing strategies.

[Guy Kizner, Chief Financial Officer at Nova]

As always, we are committed to executing with discipline, staying agile and partnering closely with our customers, positioning us well to navigate changes and capture opportunities. With that, we will be pleased to take your questions. Operator?

[Operator]

Thank you, sir. We will now begin the question and answer session. The first question that we have today comes from Blayne Curtis of Jefferies. Please go ahead.

[Ezra Weener, VP - Equity Research at Jefferies LLC]

Hi, Ezra Weiner on for Blayne. Thanks for taking my question. Just to start, can you talk about where you are in the gate all around ramp in terms of that 500,000,000 cumulatively and how we should expect that from a shape perspective over the course of the year?

[Gabriel Waisman, President & CEO at Nova]

Sure. So in terms of Get All Around, we definitely see a ramp in the first half of the year. We see strong demand from Gatorade Round. And looking ahead, we expect to meet the growth plans. Of course, there could be some changes in the second half outlook as a result of market conditions.

[Gabriel Waisman, President & CEO at Nova]

But overall, we are on course for the gate all around.

[Ezra Weener, VP - Equity Research at Jefferies LLC]

Got it. And then can you talk about kind of the size of that opportunity between the R and D phase and the ramp of high volume manufacturing?

[Gabriel Waisman, President & CEO at Nova]

So obviously, beginnings that are happening this year are reflecting the pilot lines and initial investments and the business is growing so that once it moves from this stage to high volume manufacturing, expect business to grow. So when we spoke of '24, '20 '5, '20 '6, it was obvious that '25 is going to be higher than '24 and definitely '26 is going to be higher than '25. We are also looking at additional players coming to play. So overall, we see this growth as such that the business next year from Gatorade Round planned to be or expected to be higher than this year.

[Ezra Weener, VP - Equity Research at Jefferies LLC]

And one more. In terms of your gross margin, you obviously had a great result in March, comes down a bit in June, and you were talking about tariffs. Can you talk about the moving pieces for the gross margin?

[Guy Kizner, Chief Financial Officer at Nova]

Yes. So on the gross margin side, the way to think about our gross margin is really on the annual basis, not the quarter over quarter. In any given quarter, mix can shift things slightly up or down. In the second quarter, specifically, the low gross margin reflects two main things: the impact of tariffs, as I mentioned, 30 to 50 basis points and some product mix effect. That said, we remain fully committed to our gross margin model of 57% to 60%, and we expect to be within this range for the full year.

[Operator]

The next question we have comes from Asif Malik of Citi.

[Atif Malik, Analyst at Citigroup]

The first one for Gaby. Gaby, interesting to see some cross selling in advanced packaging with some of the same customers who are also using your gate all around equipment. Can you talk about what's driving these dynamics? Or maybe I'm reading too much into it.

[Gabriel Waisman, President & CEO at Nova]

So we are definitely well positioned in terms of our, as you mentioned or define it as cross sales between those front end players that have either logical memory advanced packaging processes. So we're looking at both high bandwidth memory as well as advanced packaging in logic. And we have positioned both our dimensional metrology as well as the chemical metrology solutions into those markets. What we can see is a very strong double digit growth in our advanced packaging revenue for 2025 and definitely a higher share of the revenue from this segment compared to 2024. We are seeing also in addition to the chemical and traditional dimensional metrology solutions, whether it's the standalone OCB or the integrated and we now see in Syntronics, well positioned in order to help us drive this business, again, leveraging our strong position in front end with those who have either high bandwidth memory or other logic advanced packaging processes in their midst.

[Atif Malik, Analyst at Citigroup]

Great. And a follow-up for Guy. And Guy, on the tariffs, some of your equipment peers have talked about the revenue impact in China from the reciprocal tariffs. And just want to clarify that you did not see any revenue impact in China in your guidance. Also if you can remind us for the full year services growth this year?

[Guy Kizner, Chief Financial Officer at Nova]

Yes. So as I mentioned during my script, the main impact of the tariffs is on the gross margin, 30 to 50 basis points, and we don't see currently impact on the top line. On the service, our model suggests percent growth year over year, and we are we will meet this target for 2025 as well.

[Operator]

The next question we have comes from Mark Lapatis of Evercore.

[Mark Lipacis, Senior Managing Director at Evercore ISI]

Great. For taking my questions. A question on tariff, what is the framework that we should think about for this? Is this simply components shipped into The U. S?

[Mark Lipacis, Senior Managing Director at Evercore ISI]

Is that the main part of the tariff impact to your gross margins? Or is there something else that we should think about here?

[Guy Kizner, Chief Financial Officer at Nova]

So the main tariff related impact on gross margin come from the BOM of our machines, but it's relatively modest. Most of our supply chain is localized, so the volume of imports is quite low. The second piece is service per part, which do involve more imports. Altogether, we estimate, as I mentioned, the impact on the gross margin, 30 to 50 basis points. That said, the environment remains dynamic, and we are actively monitoring it.

[Guy Kizner, Chief Financial Officer at Nova]

And our diversified operational footprint across regions give us the flexibility and helps us cushion the impact.

[Mark Lipacis, Senior Managing Director at Evercore ISI]

And I guess I was curious is and I don't know if you can answer this, but is most of that tariff impact from a geographic location on shipping components to your manufacturing facilities The U. S? And then is that where the most of the impact is? Or is this something else? Should we think about it differently?

[Guy Kizner, Chief Financial Officer at Nova]

Partially is that, and partially of that is the shipment of spare parts between different territories that have tariff impacts.

[Mark Lipacis, Senior Managing Director at Evercore ISI]

Okay. Got you. And then you are coming in at the high end or above the high end of the target model. Is there what is the process for reevaluating your target model range and timing? Is this something that you consider doing when you're hitting this kind of levels of profitability?

[Guy Kizner, Chief Financial Officer at Nova]

So we did introduce during our Investor Day lately an updated model on the operating margin of 28% to 33%. It's important to note that in quarters where we're growing in such a quick pace as we did in the first quarter, it takes time for the OpEx to catch up. We see the increase in the OpEx this quarter. And as I mentioned during as part of the guidance, the second quarter, we will see additional increase. And this increase, we are building the main focus is investing more in R and D and sales to support both our road map and strategic evaluation.

[Guy Kizner, Chief Financial Officer at Nova]

So I think these are the main components for that.

[Operator]

The

[Operator]

next question we have comes from Vivek Arya of Bank of America.

[Analyst]

Hi. Thank you for taking the question. This is Tak San on behalf of Vivek. Just a follow-up on the tariff question. I know you said you don't see much top line impact, but have you seen any signs of potential pull in or push outs by customers just given obviously you have a very diverse geographical mix?

[Analyst]

Thank you.

[Gabriel Waisman, President & CEO at Nova]

So there are obviously concerns, but we haven't seen any major push outs or pull ins in that respect. No.

[Analyst]

Got it. Thank you for that. And then one follow-up on HBM. Obviously, you're doing very well in advanced packaging overall. But your memory revenue, despite the market, the underlying market growing very significantly, I think memory has been flattish year over year for you guys, whereas foundry and logic almost doubled.

[Analyst]

So I'm just curious about your ramp and progress in HBM. Thank you so much.

[Gabriel Waisman, President & CEO at Nova]

So we definitely see a double digit growth in advanced packaging and HBM part of it. I can say that HVM represents about a third of our advanced packaging product revenues and we do see major growth in that as well. So it's progressing across the board, both logic and memory.

[Analyst]

Got it. Thank you.

[Operator]

Thank you. The next question we have comes from Mark Miller of The Benchmark Company.

[Mark Miller, Equity Research Analyst at The Benchmark Company LLC]

Congratulations on another record quarter. In terms of memory, after several years of slowness, NAND manufacturers are increasing their CapEx. Do you expect increasing sales related to NAND?

[Gabriel Waisman, President & CEO at Nova]

We definitely hope so. And we are planting the seeds in terms of our portfolio in order to capture the ramp. Have we definitely see that momentum gearing, but still not translating into immediate revenues. So we hope that that would happen towards the end of this year as we've indicated before. And our effort now is really to build the footprint in terms of technology, valuations in order to have a strong position in memory in general and three d NAND specifically.

[Mark Miller, Equity Research Analyst at The Benchmark Company LLC]

Looking at your backlog, what is the margin profile of your backlog? Is that similar to what you've been seeing recently in terms of reported margins?

[Guy Kizner, Chief Financial Officer at Nova]

Yes. It represents the more or less the same mix.

[Operator]

The

[Operator]

final question we have comes from Charles Hsu of Needham and Company.

[Charles Shi, Managing Director - Senior Analyst at Needham & Company]

The first one, I know that in the prepared remarks, you did express some cautiousness about the second half given all the uncertainties. But your largest peer in process control seems to have soft guided flattish second half, at least over the first half. Wonder what's your thought there based on your order backlog and the pipeline at the point, I mean, of any potential impact from the tariffs?

[Charles Shi, Managing Director - Senior Analyst at Needham & Company]

That's the first question. Thank you.

[Gabriel Waisman, President & CEO at Nova]

So we are not giving any guidance for the full year, but we are not necessarily sharing the same views of our peers in the industry. And I think that our position is different. But overall, we definitely see the concerns on one hand, but also see the robust business ahead.

[Gabriel Waisman, President & CEO at Nova]

So we can definitely expect different trends.

[Charles Shi, Managing Director - Senior Analyst at Needham & Company]

Thank you, Gabi. Maybe let me drill down a little bit. I think, let's say, go back one quarter ish. I think you also said expressed a little bit of a conservatism on the China outlook going into second half of the year in terms of the visibility now we're in May. And what's the sense right now?

[Charles Shi, Managing Director - Senior Analyst at Needham & Company]

Because I did catch what you said on the prepared remarks, mature node seems to be still pretty steady, but I kind of inferred that as a China commentary. What's the China outlook going into second half? Any

[Charles Shi, Managing Director - Senior Analyst at Needham & Company]

thoughts there? Thank you.

[Gabriel Waisman, President & CEO at Nova]

So we overall, we expect the nominal value from our China business to stay flat or slightly decline year over year. As I indicated before, share wise, we expect to see a relatively lower share of the revenue as advanced nodes are becoming more prominent. We do see good backlog for the coming quarters, but we still lack full visibility of the year.

[Gabriel Waisman, President & CEO at Nova]

And in any case, we see this trend offset by the strong performance in the other territories and other regions. So overall, as I mentioned before, and that hasn't changed, nominally flat or slightly declined, share wise lower, but we do see the good backlog.

[Charles Shi, Managing Director - Senior Analyst at Needham & Company]

Thanks, Gabi.

[Operator]

Thank you. Ladies and gentlemen, this concludes our question and answer session. I would now like to turn the conference back over to Gaby Weisman for any closing remarks. Please go ahead, sir.

[Gabriel Waisman, President & CEO at Nova]

Thank you, operator, and thank you all for joining our call today.

Participants

Executives

• Gabriel Waisman, President & CEO
• Guy Kizner, Chief Financial Officer

Analysts

• Miri Segal-Scharia, Founder & CEO at MS-IR LLC
• Ezra Weener, VP - Equity Research at Jefferies LLC
• Atif Malik, Analyst at Citigroup
• Mark Lipacis, Senior Managing Director at Evercore ISI
• Analyst
• Mark Miller, Equity Research Analyst at The Benchmark Company LLC
• Charles Shi, Managing Director - Senior Analyst at Needham & Company