NVMI - Earnings call transcript Q3 2020

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Operator

Good day, and welcome to the Nova Measuring Instruments Limited Third Quarter 2020 Results Conference Call. Today's conference is being recorded. At this time, I'll turn the conference over to Miri Segal, MS-IR. Please go ahead.

Miri Segal

Thank you, operator, and good day to everybody. welcome results you conference to quarter Nova's like financial XXXX call. would all to of third I With us on the line today are Mr. and Eitan President CEO Mr. Oppenhaim, and Dror CFO. David,

Before also and the that Harbor statement our this I today's may this Safe we earnings call. in provided release call statements information to on listeners forward-looking contain outlined begin, may pertains certain remind

call of section If you will with Investor view Relations of it by an company's please business Dror begin have not financials. overview a the the received followed update, of in release, the Eitan the copy website. with the the

We for Mr. now Eitan I'll open Eitan, will to President hand Nova's ahead. then CEO. and the the question-and-answer Oppenhaim, call please call over the go session.

Eitan Oppenhaim

third will our call. quarter financial Miri, you, highlights. and Thank results start speaking about call our I today quarterly by results performance and welcome to the conference everyone

will Following including the guidance for detail, my quarterly commentary, in of XXXX. Dror financial results the year quarter review fourth the fiscal

third value next growth to segments. and bring currently year-to-date. progress industry long-term across growth while we company's for to demonstrate outstanding strategy We our they exceeded market solid the with financial we long-term our year forecasting continued targets. sound rate against devices our as their strategic previous Despite remain quarter, be guidance. we guidance our cash quarter the XXXX performance, execution we all to a Our fourth expectations the strong and generation, to and projection are Along Nova and dynamics, results the flow customers for for the outperform the generation confident technologies in

technologies. experiencing by including continues resonate year, wins the our various with our new is the quarter, shifts demand the disruptive value demonstrated during to for and third our customer in traditional market, selections technical Although this industry

and CD is our software revenue for our guidance. both revenue, reached our of our reflected record continued optical demand our the well-executed and execution quarter EPS results sales a Our and model. for operating by and product the announced Moreover, financial in of our is both global team, standalone third by our strongly result exceeded products plan outstanding our where local highs. previously This customers, resiliency

the revenue diversified the territory made highlights for up two to included which now four two providers business a was quarterly mix, logic customer global manufacturers. our and quarter, Turning of foundry and large customers, memory performance primarily

as prepare demand from revenue XXXX, from Exiting expected, healthy key and for nodes for manufacturing the we to strong and customers manage As foundry foundry demand advanced this stream both growing in territories. across and they dynamics trailing well expect as changes in XXXX several customers remained continue quarter. in structural applications

the One Nova's is most sites. continue Although of relative this towards memory our to memory in logic, existing recent us our new us this utilization in recovery our and quarter penetrate proliferation memory PRISM further announcement in a in customer to weighted expect softness advanced high memory share market indication top continued that and allowed to side XXXX. the selected its we of for The segment XXXX growing during this products was see enabled fabrication segment. and

an our both selection, to raise to a XXXX. October, expansion. $XXX also interest extending long-term fact to In indicator of on decided the participate XXX tools XX.X%. a next successful was inorganic in million. with multiple Europe announced we a but positive throughout and conversion Based approximately upsized the to have U.S. offering Israel. of to a percent The expects note organic $XXX that was offer The Following of strong we initially on million, beyond which condition it borders, sites to of completed level drivers, company zero very We multiple convertible trajectory, the our growth private combines capital due demand. offering deliver closed support institutions attractive offering premium over of at applied including to us and interest

Beyond us leverage a for it in assets stable broad company for the vote of to this move inorganic expansion, recent position our business create fact a confidence Nova's trajectory. is that

transaction, the continue disruptive seek value. to investment attractive pursue Following in will merger shareholder opportunities and new and acquisition we technologies, enhance

our both focused quarters, During the Nova's dimensional we solutions. portfolio in a and last engine growth build materials remained disruptive realizing on strategy constructing by metrology to

market introduce our and the allow set competition Our goal new from emerging solutions to disruptive is challenges. apart us that to continuously and develop to customers the overcome

traditional including standalone and III optical software months, strong engines iXXX VeraFlex and deep the prism challenges and lines X-ray all XX metrology introduced across integrated of tools with were to in generation strategy, installations. customers' all semiconductor all multiple supporting we last our CD and this enhanced product orders of traction platforms segments. learning our with generating platforms ASTERA platform, that continue the tech new part The set our complex As future new machine customer new

new market These the our Additionally, XXXX to new application create in-line, our of in overcome or advanced us to scheme aim met working today existed not challenges the will in-die their disruptive for a change to new this are have in in traditional was customers technologies systems market new total part the develop gain By IR expand to environment share fundamentally are pipeline and the market we that available with time decades. that non-traditional in strategy technologies that of fundamental most platform, space node. order to by production control process shorten metrology to in introducing steps. OCD

only back XX in customer initial certain and typically orders. new acceptances to still that installations our expect We spread, and approach, receiving after reach due announce sites. installations procedures purchase challenges leading maturity, of is according COVID- some It to XXXX. multiple mentioning cautious we actual met plans are we worth of with our a on following track multiple Although products they level the

is market on in aggressive few industry. the undergoing technology most where moving portfolio of product and process to new litho, built no of spend with industry our a to improvement trends main one compounds, sole and explain of Since more including our the our and hardware would used performance. advancement in a the materials, highlights, deposition. dimension-driven future very minutes the traditional evolution like deliver to scaling, avenues I chip long-term steps, critical longer in the Along our technology, next of meet the technology etch scaling the view, Following always quarterly the is be semiconductor the in can generation introduction In is is process alloys to advanced detail. major

VeraFlex industry It and creating analysis. need of the standard measuring control span in compositional strong for production, controlling for X-ray patent composition with a property critical performance films the non-destructive result, in-die, measure stress, ultra-thin raised a has metrology on including cases ability capable fulfilled materials' Customer happens. solution in-line material to the sensitivity use properties, wafer, of bar Nova's productivity accurate already multiple is composition, solution advanced dozens also of such surge surface complexity the analysis major As angstrom and where ultra-thin platforms, XXX most distinct each unique segment. high in and requirements of the non-destructive in such and below with more. strains, factors tools, as for properties extremely material a film,

produces units. evolves in dimension other application expanding spectrometry space solution, metrology metrology are the critical to and the continuously aspect materials ratio by driven high devices, methods performance, by and new space, XD X-ray Nova new its optical we continued the new capable addressing and In analysis led optical also including growth of developing CD and While scaling technologies, complexity, challenges.

dimensions our are While sensitivity. application non-destructive metrology address in solve was CD will future. clear as there optical with today the which measure well. dimensional new methods each X-ray vision be measure We of our in optical CD of technologies to will aims metrology extra will the in X-ray solve X-ray The critical driven definitely to where directions applications future that optical portfolio by methods between other combination distinction to and the used past, complement capabilities and a cannot materials, and to and physically expect a converge portfolio in-die X-ray the used metrology

Let now status. the company me to turn operational

pleased operational executed strengthen terms our growing to our We and disruption COVID-XX last safety quarters. volume three chain are we overcome In the the manufacturing, while take of of global the global supply high very with we successfully and in pandemic, actions managed to our health infrastructure proactively efforts workforce. the comprehensive maintaining

months. remain a the our working dedication and new levels. environment a production XXXX result to to our our concern global and for expect fundamentally implemented we ramped least procedures As employees' of outstanding them we next have up normal as the during capabilities at well, efforts, changed as lines virus XX Since the we development quickly peak and

a the and disruption. The clean engage entities local The Israel into continuity, significant growth support. distancing interim will focus on of continue for we go-forward our Industry confidence step and utilizing term business production platforms to advanced minimal in As ensure allow room flexible new opportunities our have adjustment to remote social the planned manufacturing and engines shift is headquarter for maintain long-term pipelines on customers and in the our X.X announced and global agility we our order with service goals top various various product large The for our methods. despite capacity will and line by construction the business scenarios. continuity most our is short reliance dictates our recently in new goals Nova's recovery portfolio long-term transform for focus state-of-the-art facilitate facility our and better changes, emerging ability strengthening long-term to currently new work ensure of production operational swift capabilities towards our quality in in

the with disruptions quarters of positioned Looking growth strong for in in the goals. similar guidance we fab the our of conclude, offering, strategic XXXX, we and performance. three fourth well forward, first Nova and customer equipment and strong deliver year, wafer despite is base spending. outlook latest level a is assumes our year, quarter are long-term product outperforming several diverse positive our projection Coupled To Exiting overall this the term the we finish well year had Nova delivered on growth to of expansion. results the market of industry's to for our positioned and

Now, results Dror? hand review to the call let in detail. to the financial me Dror over

Dror David

on to to business basis $XX.X basis to margin all-time GAAP the logic revenues tax the XX% to Effective U.S.-based on target quarter perform and from a XX% day, a quarter XX% the were redundancies XX% major adoption and at the at financial basis These are a revenue company U.S. are basis. XX% initial approximately rate of was at to Operating exceeded XXXX of another the company within customers and company of customer Good on penetration quarterly per from the of the the XX% quarter the and and of COVID-XX XX% on per Product per increased GAAP contribution than increased China, a than product more the diluted related third in new product two the the revenues, of the to than contributed and of XX% each or in quarter XXXX, share share increased the $X.XX all in per third approximately expectations XXXX. memory. to model that In non-GAAP diluted our margins GAAP guidance. approximately GAAP and the record $XX customer share Eitan. a contributed was two XXXX non-GAAP XX% company revenues, customers Geographically, non-GAAP third results in came a in and usual Earnings customers. distribution and came recent basis. third $X.XX Thanks and aligning levels third The Total more GAAP higher environment. the million Operating U.S. resources and Taiwan expenses quarter basis. across basis. on region and Nova on PRISM aimed to XX% foundry in XX% so quarter non-GAAP million, XX% revenues. the gross to continued on well, higher on basis, non-GAAP a for basis. in the by and in on a on company four On basis customer. Blended memory quarter foundry growing basis including XXXX a the million a activities to to a a operational a increases incremental $XX everyone.

approximately out by to a accounts main Moving XX sheet during $X third decreased balance trade the at further items, days. result the effective collection as came and in million receivables days quarter of sales

continuity measures pandemic. higher the levels and due to due to As a as COVID-XX expected, continue of taken the to company the business increase inventory business volumes result

chain order end to to across and a expect of gradually and at accumulated the secure delivery quarter the times territories. We increase and inventories much of products production supply as Inventories related inventory and the locations X with as continue year. the services possible to in $XX commitments turns million different company's third to of the

During in million flow, the of $XX the approximately of third quarters flow quarter, operating the of XXXX. approximately company $XX accumulating generated to cash positive three operating million first cash

issuance impact the result, cash to a company the overall the at million results. to in buy process. convertible The guidance of In $XX quarter the successfully of amount offering interest on already for quarter As convertible the into these accounting end the debt has reserves consideration used shares parallel, The of percent GAAP million. the proceeds concluded fourth in company offering million. back the bond of the company during increased XXXX, $XXX taken a October third zero company $XXX

We expect as the of purposes of operations par and at is million for charge quarterly GAAP on the expense discount maturity quarter in $X can consolidated as breakdown press intention a the of XXXX. in end the investors date. in in and The is is the basis. financial company's amortization reconciliation ability quarter adjust to debt and cost and to non-GAAP company The to approximately view release. of basis the results and non-GAAP convertible fourth to specific amortization the company debt due on fourth the of the the to amortization value this be for presented redeem to has have to cost a GAAP in it at expected starting intends statements purposes This years issuance GAAP expected debt of quarterly convertible five relates cash the guidance the

in may to future. adopts company shares are price the share a count price the earnings fully occur when related new underlying of standards Nova of per to for or accounting to Such the result, convertible partially convertible than the conversion diluted purposes higher the expected if relate As company the share, impact is which share debt not debt. or near the the impact

- details between of earnings the are the of the earnings between the share $X.XX, for into quarter non-GAAP expect $X.XX following. outlook million of guidance, expect margins Blended the million, following. diluted GAAP be between expected Moving per we company Revenues we diluted $XX At and fourth fourth XXXX, per to $X.XX between and gross midpoint to expected $X.XX. be the quarter share are $X.XX XX%. approximately $XX the to

proliferating in increase the closing million the slightly a products respect, that tax GAAP focus result increase provisions processes. a fourth workforce. expected the basis its resources $XX is Given to introducing of parallel, of build to tax this In on and to million to rates situation, increase Most and as up are annual continue COVID-XX to global company to expected $XX expenses and increase across to back non-GAAP approximately new In R&D operating on we approximately are a globally. expenses. Effective in expected continues basis. on quarter

With during XXXX, enable to million. As to and which a will different more of company, this turn cash explore COVID-XX are be we back We expected for Eitan. crisis. business expected the to opportunities year overall that, Eitan? the record conclude pandemic the will the $XXX level revenues accumulate reserves gross global than believe to call company to is after I

Eitan Oppenhaim

Operator? With your Dror. will questions. pleased be we that, to you, Thank take

Operator

our take Bolton [Operator Needham Quinn with Instructions] And will question first Company. from we &

Quinn Bolton

foundry first U.S. a export believe fourth couple having segment got Wanted Department Obviously, Commerce an your the needing start any any you've business outlook customer to U.S. on your licenses. questions. but the of export that's the wondering impact that results demand in of on SMIC I've the result your follow and quarter then if result don't up in as if a just market. for shipments? of outlook. from I And requires seen Wondering actions change control. Nice OCD license, with will the quarter job on specialty third export companies

Eitan Oppenhaim

demand Eitan Quinn, So, most of question. for the thank the It's here. you - sorry,

demand So from our any coming demand. came We that of tools for most the SMIC tools from Israel. pool-in shift see trying of tools pool-in in in for an are the tools rest to see Therefore, the we as of OCD of don't vendors. the do overall phenomena of part SMIC of the

the We capacity as it well. in we nor a reduction So see see demand. don't

Quinn Bolton

to win the PRISM I you you I the provide reflected more logic believe said third then shipped And memory any you have to customer second a revenue for a you heard did, that color sure then whether comments that large U.S. U.S. for of than helpful? that may also the I detail more that's the or manufacturer, Wanted PRISM at if make more in PRSIM said but any And think made, be would could was right. the quarter, you logic or in I XX%

Dror David

said is the to PRISM the quarter So our revenues for in U.S.-based adopted this to that as the third Nova year which win was the customer, logic what I prepared in in product area U.S. U.S.-based that well. which we the customer was announced in another the related remarks increase and earlier

Quinn Bolton

Dror, couple just, clarifications. then quick And a of

to that $XX rec or still a expect On million, you additional the that you to $XX $XX the that million rev to includes extent million the rec revenue guidance if script $XX tool tool. $XX whether Wondering of million rev be in on had million? in new rec would the new rev to million mentioned you $XX do to

Dror David

fourth acceptances technologies. quarter, for guidance in including reflects related XXXX. initial the already expect do elements in the The our new the new all range So the that as to projections Eitan from mentioned, quarter of we technologies

Quinn Bolton

on you inventory. lastly there for any customers just that then in support I are increased either - level or also some technologies? demand. Thank the also of Wondering you inventory, for reasons, new figure inventory increase an into continuity that one, the included new eval but if And units said of at your there business PRISM you. know higher is for the

Dror David

necessarily across in relates product. quarter, new the XXXX of new third the Yes, also increase evaluations but inventory, the not to in

Operator

question We Street. Lake our from next Jaeson take Schmidt will with

Jaeson Schmidt

here. for be your think more even logic previous that Is assumption? to the a expectation I was and still bit QX for memory

Eitan Oppenhaim

If we're stronger, will expect do although that bit up. still quarter, on a we will the we looking expect that fourth be foundry right now memory come

allocation it same be around will So in in a see more now still be the QX. Nevertheless, will the but not as stronger XX-XX, we foundry right equal definitely way.

Jaeson Schmidt

And any at you're curious then supply channel? just across the constraints if seeing all

Dror David

chain No, in which but suppliers disruption. is at difficulties times, some not before, some significant with during these any significant as of are we inventory supplier at the Obviously general, supply both also see have do orders, securing we nothing facilities. of the and hand and inventory mentioned

to-date. So do we not have disruptions

Jaeson Schmidt

then rebounding bottom with the mean the the that XX% goal even for basis. the service we macro revenue still I'll annual bit an going think out all the queue. is last mean, was into QX And back that that me should line point the How Obviously, I one forward? at about just or one think you jump sensitive. I target, to a more above grow uncertainty I think there? and Do on was is

Dror David

Yes.

the Generally, this service discussed a the we've installed the future. increase maybe between still and of the X% increase rates base. X% expect in the So is before, X% growth we as and with highly XX% is in business year, such to growth correlated

Operator

Stifel. Ho We our from next question Patrick will take with

Patrick Ho

with you're seeing like trailing that little a and looks give on time, speaking? you traction Thank quarter the logic seeing up markets little product color the is what Can Eitan, picking maybe congrats fits foundry business it at at a edge? trailing that segment you outlook. situation, that the the you're of very from off, and the color in bit well nice broadly edge you give the of of first much OCD metrology, out SMIC can and are bit on of in aside on there this some

Eitan Oppenhaim

Yeah.

significantly on nodes the advanced roughly nodes XX% So demand coming around China trailing and we around XX% China nodes the distribution two quarter, we from in the in of trailing from changing actually when advanced - over year demand the growing and coming next China, trailing and right where between providers coming year. this definitely major edge demand nodes. China. expect of this next coming continue the the is from foundry drivers next unless we U.S.-China we're XX% and Taiwan both where are see we in across them growing quarter There nodes, something a the from one will growing. that along The see foundry and And looking definitely at two now is foundry are the divided see solid from of trade grew a them war is year, trailing from least

So the expect and to same if come as will next XXXX, leading XX%-XX% growing nodes year keep modestly will this foundry where capacity what that well. increase around that edge of also in distribution it's trailing we I need the have will

Patrick Ho

occur? and market Xz the that's possibly marketplace. think metrology me growth Eitan. your Can a for space, of X-ray and go And those beneficiary perspective as question, capacity obviously NAND intensity more the thoughts capital you the starts on well as nodes. most Great, OCD And helpful, alpha may to wafer advanced and to been X in from that give need and of both my secondly, a XD shift metrology trends, DRAM the particularly OCD they for as you follow-up the industry what maybe that really

Eitan Oppenhaim

All right.

OCD the dimensional the between capabilities So materials demand. shipments divide and traditional we are X-ray I need - to it and the versus

from looking demand intensity we're the the is node new you After increase that, are sales, two number wafers. one stack every which VNANDs, X,XXX stacks, it's the coming per the number layers. the advanced right and logic now sites increase ones OCD, of the the stacks, growing foundry and and And from of further VNAND large as DRAM. the Even require increase But is Xy, Xx, is including logic. the bit the layers first and OCD. and one in going memory, and sorry, and place third I second the the it's the or I'm intensity. currently the that the place - increase even foundry increase is NAND in, VNAND also on But that Xz that VNAND to the the if that into you is most a DRAM scaling you sales actually and If memory, the DRAM think So not once Foundry.

So scale way rate X-ray And every it this same is which that the the is in, goes. node actually the new tools, is are means for XPS' the coming increasing. attach the

So more node than is new attach rate introduced in memory foundry. every having that's

Operator

question take will We with Miller Company. Benchmark Mark Instructions] [Operator our next from

Mark Miller

on quarter your the and outlook. Congrats

I new to in these you in China, customers? were you two Just third shipping quarter customers indicated was wondering, the

Dror David

Yes.

Mark Miller

And fourth also? shipping the you quarter anticipate in

Dror David

Yes.

Mark Miller

a sales year? mentioned your You software being do this percent a year, X-ray, similar you greater and just had higher X-ray for then what of see wondering, or next attach you rate was to

Dror David

to So to to - my X-ray a like to that I we dimensional well. referred of when I it that tool be as would in script, said converge part

in is growing looking fast tool. next very it's worth X-ray rate growing from growing the now in-line be our driven and to on new that on the year, if year, growing we dimensional I'm right X-ray it's that line non-destructive, mentioning looking attach see demands So from customers, tools demands from X-ray and perspective, next tools the it's okay. materials I'm of it's fact going now It's and definitely both and by right

growing it's looking growing capacity we X-ray. on X-ray, are definitely therefore So with in and

our Regarding software, at revenue. our long-term model around staying of is XX% about talking product

as year, will product will grow So software if next revenue the the grow revenue well.

taking metrology space. the outside are We of it not

as XX% look that, stick on So would to the like to we we number.

Mark Miller

With margins? or the improvement impact what that be next slight on the stay a X-ray Will year, same? growing the is

Dror David

less the or same. More

Operator

It this conference I to additional would no Mr. appears the turn further time. closing remarks. or to there Oppenhaim like for are back any questions at

Eitan Oppenhaim

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

Operator

you That concludes participation. presentation. today's Thank for your

disconnect. You now may

Nova (NVMI) 12 Nov 202020 Q3 Earnings call transcript