NVMI - Earnings call transcript Q4 2020

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Operator

Good day and welcome to Nova’s Fourth Quarter 2020 Results. Today’s conference is being recorded. At this time, I would like to turn the conference over to Miri Segal of MS-IR. Please go ahead.

Miri Segal

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

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

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

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

Eitan Oppenhaim

all then and results joining summarizing some start about Miri I will speaking you will call quarter XXXX our year. our fourth achievements you, I today. spend thank the highlights. for us by the briefly main time and performance for and Thank

Following quarter guidance financial including the revenue fourth the results with for quarterly the reported guidance my in first and annual quarter, review Dror XXXX. results for detail, Nova exceeding remarkable the commentary, and guidance, demonstrating of the and throughout execution the reaching the high the performance the quarter growing our exceptional in end of The global agility year. and by profitability solid company led our the capabilities. pandemic, amid resilience team, drove will

and support which segments, industry attractiveness growing to to Flash growth dimensional technology DRAM offering semi This our an well-performed of positive year, well. our the reception affecting customers’ and strong event, growth we model in during XX% continue trends a to and our in sound record semiconductors Our the of a all accelerated technology NAND. our our revenue of years. differentiated available innovate representing across annual new The XXXX expand in markets continue was robust as results our continued materials to momentum the a including a product to The expand and coming earnings. quarterly increase represents significant concluded our demand our operational conclusion for year demands. in market and our our logic, complex supports rate non-GAAP These XX% portfolios compelling and

successful in our that introductions Nova multiple customers well market believe across its Following to is footprint product increase we XXXX, share XXXX. in positioned and

year environment the support and that to despite this accomplishments the developed activity the our highlight Our company imposed the challenging agility along the growing disruptions. by resiliency COVID year

quarterly and a meet driven highlights, enhancement, was the are on target. logic their Based mix reflecting current a advanced long-term for current high for applications growing like product market by were required revenue the node computing XG, organic and demand environment, by XX% our In from to mature quarterly concluded to our XXXX. meet third customers. for demand technology both growth sequential and sales Turning performance primarily demand advanced quarter representing now our the devices HPC. healthy year leading-edge strong of driven reached the a Nova’s recent our dynamics, record The high, quarter of our introduction to the business the wins, progress in very accelerate logic. transitions to customers logic AI The for

nodes other industrial. automotive demand across drive digital the consumers, the and markets applications in for On the also as hand, many in such evolution acceleration various mature more

mix our segment. logic XX% was As from quarterly with the a result, around derived revenue towards of this weighted

demand the to expect just various same generation year healthy started XXXX continue we this logic across as well. we Although

in the DRAM, mix. quarterly increase in demand, more fourth their our mainly Although investment revenue XXXX customers was also more quarter, sequentially than to robust in memory grew our which in XX% logic started

The XXXX during evolving as this memory expect growth COVID also moderate demand across memory is in application segments. continue semi broadening in market space. various to We well fueling other

better expect result we As in and demand investment supply in DRAM decreasing of balanced levels, more inventories a memory, cycle XXXX. and both throughout a NAND

Our by three mix major highlighted revenue and to the foundry balance also is which progress memory contributed XX% this leading yielded our foundry in quarter This mix, along includes our customer customers than growing a to more revenue. manufacturer, a a the leading year each that provider China.

more our One fourth the materials revenue from achievement notable record in contribution of metrology the quarter sales. was the

nodes. most thin leading logic VeraFlex quarter, film Nova’s the material were for orders multiple the control metrology which process into The penetration provides received manufacturer metrology material During position technology a industry our leader. as breakthrough thickness leading win advanced and solutions. metrology marks current emerging customers we multiple Nova’s for recent material for and for and bookings platform, capabilities The composition all Nova’s growing cement

stand-alone material consistent measure expand part As The to the as December applications. stress, both metrology designed of is of launch materials logic strain a for a exposure in revolutionary to more announced properties, in-line applications, and approach and materials our to metrology platform solution. ELIPSON, we surface such new memory Nova

we customers, the XXXX. accounts and we outstanding initial revenues multiple in announcement progress had already the with several recognized Following from

COVID-XX high, now the me past our concluded the on than annual a threatened better world previously compound our revenue year a to an light of representing growth signifies quarterly growing challenging note record yearly in a shine some XX% benefits. Let year rate stability. to end years. X Nova’s optimistic performance anticipated, which We for

strengthen significantly as Our also income net year-over-year. with to earnings well growing continued profitability

to this period, I multiple strong factors performance contributed and would During four XXXX mention in like to disruptive ones. our major

product allow lead allow during to faster to which and well model support adopt and stronger our recovery this that resilience, our territory function model Nova flexible This the plan. the tighter safer changing conditions. is robust development employees, environment currently better guiding is a First operational period to supply built go-to-market strategies, chain, for advanced and agility cycle, we times,

XX% without a a single around plans by our demand manufacturing As result, continue capacity to and shutdown customers’ we day. according increased

to this of team global and strengthen our invested professional service. Additionally shorten by restriction, time the to headcount to year in around the increasing facilities expanding light the and customer continued and significantly we travel response globe

introduced enhanced during Second the the we product is year. portfolio

and Our investment grew new both lines of which generation, was ground XX% OCD, the development the stand-alone the up. in new new the industry, In advanced light on of focused from our introducing and year-over-year, platform and two a all integrated software in research including the technology introduced products product development, the product we X-ray to entirely lines, evolvement in at main and generation package optical XPS. the and pillars: around traditional

already revenue. are generating accepted All and of them installed,

technology accounts, this new the stress positions in metrology platform and system. that metrology to proliferate year materials memory winning new continue information based Regarding like on front, aims gaining platform materials introduce strain, to share we and Raman our deliver introduced innovation, new multiple also inline and to unmatched PRIZM by On are both additional ELIPSON, any this the materials logic. excited newly a in other we

As record year-over-year. of result revenues a and new our the annual in these and portfolio, product metrology standalone could both in reach sustained integrated both innovative we significantly growing CD initiatives optical

third us mix cycles of I the continued demand diversification is mitigate allows to the The to mention in would different that our industry. revenue highlight like

logic, also globe. balance The accounts mix support in long-term The penetration and our XXXX a to strategic to wins I with towards of the had growth year IBM, This will mention given highlight healthy responsibility customers, we including XX% global our targets support memory last other and would China. creates contribution, into other COVID-XX in reality roughly that plan social significant to interim this growing the large was Although of our continue weighted revenue and to we to in importance XXXX. plan. regard commitment the solidified like across been is communities have manufacturer

well families, the year, individuals communities. and and customers our as we Over as in health the supported past partners proactively organizations

ethical, aiming Our evolution our enhance is corporate social performance. announced continuously social recently a strategy responsibility and environmental practice, of to ongoing our natural

dynamic Despite and responsibility performing to solid briefly year. continuous our challenges socially and committed disruption position over before summarize hand Dror, our daily operations Nova’s wrap inviting associated up me while growing and the business new with into We driving global and call adopted are and a let results management, all pandemic I our into into the social growth To ecosystem. to the environment stakeholders market responsible incorporating going spread, to team quickly well XXXX.

is industry the of tremendous result through structural transition evolving a a to accelerated and markets. adjusting as catalysts the demand changes data-driven going While different world, and changes meet more expand to is available to rapidly the our these offering our

to new rollouts as in positioned product on agile growing believe exposure well. broader we innovative and is well Given that opportunity operational XXXX growth opportunities Nova capitalizing to range, a continue portfolio, our model,

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

Dror David

expenses non-GAAP exceeded on revenue and gross Blended to logic and XXXX was due day, basis Good to favorable basis. product product lower all-time the as mainly we proliferating fourth and income XX% a at higher share Service to diluted non-GAAP basis fourth $XX Earnings between annual per in a our reduced revenues. in of net and record non-GAAP a currency and foundry per operating to presented product rate. to than XX% Taiwan, contributed reduced to on and and XX%. basis more an basis as per share, major million, unfavorable share $XXX infrastructure, guidance mix. on same and $X.XX In and grew on due XX% fourth a in product a basis XXXX, impact XX% contracts of to non-GAAP of grew XX% or basis the adjustments. and $X.XX. to financial as In customers and Total a basis non-GAAP and less by one expenses grew for favorable gross target increased due GAAP within in end technologies while and and year-over-year GAAP our elements annual product reflecting foundry margin grew rate unfavorable of revenues, more to materials from XX% result development, financial reached a research basis announced of XX% to Korea to share developing, fourth of and customers over $X.XX, including and exchange well XX% basis basis, related quarter well company margin our a in margin notes on similar per quarter, share $X.XX previously inventory and distribution basis, to closing basis, Operating customers range. mainly which cash earnings million Israel $X.XX basis, revenues distribution as on our growth per new contributed $X.X to contributed gross a to per XXXX, and diluted increased mix major to $X.XX the concluded XX% expenses Product and revenue growth, to in time a financial a basis on quarter in to Taiwan of unauthorized of one end-of-year bond parallel, while and as Earnings offering per between of a October debt basis non-GAAP our expenses million each of everyone. a investment foundry basis XXXX expenses successfully an approximately an XX% of in costs approximately grew XXXX, memory. in from rate. XX% made free included customers transaction three year-over-year, non-GAAP non-GAAP and Operating end-year for a administration mix. were and basis $XX contributed share, margin and in gross as XX% on to for fourth a onetime Product year-over-year adjusted memory the a our earnings on of quarter revenues, favorable from $X.X issuance for headcount non-GAAP a margin and material memory. the were XX%. GAAP our expenses and X% XXXX product and customer. basis $X.X related of to per GAAP gross basis, significantly of Both on GAAP levels, each utilizing two on GAAP XX% fourth an revenues, quarter high on on a mainly outpaced On $XXX Geographically, costs, $XX XX% XXXX. revenues a XX% recovery of increased million. million, basis. in a GAAP on and presented margin of as the In Eitan. grew XX% GAAP XX% costs. generated approximately mentioned less the XX% due previously million the warranty basis previously purposes. representing the Service income was revenue GAAP than in to year. amount increased exchange Product a currency convertible Israel contracts customer was onetime XX% a the XX% million. consumption the a XXXX $X.X guidance the a were on quarter higher basis XXXX. the blended higher expense customer convertible slightly on $XX million to Effective flow reflecting to contributed result share or GAAP than model was On institution. the XXXX materials, revenue in Korea approximately was significantly higher on of above amortization XX% the general quarter related XX% guidance foundry revaluation cash memory $X.XX the result in related in and China non-GAAP logic a million XX% On a the issuance of to including margin introducing a China of lease Product per these three from on gross on and diluted revenue significant more million, two on XX% the of the of liabilities quarter tax of products. approximately discount and the Thanks, Operating customer. a quarter Geographically, XX% in approximately our Annual Operating XX% $X.XX personnel

of XXXX gross $XXX us within reserves cash to As excess in with a opportunities pursue enables result, which business entered year. we the million,

be outlook share the share expect margin At quarter XX%; million increase blended into tax Moving to and Eitan? gross on $XX.X and basis back to earnings between XX%, to guidance, while we $XX $XX $X.XX, on expected turn we a to effective following: XXXX, first million, the million margin per be I XXXX expect year. Eitan. XX% the earnings With approximately is service XX% to per million for the approximately call GAAP the will of $X.XX. GAAP first $XX midpoint $X.XX between diluted the between a quarter operating to basis, be and throughout first approximately to between gross diluted expenses non-GAAP the of revenues our to $X.XX of approximately quarter that, non-GAAP the rate be following: to and in

Eitan Oppenhaim

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

Operator

Please We Instructions] Bolton [Operator go you. now Company. Quinn Thank ahead. & Needham first our will question from take from

open. is line Your

Quinn Bolton

Congratulations you of would sit strong half first you. front level more has I the love debate you us half and would year? whether the revenue strong the second is sit whether as through my revenue question and in weighted book your have Thank year looking for weighted. among wondering make perspective about profile you how here strong or balanced could I just this guys. XXXX, on your half spending into order that very a you and as guidance. first your quarter peers I balanced guided first comments sort your think think you ‘XX look front am you XXXX some you you be guess if any been sustainable of Hey, There at about is. a to finish very today quarter. or WFE to loaded, backlog your

Eitan Oppenhaim

Thank and Eitan you, it’s Quinn here.

and at fueled we what remarks, logic the there first so in demand DRAM. that So in my regarding the healthy first catalysts the secondly, the prepared in half investment growth which the in least as I the that in foundry market is in said and XXXX, at continue are growing expect least main in review two will half, entering should XXXX,

Now not the the second cautious we QX you guide visibility the in the right XX% XXXX and as regarding and at for XX%. I is say in the support so I great. market that year prediction the know, for although the analysts be can don’t the half now that’s that saying grow and to will WFE around

X, HX demand, half on looking are continue will X, I I added healthy I I X-nanometer am half, second will foundry mainly segments, the that the basically probably think in now be NAND, by right the think same fueled okay. if looking be think that VNAND, logic and as logic foundry. second on we will the on the the and on and that well, If

on least am a prediction. I looking So balanced right at year, now from our

Quinn Bolton

then to And one added fourth to things the Great. costs that the appreciation that quarter. shekel of the Dror, you of mentioned in was the

us XXXX, as have if quarter. this those going expect are exchange currency Just or OpEx you are sort foreign that’s are Do OpEx thinking for costs with guidance exchange? you looking higher foreign of about the year that How you about wondering, to on and thinking given ‘XX? remain in that sort to of are you OpEx first how elevated you

Dror David

Yes.

a elements since during foreign the of obviously, hard is the then. low some first and level recovering So these hit say it’s rate did to of I the market. quarter, can exchange started predict economic What that kind

quarters. kind hit of coming from as small remain result these is assuming so will not hit it a guidance – in aspect January, And some at the low stable of the that in first additional get expenses quarter already the another levels debt. currency would Our for embedding a did an impact again,

Quinn Bolton

great. you. Okay, Thank

Dror David

Thanks.

Operator

Atif question move Citi. Please from now our from Malik next will to go ahead. We

is line Your open.

Atif Malik

you And products first technologies on taking comment you parse the thank DRAM-type intensity and as Also, Eitan, my guide, X-nanometers? can your to X-nanometer all results the Hi, mature devices, good leading strong very year, last for in job can the we on versus it you of questions. if the if on XD, between demand, largest demand and metrology edge? move be

Eitan Oppenhaim

the Atif, Thanks, question. for

on we’re looking there intensity, right now if two are So metrology pillars. the

the The at the pillar DRAM always or has foundry, in highest in segment, in the there are reason are intensity is is allocated. reduced many is This And and stable all way materials The is end the the as also that okay, logic is mainly there the is the products VNAND, the higher dimension. products. the number products that NAND. of and the is it’s that first DRAM that the the the and and and in foundry, along been semi we that after intensity the to go VNAND, changes more

intensity wise logic the the higher So in always is foundry.

is this pillar. one So

when you’re a the always on a in to to now when X and The logic the you changing to movement change are moving well, the the of down segment. second increasing scaling nanowires is also moving right go architectural course, to if and is every memory generation materials. that the And looking every intensity as move structure And device, of and new for see itself to also, new new the on – complex to a we chip the that pillar is and X changing moving device. you’re current generation the are you

now is and level, attach right? the XXXX, new then up. you try by we’re on all be your talking of normalizing is logic or some to generations X-year, memory, to and rate always, to always But in well. if next going are capacity, going it foundry technology if replacing higher changing you replacing as intensity intensity, offset. higher all higher. devices, the materials we it about have the if very that same you the right the And are is XXX is So also and complex looking and need intensity to going going and course, in X,XXX when and when wafers, wafers not have so nodes We So logic you’re in capacity the see offset and intensity going both the

Atif Malik

Great. And driving margins you the about And talk as Is for volume? service two higher can you my March gross quarter? it thank follow-up, margins. just the if in what’s breaking out the the

Dror David

Yes, sure.

was adjustment. that aspect consumption QX, obviously, So specific one-time and to the phenomena material phenomena end-year before, the I a the in in quarter related mentioned more

So in should gross see this levels. service quarter the along first level, returning actually, further year, improve pickup revenues along even the year. in the we you If what the margins can that margins see normalized we to these is a and from are what will service is expect

Atif Malik

you. Thank

Operator

go We will Benchmark now move The question from our to next from ahead. Miller Please Company. Mark

line Your open. is

Mark Miller

it in up trend and to Based it is appears midpoint your last going like that guidance, of on significantly XXXX. the that R&D be Is went looks quarter, correct? continuing

Dror David

Yes.

Mark Miller

Taiwan you. to Semiconductor major starting to is fab a Arizona. putting up a orders year? Are that? that be Or later of key in is this It’s Okay. customer from in going flow

Eitan Oppenhaim

know So And they I going the know don’t I exactly when the the start of don’t the orders and to probably end come, again, to but fab are probably towards for year. orders the will Arizona arrive.

Mark Miller

Thank you.

Operator

Jaeson Please move next we will And to Street. from Schmidt go ahead. from Lake question now our

is Your line open.

Jaeson Schmidt

taking Hey, my for questions. guys. Thanks

rate for service think of be sort a the time, that I talk about growth line that the is goal there still good that targeting would revenue think ballpark revenue was at stream? for one growth, to XX%

Dror David

following. I the Well, say would

and Our services value-added growth the the current is growth for year. base assumption on depending also services specific and installed X% XX%, in between

X% going this could around be level, X%. XX% years year, this XX%, year. obviously, a it’s up So it’s approximately to it to was There but between way,

Jaeson Schmidt

supply side here That’s forward Okay. you’re And as on going any QX anticipating a curious just in you any the in helpful. if if just near-term? then or the constraints follow-up, saw

Eitan Oppenhaim

chain. production we I everything you for trying well secure to chain managed that are in facilities, think the XXXX, supply supply if in very Jaeson, the that we talking our about can

our tried the and So and to try in need is qualify forward also, see we we we in increased we that growth our that elements you sure And a a have try it of a supplier in in production. X order each looking to is the And actually X one we see or that to months, capacity make enough supply line, second we we way report. currently. to third that also to for the chain. because remember inventories, to means are financial the any to see secure But regarding this secured. the and And the disruption capacity need that we don’t next bottom extra trying

So if the worst that and even same is behind us through the XXXX and be I production, we the higher. can could succeed think increasing XXXX

Jaeson Schmidt

Thanks Okay. a guys. lot,

Operator

now take Ho we question go And ahead. from next Patrick will from our Stifel. Please

Your is line open.

Patrick Ho

on Thank very the materials and year. adoption to congrats for new you it’s a see good nice traction very quickly maybe off finish and the to front, much first these Eitan, the metrology on products. the

side the the the side applications has some you some memory things, at and of materials the today? wins color little have the metrology can and on of a mentioned of you DRAM As you that more give intensity, potential memory look maybe with higher metrology offerings you on

Eitan Oppenhaim

Yes. Thanks, question. for Patrick, the

all running the okay. and the and in applications This previously specifically applications thickness X-ray the So the running we ultra-thin two two composition, products the main these that on the are customers. – material applications is composition, or two ReVera on is measurement, are the main on

We or lab-to-fab. metrology fab. a couple the started, it from per it from Now because phase the systems started per of a it started it’s with way from unique that XXXX taking capability,

them we in some production. move X those were And in could in of tools. be were R&D them the to production years, tools real inline of Some last

rate to them in move you intensity. and the inline you also once the So and production, attach improve

fast nondestructive because it’s can to and say but to XX%, attach you’ll between to confidence, capacity, without or the that more more I getting start and logic, capability, and into exact the customers’ a distribution more get foundry you very the once with it’s So memory the numbers, start around XX%. get it’s becoming intensity. fab rate metrology

are are And applications the when are starting new and moving and side, they applications mainly have foundry, they the very when So from also the we to have to memory, for materials. ultra-thickness structures. VNAND changing they logic coming

direction we them measure So really intensity in-line have that systems move once to are different two the it’s increasing to the the the both of usage but fast. and of capability in-die

Patrick Ho

And XQ. performance on it’s helpful. move as to Maybe business evolving core maybe question, how good is continue you the How see draw type services margin more break-and-fix services, services from are the customers really model, improvements, into mentioned to that with the upgrade? as we follow-up much as uptick margin features, where of helping only much enhanced my is standpoint grow, contributing and to type products That’s improvements of business with Right. of that as the not well the but in forward enhanced you the traditional growth margins?

Dror David

XX% bit of probably of a in end on the ability low to this the the do to upgrade services because situation the of the That’s which a the of in enter point, in XXXX, good year little the and mentioned. of impact at fab actually, Patrick, because had was XXXX, that I cycles least COVID-XX, these at And growth the of some was megaprojects first limited. the half the X%

into accelerate we our less to revenues Looking when XXXX, these services XXXX, And in are significant. can the business. contribute limitations forward, obviously, in more move the this growth and hopefully, hence, of

Patrick Ho

Great. again. much, Thank you very

Eitan Oppenhaim

Thank Patrick. you,

Operator

& Please We Co. Krish will next our Instructions] Cowen Sankar take go [Operator ahead. from question now from

open. is line Your

Krish Sankar

definitely calendar really Yes, peers. to hi, question at have guys your the I you of grown numbers, thanks question, some seem really results. one quick the strong both or my on for Eitan industry look also your congrats you outperformed Dror, nicely, when ‘XX and taking and growth

a vertical then share curious, And there growth much came your a of or is quantify from it I’m of were was So you had I foundry, gains? and those And way can kind memory? share follow-up. logic how which gains

Eitan Oppenhaim

question. So, Krish much thank the very for you

now as And in XX%. looking looking our said, you market, the about was products, in was on if year it on you’re growth growth the around XX%. So rate if right average the the we’re right now

is capacity is I it’s as you’re big mention share once our said In because all strong in as well but a that light the that a that, market global I think adding either before, specific as So it couple this outperformance, to to percentage I And share in gain. demand new our doing well or one purely year. of old as other high as where, in starting are performance of is you’re IBM, from as of catalysts there I year, calls; in But memory my the it’s capacity and share growing market them, in in customers two market integrated second some took exactly materials taking is that growth. of of open discussed market course, we this remarks, portfolio, I a cannot a prepared a took stand-alone of segments. in mentioned we share. also software. you customer And – in my holding and were couple One, China

the for So in right this demand. it’s is not open that mention also that in top will XXXX, definitely, if we And are years. year share we’re that – there on were many probably new bringing looking market applications production would answered in on product increase of now the I new

also getting in increase, production. So besides the the it’s moving to we measured before were share, in-line and applications lab can market now that

Krish Sankar

products then assume level, op And fair and product impressive. a for Very similar it margin and margins. it. to At service have service color Got the had quick Thanks is the op just on margins? gross the I follow-up.

Dror David

Can question? you the repeat

Krish Sankar

to similar The low In op margin op are other level, average? words, that corporate have to an similar OpEx, product services divisions similar product. from to they low level sales margin R&D service and

Dror David

Yes.

and the is that engineers business is products, on heavy is maybe and relative on field materials. situation the service service the headcount to actually, personnel in as more whole field heavy a So which

the this services and difference heavy forth. practically, products, reason on organization main of the infrastructure gross is of XX%. the personnel service main is globe, margins across reason so headcount and that So around it’s sites services for the the the Again, products XX% between is and and around XXX

Krish Sankar

Got very Thank much. the it. you color. Alright. Got it. Appreciate

Dror David

you. Thank

Operator

further no are there And questions.

CEO, like remarks. to for So closing hand to call President any I’d the Nova’s Oppenhaim, and Eitan back

Eitan Oppenhaim

for our we you. you joining Please all Thank call you earning in stay meet the Thank and today. next you, operator and safe call. healthy thank and

Operator

Thank and participation. concludes this for your Ladies call. gentlemen, today’s you

You disconnect. may now

Nova (NVMI) 19 Feb 212020 Q4 Earnings call transcript