Earnings call transcript Q4 2022

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Operator

Good day, and welcome to Nova's Fourth Quarter 2022 Results Conference Call. 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 everyone. welcome you to call. our like would all to of conference I us are today the With line Mr. on Oppenhaim, Eitan President and Mr. CEO; and Dror CFO. David,

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

of you in the it have please release, view not If Relations received the section the website. a copy of company's Investor

Dror by an with a business the will overview Eitan the financials. followed of begin call update, with

will open We then the the question-and-answer call session. for

Eitan turn Nova's go now the I'll call over and please to Mr. Eitan, Oppenhaim, CEO. President ahead.

Eitan Oppenhaim

you, the highlights. Thank our start call joining by for summarizing quarter you and performance Miri, our all full-year will call today. I fourth thank and

the Dror annual my and details. will financial in Following review quarterly results commentary,

perform concludes industry in business strong by volatility notable strength increase performance model Nova's Despite full-year, and demonstrating Nova revenue technology. markets fourth behavior, across of and quarter was during a the our agile and the market record highlighted diversified profitability. to the and fourth well in and dynamic the customers, year another quarter able

proliferation can position particularly penetration. us long-term that addressing we to share gains, seize our While challenges, our help company's solidify new current environment, product strategic of the through and in and newest in in opportunities, our control we strengthen plans position on interim various this process implement periods. to portfolio, believe continue additional remain the focused We fundamentals unique market our the

our quarterly and new the at came the high-end As yearly of in quarterly financial quarter revenue testing highlights, for records. fourth guidance the

EPS strong first XX% year $X XX% industry per on the year-over-year, the year. for annual new to allowing high an time. share While quarterly results remains record Profitability exceed indexes for company outperforming the for grew basis revenue of the annual grew the with revenues

significantly also productivity of the our XX% in million and revenue. to increased Along demonstrates record packages all our product and divisions, chemical surpassing customized dimensional, of lifetime in $XXX business across our metrology the services results generation. improved attractiveness year-over-year with and our sales, grew materials, in XXXX milestone previous extend tool, the annual product This gaining

growth, be as to three their softer which XXXX we demand years the They we made Nova relatively to more some will expect possibly PC, record ended with volatile industry outperform meet fourth customers capacity mobile to others. significant of in enable adjust segments uncertainties like these XXXX. us Following quarter and a anticipate in backlog,

the navigate that future, as intact will growth adjustment, map and a the opportunities, To our and to main adjusted applications. help believe all continued in additional additional as well to enable our programs increase potential fundamentals unexploited short-term with across these meet market capacity or industry in During undergoes we customers, as trailing building investment long-term tighter exposure territories. this strategic our in priorities edge either nodes, continuous remain new well-established the us opportunities, R&D road period, the markets, risk us partnership

agility and our growth following again growing the XXXX The in future with to and highlights. its demonstrated activities in were our contribution diversification once notable

I First, revenue highlight generations. mix like across various would key to our

nodes, and different our nodes edge XX% territories. from from where is generated nodes variety revenue remaining technology training across well revenue in approximately of advanced came technologies Our diversified of the a while different

technology in utilization in as year process in and improve during accuracy nodes nodes. This investment we control legacy significant these While in metrology edge the end. result a affordability for demand front requested saw past, in is to and continuous solutions require basic the the a these similar growth cutting performance, yield of

to demand end, believe beyond we few other for two enhancements advanced need expand next where that We in in the for and trend see growing the also technology improve will the by used basic front have end. fewer past. involves encouraged the since advanced across in days, packaging will solutions years to Additionally, metrology nodes performance, customers grow this back that very accurate past control to process the chip fast were metrology

Second, progress made of metrology like would contribution our increasing in I the to materials the highlight portfolio. we

goal of outlined division. of and both metrology as customers leadership and expand back-end record ancosys more Investor billion materials Nova the in Our the in to this and mix the XXXX, segment, $X is recent XX% to during Day In for part metrology and more we revenue revenue both succeeded area XX% resulting plan. previously in front-end our the our in is clinical adding application reach the

of range to will expanded customers include greatly profiling composition, advancements more. thickness from continue is expand in we engineering measurements application aim We to complex purity, The anticipate simple materials the materials modifications. stress, that serve application inline performance and as materials today to mix and improve

technology through diversification. A highlight our further growth is

year. increase a our logic the latest we memory introducing business main customers, sales standalone to expand by are adoption and addition, adopted lines, sales. to we technology solutions in of manufacturing record addition PRISM volume ELIPSON OCD solutions continue with PRISM and Furthermore, our METRION, high in our in which among new numerous performance significant the encouraged product In during customers of of resulting the were by the

XXXX. with by solutions are be further Both customers additional made in decision undergoing to expected evaluation currently

We NAND that segments. wires, the different our we opportunities market have and broaden advanced offering will in Logic, are across nano confident metrology including demonstrated

year portion portfolio. Another was this growth our that was of engine the amplified software

software. high in within for and strategic the model target reached Our aims complete of second at a adaptive segment, in this new year our the machine to least XXXX, for XX% learning end record row. plan we generate management of modeling-based the putting us a By revenue, product

should geopolitical distribution our well. be current the considering XXXX Finally, highlighted environment, geographical as of revenues in the

us memory to some support territories and in the were While U.S. doubling across in future. contributors helped counteracts risks year-over-year. will the in Europe of revenue China forward managing continue and has approximately weak contribution us the Taiwan the our regions lifts and potential largest impact the revenue Divesting different demand

our To be summarize to that adjustment my We part, impact of demand slower inventories a by with to customers year its will and planning. on segments. know and in like year now I as high capacity would refer this various struggle XXXX

industry driven the the strongly Although engines are the by in we current navigating growth and in multiple long-term on risk space, believe technologies, environment. we focused

maintaining Our focus while requirements. spending, is on meet balancing customers’ competitive edge drive investments and R&D to

well we years, segments. and by in relatively recent expanding XXXX, new market our across in As adding increasing new industry as applications, to winning share, opportunity mix expect outperform names,

robust remain confident projected strategic softer we outlined in a XXXX is be years $X in billion year, our conclusion, while In to of Investor plan Day. following our three growth,

solid next up operational set and Our years. and outperformance structure, over the competitive position us strong outgrowth few deliver cash portfolio to

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

Dror David

full-year Thanks, Eitan. was reached Product logic with revenues slightly XX% conference U.S. more approximately Products above included memory. in of XX% our Good XX%. joining fourth call. record and fourth a XXXX total the than day, in everyone, XXXX four of territory Total territories up from contribution revenue to approximately foundry XX% the the level growing and distribution contributing each and the million, and to from revenues XX% customers quarter $XXX you year-over-year. thank for quarter of three

due basis Gross product the a target XX% the basis model, lower the in mainly specific quarter fourth quarter. mix company to was margin on GAAP than a and in unfavorable non-GAAP XX% on

We already of expect current return XXXX. the gross in first to to margins normalized levels quarter

was The and Operating on increase increased came million a expenses $XX development the basis. million quarter and $XX a non-GAAP higher at and to on mainly in in research GAAP basis expenses. attributed

company in already XX the measures XX We the to level to result as first by expect cost operating restraining a quarter $XX decrease million the expenses of of implemented management.

GAAP credit the and diluted than within mainly were the rate fourth XX% was on on a quarter fourth XX% debt on U.S. target on the result values the per tax in XX%, of a model. company's basis and non-GAAP basis the The basis $X.XX quarter margins Earnings increased a $X.XX in lower effective a fourth basis. a in Operating quarter financial higher-than-expected tax in to share non-GAAP as

a the across for ancosys, calendar equipment annual factors. than growth average XXXX a and to was service lines acquisition the of record substantially each product from higher metrology fueled of revenues materials to revenue installed business base revenue industry growth is strong The results main grew active three the XXXX, rate by X,XXX on and installed the of of level year of in This Moving growth contribution and higher fab the industry. for wafer systems Nova's $XXX our million. a XX% rate dimensional utilizing than approximately

It revenues. revenue through more to in important each of in logic memory new in its Annual result approximately and as acquisition two note expansion front-end than foundry of customers and into and the back-end had territories company from company approximately of into from for XX% China accounting and of a customers new distribution XX% was expansion past product the the four customers product the XX% that doubled number and XXXX customers years, ancosys. two through active is

higher features and company by stable capabilities customers year operational company of continued XX% challenging within achieved was the XX% present XX% at the the to and the gross costs. supply non-GAAP by GAAP product through environment came the platforms. to for to on margins able Year-over-year, a significant in a rising Gross chain and in and on was inflation a XX%. margins efficiency of proliferation growth basis This target basis increased new same of on provide value that model

non-GAAP came year-over-year XXXX the the basis infrastructure, increase and and in on levels strides a in and projects its in aligning a at made a development basis. business $XXX teams a opportunities. non-GAAP significantly meet expected and on million to sales and This reflects basis million expenses as GAAP XX% current Operating company on increased $XXX

Operating basis in came the share Earnings on of per level at $X.XX in at the basis grew on annual basis at model on a non-GAAP GAAP margins a on a and record at of came target financial a basis. XX% $X.XX to of XX% for year of company's GAAP on basis level record a significantly and a an high-end diluted and XX%. non-GAAP non-GAAP the XX%

of cash XXXX, year. days $XX million in free healthy management inventory a with company times sales turnover and parameters of flow presented working X.X approximately During to capital the XX-days approximately related and outstanding generated

ancosys; capital approximately expansions the and inventories $XX during investments accounts approximately of $XXX deployed addition, approximately capital million million in growth; and $XX $XX main follows: million for company facility for acquisition approximately for million during share $XX mainly the in cash all for receivables; working and repurchases. in In sites XXXX, as approximately million

$X.XX. first revenues per per share diluted Moving for between in between XXXX, and of $XXX to expect customer earnings non-GAAP the guidance and GAAP to reflecting the $X.XX $XXX million we earnings share quarter adjustment our million; the levels; on followed: between spending diluted $X.XX $X.XX;

non-GAAP of anticipate quarter basis we midpoint million; come margins a relative and to the a normalized approximately financial to operating come improve come to to a the on first the of XXXX quarter level our expenses previous approximately tax following: XX%. quarter At relative income expenses decrease at at basis XX%; yields $XX million approximately to previous decrease the in million; in $XX approximately and estimates, on operating rate higher $X previous GAAP to relative due Gross and and approximately quarter the effective cash to in to on to to at reserves, to increase return

for has already the different the reduce note levels. conclusion plans scenarios XXXX. prepared of are management continues mechanisms yield measures closely in restrain These fruit like mitigate and to first expenses would I market company to remarks, several In to different company of the the To already demand to customer XXXX. and operating expense activated monitor my investment expected to that scenarios, quarter

part of as program, billion growth $XXX to grew the the million of which cash aggressive plan, strategic the was at over In as healthy execute share level as execute $X reserves us and to continue initiated strategies in in to continue end further are This to and and $XXX addition, XXXX. XXXX Nova infrastructure cash grow well repurchase company's investments the XXXX. allows and and expected announced million

questions. your Operator? we that will be pleased take With to

Operator

Thank you.

[Operator now America. go of Our from comes Arya Instructions] begin question-and-answer the Bank from Vivek will first We session. question ahead. Please

Unidentified Participant

broadly Hi. outperforming Is push This your well? Vivek. something is you. view behalf near of trend for Jain] cancellations some broader outs. just taking as on of And are and Thanks industry are you my [Sachin that mentioning question. the Thank know peers you you're that do (ph) the order seeing how speaking demand I overall?

Eitan Oppenhaim

the for Thanks question.

a will So -- to the see see we so not first particular outs all, do we that changing We do (ph) of basis. it's the year. behavior gave. responsible talk do be I’ll the in] guidance are of environment daily things dynamic We And push of Eitan it rest not current are see the on about a here, dynamic beyond in quarter and our this customers. we giving [go

when market even situation. major we the as the see enough, on I Fortunately target is didn't quarter, of our cancellations, outperform the before, rest said we're and in currently the current to looking

I said products, And market my identify new in share, as remarks, difficult same. And the be knows Nova growth will very that to technology. either opportunities for it in XXXX, new I in prepared geographical development, believe situation

Unidentified Participant

guide, Understood. contributing been dynamics over And Should services we assume then how has to I guys time much know generally downturn. similar but more around? is don't services outperformance? the that this resilient you last

Dror David

strong do which at specific we we now. than situation, less it grow a also some in So XXXX. was service the bit But impact see areas, as in obviously service expect XXXX, the in lower-pace to a right little in on obviously revenue business generally, maybe well are current

Unidentified Participant

Got so it. much. Thank you

Operator

from from Company. Our next question comes Quinn go & Please ahead. Needham Bolton

Quinn Bolton

Hi, than nice of and Dror, going control expect some Eitan sort expect non-litho strong in will they're outgrow relative they start faster process of outperformance sort say the guess congratulations to I outlook. grow WFE. to relative WFE, other XXXX, wanted on that of they results with and to I peers say will peers your the

people about so the is it give -- are year? more the XX% And I talking you Is year portion, to can us non-litho XX% you're outperform? just XX%-ish or when overall down to sort expect WFE, be which this of which this might XX% it base think just what's outperformance, down you think

Eitan Oppenhaim

Quinn. thanks, yes, So

the now, So WFE results, some of on that of that to the But and peers So industry. course, deduct right that's right second, little the XX% both XX%. I'm consensus all when okay? on reported, of reported measures. -- lead to -- is performing, the looking -- two say, on would And I'm around, looking outperforming right you to now not One be is now the as provided equipment looking them us of the the look of need we’re my rest percent.

even better of and that. to we think XX% I one them want than be reported

Quinn Bolton

through know that the revenues of you you I want you And Understood. into second revenue beyond first wondering, kind that of the XXXX you're Just really any you trying the weightings half seeing event? But from Do you think quarter. might think relative could don't as trough? second what guide of half of, where half? be current think to weak today, sit do just Is customers, a have first versus half to sense XXXX?

Eitan Oppenhaim

reported right ahead numbers happen in we I think quarters the the to the thrive now stay it in on current fourth lens, be position memory So HX quarter. what that and price not how look approximately because responsible will okay? the if will on again, at And the of of we it will you I would the like depends least So can't us, be predict in on the everything to guidance. and from recovery,

Quinn Bolton

it. Got

quarter, Okay. impact Wondering I only seeing data, some And those the materials restrictions? a to business we've another million out any had from OCD on of you export last then called from are impact think of metrology as quarter lastly, controls. the you China China $XX

Eitan Oppenhaim

two. I'll So to answer this divide

minimal the said, it of and side, $XX U.S. same from saying first on coming remaining around the million material the as version is are all, that So the impact we still you is

that Chinese we don't level that need is can aware right to XXXX. overall China lead Netherlands, from the to okay? going of from see now, current planning semiconductor something stay is is of industry, industry the be it that U.S. We influence second the is our but that stable that The amount else will can on question Japan, the pressure in

Quinn Bolton

Understood.

Thank you very much. Okay.

Operator

Company. next comes Mark Benchmark Please ahead. question from The The Miller go from

Mark Miller

emails emails what You areas numbers on. color wondering and the provide mentioned of some these on? going I'm you could some emails terms if going more in on are just

Eitan Oppenhaim

Yes.

look So did XXXX. that on customers. Matheon results the now the but privilege we about Ericsson with the of the right basis with discuss when in customer started in it numbers XXXX, of profile, and was the so we the we had we and we will had the can and the good far discuss And we results, not what the we leading

and the them accepted we in reference customers. of some So industry already the much the therefore, better, should tool, with different is started

we to So is opening have the customers. of rest an which page, going good now the

the as said both whole changing on Matheon, Looking the the before, Ericsson is the metrology I right now scheme. solution and

the the in going volume So to manufacturing. you are then need into and changing scheme coming, therefore, metrology eval every you through fab, customer the of go high that

So therefore, front-end the we have will think those segment. of we of the them. whole covered to And able be say that we couple we end us, XXXX, that in by give

Mark Miller

you successful? Would these evals they're gain to from new expect customers if

Eitan Oppenhaim

Yes, we are.

Mark Miller

Thank you.

Operator

Atif Our next question from Malik. ahead. comes Please go

Atif Malik

my for you it expecting can products on the areas yet you Is year outperformance come around And the execution. talk the job expect applications you're the taking on coming memory Eitan, of logic this from to outperformance on thank that and Hi, where the of the about -- side, questions good all your from? you do around side.

Eitan Oppenhaim

Yes.

different engine the from at year, the capacity. is So I this which I'll talk that disconnected them look about growth

of the recognition this year, than So introduced product, first this all will the new think that the we new is last one. So higher of year right? that is pace be we product of

there available us we to those over logic for lot do and there now the with the lot our standalone have lot logic there's test. Second, of the on overall, to we okay? if right grow solution standalone market with in the and as when to a PRISM Because place and a logic a customers, we're the now of you're that in strong, are on grow is looking even looking right very

that The measure okay? moving and materials laboratory the related now, unexploited one they in should materials, third during And process, to that The are they application be to customers starting measured combination in lot the metrology line. the of in started line. change everything to of a material is that fact before opening

So this is the one. third

efforts we And to not we revenue, see reached now bought our there metrology. was ancosys that we so part ancosys, strong already the a the we’re [Multiple over the we that we when record in bought everything fourth chemical last to in The grow related expect strong and is back-end. in one and that becoming year that which said as is the and well part strong front-end with front-end very that is do And the Speakers] ancosys

Atif Malik

And this for for your Dror. to one grow. on services at Great. I Dror from year, expecting the peers when look they're still services the commentary sales

Some of reason there put there believe your is them don't behaves into that mouth, to are but services flat. I from peers? differently saying and -- words Is your any it's want to your business

Dror David

so. No, I think don't

expect also Obviously, we services think more they grow of to several XX% XXXX, in than business I XXXX. grew because in significantly reasons.

XXXX in installed grow the to all services expect that, cross growth be we practically do parallel than in with our to more less base which the business territories. will expected in X,XXX to growth but systems -- be So XXXX would of is in

Atif Malik

And the behave your attached more does or to to it sale? services that similar is software component, system

Dror David

software system to sales revenues. presented most It's of is more business product attached and within the

Eitan Oppenhaim

talking that part So here, the attached software about just system. that to to not want we talking are about it’s add we is when I sales, the are that, Eitan to

sold on software machine sales talking (ph). based about things talking the version So of is just to model is solution a the upgrades. is enhance that we the about around top stuff. We're which The one the algo, are standalone software, are This learning that [slits] or services. not

Atif Malik

guys. you, Thank it. Got

Operator

back to CEO to our question-and-answer concludes over session. I President like remarks. conference would Eitan for turn Oppenhaim, closing the and This

Eitan Oppenhaim

you the the thank joining you, operator. Thank Thanks. Thank call See and today. next in you call. all, for you

Operator

The conference now concluded. has Thank presentation. today's for you attending

disconnect. now may You

Nova (NVMI) 15 Feb 232022 Q4 Earnings call transcript