Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Nova Ltd (NASDAQ:NVMI) achieved record revenue and profitability in 2024, with a 30% year-over-year revenue growth reaching $672.4 million.
• The company exceeded the top end of its guidance in revenue and non-GAAP profitability for the fourth quarter.
• Nova's advanced packaging revenue more than doubled, reaching 15% of product revenue, indicating significant growth in this segment.
• The acquisition of Centronics is expected to further fuel growth in advanced packaging and diversify Nova's offerings.
• Nova's service division delivered a record year with 19% revenue growth, driven by increasing demand for capacity and yield improvements.

Negative Points

• Operating expenses increased significantly, with a portion directed towards expanding R&D efforts.
• The company's exposure to China, which accounted for 39% of revenue, is expected to decline due to growth in advanced nodes elsewhere.
• Gross margins are at the high end of the target model, but reaching above 60% remains challenging due to product mix and market dynamics.
• The integration of Centronics, while strategic, involves risks related to post-merger integration and alignment of activities.
• The company's growth in memory sales is primarily driven by DRAM, with NAND showing weaker performance.

Q & A Highlights

• Warning! GuruFocus has detected 2 Warning Sign with NVMI.

Q: Can you talk about your aspirations for advanced packaging sales for the current year? A: Definitely. The advanced packaging had contributions from both our chemical metrology division and the dimensional metrology division. We expect this year to continue and grow by double-digit growth. With the addition of Centronics, we expect to fuel our growth as we move in with this platform to additional customers. - Gaby Weissman, President and CEO

Q: Can you discuss the services growth outlook for this year and any impact from the restrictions that came on late last year? A: Our model assumes service growth between 10% to 15% for 2025. We don't see a significant impact on services from the restrictions. - Guy Kisner, CFO

Q: How are you thinking about the demand for memory versus foundry logic into 2025, and which segment do you expect to grow faster? A: We expect advanced logic and advanced packaging to lead the growth in 2025, with the HPM segment as part of advanced packaging growing with metrology intensity. - Gaby Weissman, President and CEO

Q: Could you talk about the drivers that are driving the gross margin expansion in Q1 and what it would take to reach above 60% again? A: We remain committed to our target model and anticipate strong gross margins heading into 2025. Reaching above 60% is challenging, but it depends on the success of new products. - Guy Kisner, CFO

Q: What do you see in China long-term as a lot of your peers are seeing their China exposure come down? A: In 2024, China accounted for 39% of our sales. We see the share of China declining as growth this year will come from advanced nodes. - Gaby Weissman, President and CEO

Q: Can you discuss your contributions from the Centronics acquisition and its margin profile compared to your existing portfolios? A: Centronics aligns well with our financial model and is expected to contribute positively to our financial results. We expect an upside as we progress with the post-merger integration. - Guy Kisner, CFO

Q: Can you walk us through the drivers of the strong sequential growth into Q1 across end market products, including the Centronics acquisition contribution? A: We expect to outperform WFE, driven by strong end markets like AI, HPC, and mobile. The first quarter forecast includes revenues from Centronics, which had about 10% of the $200 million market last year. - Gaby Weissman, President and CEO

Q: Can you discuss where you're seeing significant share gains and in what markets? A: We saw share gains in PRIM stand-alone OCD in advanced manufacturing and packaging, front-end chemical metrology, and integrated metrology, especially in advanced packaging. - Gaby Weissman, President and CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.