• Revenue: $179 million in Q3 2024, 14% growth quarter-over-quarter, 39% growth year-over-year.
• Gross Margin: 57% GAAP, 58% non-GAAP.
• Operating Expenses: $52 million GAAP, $47.5 million non-GAAP.
• Operating Margin: 28% GAAP, 32% non-GAAP.
• Effective Tax Rate: Approximately 15%.
• Earnings Per Share: $1.60 GAAP, $1.74 non-GAAP.
• Cash and Equivalents: $810 million.
• Free Cash Flow: $43 million.
• Q4 2024 Revenue Guidance: $181 million to $191 million.
• Q4 2024 EPS Guidance: $1.51 to $1.70 GAAP, $1.72 to $1.91 non-GAAP.
• Q4 2024 Gross Margin Guidance: Approximately 57% GAAP, 58% non-GAAP.
• Q4 2024 Operating Expenses Guidance: $55 million GAAP, $50 million non-GAAP.
• Q4 2024 Effective Tax Rate Guidance: Approximately 14%.

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

Release Date: November 07, 2024

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

Positive Points

• Nova Ltd (NASDAQ:NVMI) delivered a record quarter, exceeding the high end of guidance in revenue and profitability with a 39% year-over-year growth.
• The company anticipates annual revenue growth of approximately 28% year-over-year, outperforming the expected wafer fab equipment growth in 2024.
• Nova's materials metrology solutions and advanced dimensional portfolio saw record sales, driven by demand in advanced packaging processes.
• The company has a strong cash position with $810 million in cash, cash equivalents, bank deposits, and marketable securities, allowing for confident investment in R&D and strategic growth.
• Nova's advanced metrology portfolio is in high demand, with multiple evaluations and selections by leading customers across various territories.

Negative Points

• Operating expenses increased to $52 million on a GAAP basis, reflecting higher investments in R&D and strategic evaluations.
• The effective tax rate for the third quarter was approximately 15%, which could impact net profitability.
• There is uncertainty regarding the actual wafer fab equipment (WFE) growth for next year, which could affect Nova's performance projections.
• The company faces challenges in maintaining its China market share amidst broader industry trends of reducing exposure to China.
• Nova's revenue from gate-all-around technology is not yet a significant driver, with expectations for ramping only in the following year.

Q & A Highlights

Q: Can you provide more color on the gate-all-around technology and its revenue impact, particularly the difference between 3-nanometer and 2-nanometer demand? A: Gabriel Waisman, President and CEO: Currently, most revenue is not driven by gate-all-around, but we expect it to ramp next year. Our estimate of $500 million in aggregated revenue from gate-all-around by 2026 remains unchanged. Our portfolio is strong in this area, with selections and evaluations by all gate-all-around manufacturers. This technology adds about 30% more process steps, presenting a significant opportunity for Nova.

Q: What are you seeing in terms of domestic China demand for the upcoming quarters and next year? A: Gabriel Waisman, President and CEO: We see continued demand and robust business in China entering 2025. The share of China in our product sales is similar to our peers.

Q: Given the recent downward revisions in WFE growth estimates, do you still expect to outperform WFE growth next year? A: Gabriel Waisman, President and CEO: Historically, we model Nova's outperformance in WFE at a ratio of 1.5, and we expect this to continue. While it's difficult to predict the exact WFE growth for next year, we anticipate it will be higher than in 2024.

Q: Can you discuss the investments and inflections in the memory space that benefit Nova? A: Gabriel Waisman, President and CEO: We see demand from DRAM, particularly high-bandwidth memory, which is about 30% of our advanced packaging business. DRAM demand is expected to grow in the first half of next year, with NAND growth anticipated in the second half.

Q: How do you view your exposure to China in 2025, especially with large-cap semi-cap equipment companies reducing their China exposure? A: Gabriel Waisman, President and CEO: We see continued demand and robust business in China entering 2025. While the faster growth in advanced nodes may moderate China's overall share of our business, demand remains strong.

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