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    Nova Ltd (NVMI)

    Q1 2024 Earnings Summary

    Reported on Mar 12, 2025 (Before Market Open)
    Pre-Earnings Price$181.12Last close (May 8, 2024)
    Post-Earnings Price$186.65Open (May 9, 2024)
    Price Change
    $5.53(+3.05%)

    What went well

    • Nova is experiencing strong growth in its advanced packaging business, expecting revenues from packaging-related processes to grow by more than 50% in 2024. Last year, the packaging-related business accounted for about 10% of overall revenue, and this growth is driven by both the dimensional division product lines and chemical metrology, with strong traction in high-bandwidth memory (HBM), hybrid bonding, and Through-Silicon Via (TSV) applications.
    • Nova has secured initial orders for gate-all-around technology from four customers, with deliveries expected in the coming 12 months and ramping up beyond. This positions the company strongly in the transition to advanced nodes like 2nm, indicating significant future growth opportunities in leading-edge logic.
    • Nova's gross margins are at the higher end of the company's target model, reaching 61% non-GAAP in Q1 2024, driven by a favorable product mix and adoption of newer products with higher customer value and higher gross margins. The company expects gross margins to remain strong, around 59% on an annual basis.

    What went wrong

    • Gross margins are expected to normalize and decrease from the current high levels due to changes in product mix. The company anticipates gross margins to be around 59% for the next quarter and on an annual basis, compared to higher margins achieved in the first quarter.
    • Operating expenses are increasing, which may impact future profitability. Operating expenses are expected to increase to approximately $48 million on a GAAP basis and $43 million on a non-GAAP basis in the next quarter.
    • Delay in the ramp-up of Gate-All-Around (GAA) technology and 2-nanometer nodes could postpone expected revenue growth in these areas, as the significant ramp is expected towards 2025 and 2026.

    Q&A Summary

    1. Gate-All-Around (GAA) Opportunity and Ramp Timing
      Q: What's the status and outlook for Gate-All-Around adoption?
      A: Nova sees a strong position in the GAA market, involving all product lines. They've received initial orders expected for delivery in the next 12 months and anticipate the ramp to gain momentum into 2025 and onwards towards 2026 as customers ramp up.

    2. 50% Growth in Advanced Packaging and HBM
      Q: How is advanced packaging growth contributing to sales?
      A: Last year, advanced packaging was about 10% of revenue, and Nova expects more than 50% growth this year. Growth comes from both dimensional and chemical product lines, with chemical making headway in high-bandwidth memory (HBM) and dimensional focused on hybrid bonding and TSV technologies.

    3. Gross Margin Outlook
      Q: What is driving gross margins, and what is the outlook?
      A: Favorable product mix, with newer products adopted by customers in Q1, led to higher gross margins above the model. Nova expects gross margins to be around 59% in the next quarter and for the rest of the year.

    4. Memory Revenue Growth and Breakdown
      Q: How did memory revenue perform, and what's the outlook?
      A: Memory accounted for 40% of revenue in Q1. Growth is driven by both DRAM and high-bandwidth memory (HBM), with a focus on capturing opportunities in DRAM, which is growing this year, and anticipating 3D NAND traction in the second half and beyond.

    5. Increased Tool Intensity per Memory Fab
      Q: What's driving increased tool adoption in memory fabs?
      A: Nova reached a record of 8 VeraFlex tools per memory fab. This increase is due to expanded applications and capacity needs, leveraging the capabilities of the VeraFlex IV platform.

    6. 2-Nanometer Ramp Timing
      Q: When will the 2-nanometer ramp significantly impact revenue?
      A: Nova expects the GAA ramp to grow and gain momentum as they finish this year and enter into 2025 and onwards towards 2026, as customers gain traction. They have received orders expected to be delivered in the coming 12 months and are working with four GAA customers.

    7. Competitive Positioning vs KLA
      Q: How does Nova compete with rivals converting front-end tools to back-end?
      A: Nova identified the need early and customized tools to support specific back-end requirements, including far back-end and hybrid bonding, positioning them favorably as customers adopt these solutions.

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