Q4 2024 Earnings Summary
- Nova is experiencing significant market share gains across multiple product lines, including stand-alone OCD in both advanced manufacturing and advanced packaging, chemical metrology, and integrated metrology solutions. This growth is driven by high utilization and additional adoption of their XPS tools and PRISM stand-alone OCD platform.
- Advanced packaging sales doubled in 2024, reaching 15% of product revenue, with contributions from both chemical and dimensional metrology divisions. Nova expects this segment to continue growing by double-digit growth in 2025, further fueled by the acquisition of Sentronics, which will help expand to additional customers.
- The acquisition of Sentronics is expected to be accretive and contribute positively to financial results, aligning well with Nova's financial model in terms of gross margins and operating margins. This acquisition allows Nova to expand its offerings, especially in the advanced packaging market, and is anticipated to drive growth in 2025 and beyond.
- High exposure to China: In 2024, 39% of NVMI's sales were from China. With peers reducing their China exposure, NVMI's significant reliance on the Chinese market poses a risk, especially amid geopolitical tensions and potential regulatory changes.
- Challenges in gross margin expansion: Reaching above 60% gross margin is considered challenging and depends on the success of new products. Any delays or underperformance in new product introductions could negatively impact NVMI's profitability.
- Uncertainty in achieving gate-all-around revenue targets: NVMI aims for $500 million cumulative gate-all-around revenue from 2024 to 2026 but did not provide additional details when asked for more color, indicating potential uncertainty in meeting this ambitious target.
Metric | Period | Previous Guidance | Current Guidance | Change |
---|---|---|---|---|
Revenue | Q4 2024 | $181 million – $191 million | no current guidance | no current guidance |
GAAP Earnings Per Diluted Share | Q4 2024 | $1.51 – $1.70 | no current guidance | no current guidance |
Non-GAAP EPS | Q4 2024 | $1.72 – $1.91 | no current guidance | no current guidance |
Gross Margin (GAAP) | Q4 2024 | 57% | no current guidance | no current guidance |
Gross Margin (Non‐GAAP) | Q4 2024 | 58% | no current guidance | no current guidance |
Operating Expenses (GAAP) | Q4 2024 | $55 million | no current guidance | no current guidance |
Operating Expenses (Non‐GAAP) | Q4 2024 | $50 million | no current guidance | no current guidance |
Financial Income | Q4 2024 | similar to that of Q3 2024 | no current guidance | no current guidance |
Effective Tax Rate | Q4 2024 | 14% | no current guidance | no current guidance |
Topic | Previous Mentions | Current Period | Trend |
---|---|---|---|
Advanced Packaging Growth | Mentioned consistently from Q1 through Q3 as a key growth driver with YoY increases, strong tool adoption (e.g., PRISM and metrology portfolios), and forecasts of over 50% growth | Q4 emphasized revenue more than doubling, reaching 15% of product revenue with integrated metrology success and double‐digit 2025 outlook | Consistent strong growth with sustained positive sentiment, confirming its strategic importance. |
Gate-All-Around Technology Revenue and Adoption | Q1 highlighted initial orders and strong market positioning; Q2 outlined a $500M revenue opportunity and tool adoption; Q3 reinforced the pipeline with similar revenue targets and process complexity challenges | Q4 discussed modest current revenue contribution (~high single digits percent) with renewed focus on record tool sales and maintained $500M target by 2026 | Stable focus with consistent long-term revenue targets and continued optimism, though details evolved over time. |
Gross Margin Dynamics and Normalization | Q1 and Q2 reports showcased higher-than-target margins driven by favorable product mix and new product adoption; Q3 maintained margins within target ranges with further normalization expected | Q4 reaffirmed commitment to strong margins with ongoing efforts to sustain above-60% on select segments despite quarter-to-quarter mix variations | Steady operational efficiency with slight normalization, maintaining overall positive sentiment about profitability. |
China Market Exposure and Geopolitical Risks | Q1 mentioned leveraging mature node demand from China; Q2 highlighted a modest increase in revenue share with an expectation to decline later; Q3 compared exposure to peers with robust yet moderated growth | Q4 noted China contributed 39% of revenue but expects a declining share in 2025 due to advanced node growth, with limited impact from restrictions | Consistent acknowledgments of China’s significant role, with evolving sentiment toward a gradual reduction in exposure. |
Capacity Expansion and Strategic Investments | Q1 discussed rising capacity needs due to larger chip sizes and recovery in demand; Q2 reported investments in facilities across Israel, Germany, and the U.S. for a $1B revenue plan; Q3 focused on investments driven by DRAM capacity and expanded metrology tools | Q4 revealed a new state-of-the-art facility in Germany for Chemical Metrology, increased R&D spending, and strategic investments aligning with long-term growth | Ongoing investments across periods with Q4 adding a new facility and integration of strategic acquisitions, indicating long-term growth prioritization. |
Strategic Acquisitions (Sentronics) | Not mentioned in Q1, Q2, or Q3 earnings calls [n/a] | Q4 introduced the acquisition of Sentronics for ~$60M to expand advanced packaging and specialty devices portfolios, expected to be accretive within 12 months | A newly introduced topic in Q4 with significant future impact, marking a strategic pivot through acquisition. |
Memory Market Trends and Contribution Shifts | Q1 emphasized a 40% revenue contribution driven by DRAM/HBM growth and mature node demand; Q2 maintained steady contribution with strong HBM demand and shifting geographical ratios; Q3 noted robust DRAM and emerging NAND trends with AI-related capacity build-up | Q4 highlighted stronger DRAM performance relative to NAND, increased HBM growth, and integration with advanced packaging, underpinned by overall market momentum | Consistent positive growth across periods with increasingly integrated advanced packaging strategies bolstering memory market performance. |
Wafer Fab Equipment Growth Outlook | Q1 provided no specific commentary; Q2 conveyed outperforming market growth with higher revenue than expected; Q3 projected strong annual growth (~28% YoY) and expected further outperformance | Q4 forecast mid-single digit growth in 2025 driven by leading-edge demand, reflecting a more measured outlook compared to earlier exuberance | A sustained focus with a slight moderation in growth forecasts in Q4, suggesting a more conservative near-term outlook while overall strategic optimism remains. |
Operating Expense Increases | Q1 through Q3 consistently reported rising expenses (from $46M to ~$47–52M GAAP) to support R&D and growth initiatives, with margins remaining within target ranges | Q4 noted further increases to $54.5M GAAP with expanded R&D investments to drive innovation and maintain competitive positioning | A steady upward trend reflecting deliberate investment in R&D and growth, with operating expense increases viewed as a strategic cost for future benefits. |
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Outperformance vs WFE
Q: What are the reasons to believe you can outperform WFE growth this year?
A: Our unique technologies provide significant value to customers. We're expanding our position into advanced packaging with higher adoption. The Sentronics acquisition allows us to expand to new customers. Additionally, our strong position in advanced logic gives us the fundamentals to drive growth in 2025. -
Gross Margin Outlook
Q: What is driving gross margin expansion in Q1, and what would it take to reach above 60% again?
A: We remain committed to our target model and anticipate strong gross margins into 2025. While quarter-to-quarter fluctuations may occur due to product mix, we are confident in maintaining margins within our long-term range. Reaching above 60% is challenging and depends on the success of new products. -
China Exposure
Q: You have high China revenue; many peers see China exposure decreasing. What do you expect in China long-term?
A: In 2024, China accounted for 39% of our sales. While our strength there aligns with industry peers, as growth this year comes from advanced nodes, we expect the share of China to decline. -
Sentronics Acquisition Impact
Q: What contributions do you expect from the Sentronics acquisition this year, and what are the target growth rates longer term? What is the margin profile compared to existing portfolio?
A: Sentronics had about 10% of a $200 million TAM last year. Our Q1 forecast includes Sentronics revenues. We expect upside as we integrate. The deal aligns well with our financial model; it's accretive and expected to contribute positively to financial results, with gross margins and operating margins fitting our model. -
Gate-All-Around Revenue Outlook
Q: Can you provide more color on gate-all-around revenue outlook and tracking towards $500 million cumulative revenue from '24 to '26?
A: We remain committed to the $500 million from gate-all-around by 2026. We haven't changed our position, and we'll provide more color during the Investor Day on March 17. Tracking this number reflects our confidence in achieving it this year as well. -
Demand Outlook Memory vs Logic
Q: How do you view demand in 2025 for Memory vs Foundry/Logic? Which segment will grow faster?
A: We expect advanced logic and advanced packaging to lead growth in 2025. The HBM segment in advanced packaging is also growing with increased metrology intensity. So overall, advanced logic and advanced packaging will grow faster. -
HBM Market Outlook
Q: How do you see the competitive market and capacity build in HBM?
A: We see advanced packaging growing significantly, particularly in dimensional metrology. While most of our advanced packaging business is currently with logic in 2.5D architectures, there's a build-up in HBM, and process control intensity is increasing, benefiting both our chemical and dimensional portfolios. -
Advanced Packaging Sales
Q: What are your aspirations for advanced packaging sales this year?
A: Advanced packaging sales had contributions from both chemical metrology and dimensional metrology divisions. We expect to continue double-digit growth this year. With the addition of Sentronics, we expect to further fuel our growth as we expand to additional customers. -
Material Metrology Revenue Growth
Q: How do material metrology design wins like Metrion translate to revenue? What's the process and timing for tool proliferation across fabs?
A: We're excited about the recent adoption of Metrion focusing on R&D for DRAM and 3D NAND. We expect proliferation into high-volume manufacturing. Adoption typically starts with about one tool per fab, increasing as more applications and utilization grow. We have additional evaluations with key logic and memory manufacturers that may materialize this year. We see significant growth potential for Metrion as capacity grows. -
Market Share Gains
Q: Where are you seeing significant share gains, in which markets?
A: We saw share gains in PRISM stand-alone OCD in both advanced manufacturing and advanced packaging. We increased market share in the front-end side of the chemical metrology portfolio, and saw high utilization and additional adoption of XPS tools in material metrology. We also gained share in integrated metrology, especially entering advanced packaging in 2.5D architectures and logic, as well as in high-bandwidth manufacturing. -
Services Growth Outlook
Q: Can you talk about the services growth outlook for this year and any impact from restrictions?
A: Services grew 19% last year, fueled by increased tool utilization. We expect services to grow between 10% to 15% in 2025 as well. We don't see significant impact from restrictions on services. -
Sequential Growth Drivers
Q: What are the drivers of strong sequential growth into Q1, including Sentronics contribution? Are these increases sustainable in 2025?
A: We expect to outperform WFE, driven by strong end markets like AI, HPC, and mobile, leading to investments in advanced nodes, especially logic and advanced packaging. Our position in these markets supports continued growth. The first quarter forecast includes Sentronics revenues; Sentronics had about 10% of a $200 million TAM last year, indicating expected business levels. -
Memory Sales Breakdown
Q: Can you provide more color on what percent of memory sales were high-bandwidth memory? And what are you seeing from NAND?
A: DRAM was stronger than NAND in our memory sales. If we include HBM as part of DRAM, then it was the majority of our memory business. HBM growth is higher compared to DRAM. -
Chemical Metrology Expansion
Q: Have you quantified the revenue potential from the new chemical metrology facilities?
A: We've opened a new facility in Bad Urach, Germany, housing all units of the Chemical Metrology division. We expect the capacity to drive the business forward, and we'll adjust capacities as business continues its upward momentum.