Nova Ltd. Q1 FY2025 earnings call

Business Highlights

• Nova saw record revenues, with 50% YOY growth, exceeding EPS guidance. Market share increased in thin-film and OCD metrology.
• Accelerating adoption of gate-all-around and advanced packaging led to significant revenue growth in these areas.
• Standalone solutions: PRISM platform had record sales, with successful evaluations for advanced packaging and leading edge nodes.
• Integrated metrology solutions: Record sales, including new penetration into gate-all-around manufacturers.
• Software business: Record performance driven by strong sales of software suite for high value applications.
• Materials metrology: Benefited from demand, with Nova Elipson and Metrion platform adoptions.
• Acquisition of Sentronics: Completed in January 2025, with partial contribution in Q1, expecting growth in Q2. New facility in Bad Urach, Germany, doubling capacity of chemical metrology division.

Nova achieved record revenues of $213 million in the first quarter of 2025, a 50% year-over-year growth. Product revenue breakdown was approximately 75% from logic and foundry and 25% from memory. Blended GAAP gross margins were 57% and non-GAAP were 59.6%. Operating expenses were $59 million GAAP and $53.5 million non-GAAP. Operating margins were 30% GAAP and 34.5% non-GAAP.

Second Quarter Guidance

• Revenues expected to be between $210 million and $220 million.
• GAAP EPS to range from $1.70 to $1.88; non-GAAP EPS from $1.96 to $2.14.
• GAAP gross margin approximately 56%; non-GAAP gross margin approximately 58%.
• Operating expenses to increase, with focus on R&D and sales/marketing.
• Tariffs expected to reduce gross margins by 30-50 basis points, but actively monitoring mitigation opportunities.

• Macroeconomic uncertainty and international trade climate pose potential indirect impacts.
• Tariffs could reduce gross margins by 30-50 basis points, affecting financials.

Q: Can you talk about where you are in the gate-all-around ramp and the size of the opportunity?

A: There's a ramp in gate-all-around, strong demand in first half, expecting growth plans to continue with potential changes in second half based on market conditions. The opportunity grows from R&D phase to high-volume manufacturing with more players entering.

Q: Talk about gross margin, including tariffs impact?

A: Gross margin in Q2 affected by tariffs (30-50 basis points) and product mix, but remains committed to 57%-60% range for full year.

Q: Cross-selling in advanced packaging with gate-all-around customers?

A: Well positioned in front-end players with high bandwidth memory and advanced packaging, seeing double-digit growth in advanced packaging revenue, HBM representing about a third of it.

Q: Tariffs impact on top line and gross margin framework?

A: Tariffs mainly affect BOM of machines and service spare parts, with 30-50 basis points impact on gross margin. No major top line impact seen yet.

Q: Cautiousness about second half and China outlook?

A: Cautious about second half uncertainties, but China business expected to be nominally flat or slightly decline year over year, offset by strong performance in other regions.