Nova .(NVMI) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues for Q2 2024 reached a record level of $156.9 million, reflecting an 11% increase quarter-over-quarter and a 28% increase year-over-year [12][13] - Blended gross margin was 59% on a GAAP basis and 61% on a non-GAAP basis, exceeding the company target model of 57% to 59% [13] - Earnings per share on a GAAP basis were$ 1.41 and on a non-GAAP basis were $1.61, exceeding the high end of guidance for the third consecutive quarter [14] Business Line Data and Key Metrics Changes - Product revenue distribution was approximately 75% from logic and foundry and approximately 25% from memory [13] - The Service business grew 19% year-over-year, driven by increasing utilization rates [6] - Advanced packaging is expected to contribute at least 15% of the company's product revenue this year [30] Market Data and Key Metrics Changes - The first half of 2024 revenue was just under$ 300 million, 17% higher than the same period last year [4] - Demand for leading-edge nodes, including gate-all-around and advanced packaging, is increasing, particularly from customers in Taiwan, Korea, and the U.S. [5][22] - The company anticipates a revenue opportunity of $500 million in gate-all-around by the end of 2026 [9][36] Company Strategy and Development Direction - The company aims to leverage opportunities in artificial intelligence and advanced packaging to enhance performance and power efficiency [7][8] - A strategic plan introduced in 2022 includes investments in production facilities to support a$ 1 billion revenue target [23] - The company is focused on maintaining a diversified portfolio to mitigate risks associated with market fluctuations [6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to outperform the market, citing strong demand across various segments [11] - The company expects memory to maintain a level of approximately 25% of total revenue in the second half of 2024 [17] - Management noted that the current strong guidance for Q3 is expected to be sustainable, with robust demand from key geographies [22] Other Important Information - The company generated a record free cash flow of $115 million in the first half of 2024, growing cash reserves to approximately$ 759 million [16] - Operating expenses increased to $47 million on a GAAP basis, with operating margins at 29% on a GAAP basis [14] Q&A Session Summary Question: Memory segment outlook and recent performance - Management noted that logic demand has increased, impacting memory's share, but expects memory to maintain around 25% in Q3 [17] Question: Drivers for gross margin fluctuations - Management explained that gross margin is influenced by product mix and anticipates a gross margin of approximately 58% in Q3 [18] Question: Sustainability of strong guidance - Management indicated that while they do not provide Q4 outlook yet, they expect Q3 strength to continue, with strong business from Korea, Taiwan, and the U.S. [22] Question: Impact of CapEx cuts by a U.S. IDM/Foundry - Management stated that the focus on leading-edge nodes and AI-related chips works in favor of the company, indicating this is not a cross-industry phenomenon [25] Question: Outlook for China revenue contribution - Management expects China's contribution to be slightly higher than last year, with robust demand anticipated [28] Question: Advanced packaging revenue growth - Management confirmed that advanced packaging is projected to contribute at least 15% of product revenue this year [30] Question: Revenue split among product categories - Management indicated that approximately 40% of revenue will come from unique solutions, with chemical metrology being a significant contributor to packaging revenue [32]