Q4 2023 Nova Ltd Earnings Call

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Operator: Good day, and welcome to the NOVA Limited fourth quarter 2023 results conference call. All participants will be in listen-only mode.

Good day and welcome to the Nova Ltd fourth quarter 2023 results conference call.

All participants will be in listen only mode.

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Operator: If you need to withdraw your question, please press star then 2. Please note, the event is being recorded. Now, I would like to turn the conference over to Mary Segal. Please, go ahead.

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And now I would like to turn the conference over to Mary sickle.

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Thank you operator, and good day to everybody I would like to welcome all of you to Nova's fourth quarter and full year 2023 financial results conference call with US underlying today are gobby, Wiseman, president and CEO and Dror David CFO.

Mary Segal: Thank you, operator, and good day to everybody. I would like to welcome all of you to NOVA's fourth quarter and full year 2023 financial results conference call. With us on the line today are Gabby Weissman, President and CEO, and Dror David, CFO. Before we begin, may I remind our listeners that certain information provided on this call may contain forward-looking statements. And the safe harbor statement outlined in today's earnings release also applies to this call. If you have not received a copy of the release, please view it in the Investor Relations section of the company's website. Gabby will begin the call with a business update, followed by Dror with an overview of the financials. We will then open the call for the question and answer session. I'll now turn the call over to Gabby Weissman, Nova's President and CEO. Gabby, please go ahead.

Before we begin may I remind our listeners that certain information provided on this call may contain forward looking statements and the safe Harbor statement outlined in todays earnings release also pertains to this call.

You have not received a copy of the release. Please view it in the Investor Relations section of the company's website.

<unk> will begin the call with a business update followed by Dror with an overview of the financials. We will then open the call for the question and answer session. I'll now turn the call over to Gabby Weisman, Nobody's President and C. O. Gaby. Please go ahead.

Gabby Weissman: Thank you, Miri, and thank you all for joining us today. I will start the call today by summarizing our fourth quarter and full year performance highlights. Following my commentary, Dror will review the quarterly and annual financial results in... Nova delivered a robust quota, exceeding the top end of our guidance for revenue and profits, with GAAP and non-GAAP EPS reaching an all-time high, concluding the fiscal year on a higher note than initially expected. Nova's performance remains steadfast, showcasing the strengths of our diversified and agile business model. We persist with our long-term strategic plan to solidify our position and seize new opportunities across customers, markets, and technology. Nova is uniquely positioned to accelerate its market adoption in hybrid bonding as well as high bandwidth memory and to capitalize on the transition to gate-all-around technology for our strong stance in advanced logic manufacturing.

Thank you Mary and thank you all for joining us today.

I will start the call today by summarizing our fourth quarter and full year performance highlights.

Following my commentary.

Paul will review, the quarterly and annual financial results in detail.

Nova delivered a robust quarter exceeding the top end of our guidance for revenue and profit with GAAP and non-GAAP EPS, reaching an all time high.

Concluding the fiscal year on a higher note than initially expected.

Nova's performance remained steadfast showcasing the strength of our diversified and agile business model.

We persist with a long term strategic plans.

To solidify our position and seize new opportunities across customers markets and technologies.

Nova is uniquely positioned to accelerate its market adoption in hybrid bonding as well as high bandwidth memory and to capitalize on the transition to gate all around.

For a strong stance in advanced logic manufacturing.

Looking forward, we witness encouraging trends across our key growth drivers that we expect to steer us to a path of growth and outperformance in 2024.

Gabby Weissman: Looking forward, we witness encouraging trends across our key growth drivers that we expect to steer us to a path of growth and outperformance in 2024. Our performance this quarter was driven by the continued proliferation of materials metrology and chemical metrology solutions across both front-end and back-end marks, and the expanding adoption of optical metrology solutions among multiple DRM customers. The encouraging results of the fourth quarter and fiscal year are indicative of our aptitude in addressing the myriad needs of process control in IC manufacturing. This proficiency plays a key role in leveraging opportunities, as evidenced by the significant expansion of our customers. Our PRISM stand-alone optical metrology platforms secured several wins with memory, logic, and hybrid bonding customization.

Yeah.

Our performance this quarter was driven by the continued proliferation of materials metrology and chemical metrology solution across both front end and back end markets and the expanding adoption of optical metrology solutions among multiple DRAM customers.

The encouraging results of the fourth quarter and fiscal year are indicative of our aptitude and addressing the myriad needs of process control in IC manufacturing.

This proficiency plays a key role in leveraging opportunities as evidenced by the significant expansion of our customer base.

Our prison Standalone optical metrology platform secured several wins with memory logic and hybrid bonding customers.

Gabby Weissman: Furthermore, we exit 2023 with a growing adoption of NOVA's VeroFlex XPS and XRS, Ellipson inline Raman, and Ankylizer and Ankylosine chemical metrology. Finally, our service business demonstrated consistent growth, reaching another annual revenue record. I want to take a minute and highlight some of the technology inflection points and industry growth drivers that we identify as the propellers of Nova's growth. Our customers are spearheading the transition to 3D architectures that enable high bandwidth memory and highly advanced logic integrated circuits, as well as advanced packaging solutions. These evolutions, in turn, translate into larger and more complex dyes that require a growing number of wafers, a higher number of layers, and a leap in the number of process steps at a much smaller tolerance for error.

Furthermore, we exit 2020 free with a growing adoption of novel very flex XP S and X are F. Alex on inline Robyn and equalizer and ankles in chemical metrology solution.

Finally, our service business demonstrated consistent growth, reaching another annual revenue records.

I want to take a minute and highlight some of the technology inflection point.

And industry growth drivers that we identify.

As the propellers of Nova is growth.

Yes.

The search and AI related demand.

Also drives the need for energy efficient computing power and accelerates demand for advanced processing nodes and memory solutions from the network to the client side.

Our customers are spearheading the transition to freely architectures that enable high bandwidth memory and highly advanced logic integrated circuits as well as advanced packaging solution.

He's evolution in turn translate into larger and more complex died that require a growing number of wafers and higher number of layers.

A leap in the number of process steps at the much smaller tolerance for error.

Manufacturers now need high quality metrology across the entire wafer from the center to the very edge.

Gabby Weissman: Manufacturers now need high-quality metrology across the entire wafer, from the center to the very edge. They must control highly complex 3D designs with high aspect ratios and underlayer structures. They need to monitor new materials, measuring ultra-thin films, composition, and structures on the wafer and in-die. And they must solve manufacturing challenges that arise from GAPL-around transistors. 3D Memory Architecture, backside power delivery, hybrid bonding, and other methods aimed at generating faster, more efficient, and more powerful devices.

They must control highly complex freely design with high aspect ratios and underlying underlayer structures.

They need to monitor new materials, measuring ultra thin films composition and structure on the wafer and indirect.

And they must solve manufacturing challenges that arise from gateway around transistor.

Free the memory architecture backside power delivery hybrid bonding and also other methods aimed at generating faster more efficient and more powerful devices.

Gabby Weissman: All of which translate to a growing need for process control. Nova's achievements over the past quarter, coupled with our growth guidance for the first quarter of 2024, reflect our ability to cash in on these opportunities through a strategy of diversified growth. We built a variety of opportunities in 2023 that we expect to capitalize on in 2020. Our chemical metrology division delivered on the promise, growing to record annual revenues in 2023, fueled by the increasing demand for metrology in packaging production lines. Notably, in Q4, we secured several new packaging customers and received a large order from a leading global memory manufacturer. Our optical metrology expanded into hybrid bonding, high bandwidth memory, and related applications through a dedicated optical metrology portfolio.

All of which translates to a growing need for process control.

No those achievements over the past quarter, coupled with our growth guidance for the first quarter of 'twenty 'twenty four reflect.

Our ability to cash in on the opportunities for our strategy of diversified growth.

We built a variety of opportunities in 2020 free.

We expect to capitalize on in 2024.

Yeah.

Our chemical Metrology division delivered on the promise growing to a record annual revenues in 2023.

Fueled by the increasing demand for metrology and packaging production lines.

Notably in Q4, we secured several new packaging customers and received a large order from a leading global memory manufacturer.

Our optical metrology expanded into hybrid bonding high bandwidth memory and related application for a dedicated optical metrology portfolio.

Gabby Weissman: As a result, we increased our revenues from the advanced packaging domain by approximately 30% year over year. Our portfolio addresses critical applications, such as Fluid Silicon VIA, essential for the successful manufacturing of AI-related devices. We have been collaborating with our customers for several years to develop these dedicated solutions. We are proud to be the first to market with the industry's top five customers, having either purchased or engaged in evaluations with them. For example, the Nova Prism has already been selected by a leading global foundry and is in the evaluation process with additional leading manufacturers.

As a result, we increased our revenues from the advanced packaging domain by approximately 30% year over year.

Our portfolio addresses critical application such as through Silicon via.

A central for the successful manufacturing of AI related devices.

We have been collaborating with our customers for several years to develop these dedicated solutions.

We are proud to be the first to market with the industry's top five customers, having either purchased or engaged in evaluations with Nova.

For example, the Nova PRIZM has already been selected by a leading global foundry and.

And is any evaluation process with additional leading manufacturers.

Gabby Weissman: Therefore, we expect our revenues from advanced packaging to grow significantly in 2024. I mentioned earlier the transition to advanced nodes. And here, we see our technology growth engine coming into play. The advent of gate-all-around and advanced memory drives the need for our unique materials metrology portfolio, resulting in increased customer traction for Ellipson and Metreon and wider adoption of our VeroFlex platform. Nova Ellipson has been chosen as a process tool of record for advanced DRAM production by a leading global memory manufacturer, who has already placed repeat orders for the... We also expect additional evaluations with other customers later this year.

Therefore, we expect our revenues from advanced packaging to grow significantly in 2024.

I mentioned earlier the transition to advanced nodes.

And here, we see our technology growth engine coming into play.

The advent of gate, all around and advanced memory drive the need for our unique materials metrology portfolio.

<unk> increased customer traction for Alexon, and metro and wider adoption of our Vera flex platform.

Nova Ellefson has been chosen as the process tool of record for advanced DRAM production by a leading global memory manufacturer, who has already placed repeat orders for the tool.

We also expect additional evaluations with other customers later this year.

Gabby Weissman: Nova Metreon is also making strides. We recently announced the availability of the platform's second generation, and in Q4, we received evaluation purchase orders from two of the world's leading memory manufacturers. Nova Metreon has already been adopted by three other customers, and we expect to expand our footprint by the end of this year. The Nova VeriFlex platform proved that it is indeed an industry staple, landing new logic and memory customers in Q4. The newest generation, VeroFlex 4, grew approximately 170% year-over-year and is quickly taking over from previous versions, proliferating in high-volume manufacturers. VeriFlex 4 offers higher productivity and improved metrology performance that brings true measurable value and expanded application space to our customers.

No if a metric is also making strides.

We recently announced the availability of the platform second generation and in Q4, we received the valuation purchase orders from two of the world's leading memory manufacturers.

Platform has already been adopted by three other customers and we expect to expand our footprint by the end of this year.

The Nova Vera Flex platform proved that it is indeed, an industry staple lending new logic and memory customers in Q4.

The newest generation very flex four grew approximately 170% year over year and he's quickly taking over from previous vision proliferating in high volume manufacturing.

Their flex for offers higher productivity and improve metrology performance that brings true measurable value and an expanded application space to our customers.

Gabby Weissman: Finally, our service division delivered record performance and increased the share of revenue from contracts by 24%, leveraging the expansion of our installed base, which surpassed 5,400 tools, and cementing its importance as one of our growth... Beyond our focus on expanding our presence in new market segments and penetration of new technologies, we also dedicated many of our resources this year to building the infrastructure that will support our growth in 2024 and beyond. We opened a new clean room in Israel, expanded our offices in Korea to provide better support closer to our customers, and we opened an innovation center in the U.S.

Finally, our service Division delivered record performance and increase the share of revenue from contracts by 24% leveraging the expansion of our installed base, which surpassed 5400 tools and cementing its importance is one of our growth engine.

Beyond our focus on expanding our presence in new market segments and penetration of new technologies. We also dedicated many of our resources. This year to building the infrastructure that will support our growth in 'twenty 'twenty four and beyond.

We opened a new clean room in Israel, we expanded our offices in Korea to provide better support closer to our customers and we opened an innovation center in the U S.

Gabby Weissman: In 2024, we plan to invest in building our presence and capacity and in increasing the efficiency and agility of information systems and processes. We also plan to accelerate our investments in research and development, in close collaboration with our customers and partners. In summary of my prepared remarks, I believe that our well-established fundamentals will help us increase exposure to additional opportunities in adjacent markets and processes, new customers, and additional critical applications. Our strategic priorities remain intact, with continuous investment in our long-term roadmap and by partnering with our customers across all territories.

In 'twenty 'twenty four we plan to invest in building our presence in capacity and in increasing the efficiency and agility of information systems and processes.

We also plan to accelerate our investments in research and development in close collaboration with our customers and partners.

In summary of my prepared remarks, I believe that our well established fundamental will help us increase exposure to additional opportunities in adjacent markets and processes, new customers and additional critical applications.

Our strategic priorities remain intact with continuous investment in our long term roadmap and by partnering with our customers across all territories.

Dror David: In 2024, we expect to capitalize on the opportunities created by our enhanced market position, resume our growth trajectory, and outperform the market. Now, for some more detail on our financials, let me hand over the call to the speaker. Thanks, Gabi.

In 'twenty 'twenty four we expect to capitalize on the opportunities created by our enhanced market position.

Zoom, our growth trajectory and outperformed the markets.

Now for some more detail on our financials, let me hand over the call to Dror.

Thanks, Gabby good day, everyone and thank you for joining our 2023 fourth quarter and annual conference call.

Dror David: Good day, everyone, and thank you for joining our 2023 fourth quarter and annual conference. Total revenues in the fourth quarter of 2023 were $134 million, exceeding the company guidance for the fourth quarter and growing 4% quarter over quarter. Product revenue distribution was approximately 65% from logic and foundry and approximately 35% from memory. Similar to the previous quarter, blended gross margin reduced in the fourth quarter and came in at 55% on a GAAP basis and 57% on a non-GAAP basis. This result is at the lower end of the company's non-gap target model of 57% to 59% and is related to quarterly record revenues from chemical metrology, whose gross margins are We expect gross margins to rebound in the first quarter of 2024.

Total revenues in the fourth quarter of 2023 were 134 million exceeding the company guidance for the fourth quarter and growing 4% quarter over quarter.

Product revenue distribution was approximately 65% from logic and foundry and approximately 35% from memory similar to the previous quarter.

Blended gross margin reduced in the fourth in the fourth quarter and came in at 55% on a GAAP basis, and 57% on a non-GAAP basis.

This result is at the lower end of the company non-GAAP target model of 57% to 59% and is related to quarterly record revenues from chemical metrology, which gross margins are lower than the company average.

We expect gross margins to rebound already in the first quarter of 2024.

Dror David: As expected, operating expenses increased in the fourth quarter, reaching $40 million on a gap basis and $36 million on a non-gap basis. Operating margins in the fourth quarter were 25% on a GAAP basis and 30% on a non-GAAP basis, at the higher end of the company's non-GAAP target model of 27% to 31%. Financial income in the quarter continued to increase due to higher yields on cash reserves, totaling $7 million.

As expected operating expenses increased in the fourth quarter, reaching 40 million on a GAAP basis, and 36 million on a non-GAAP basis.

Operating margins in the fourth quarter were 25% on a GAAP basis, and 30% on a non-GAAP basis.

The higher end of the company's non-GAAP target model of 27% to 31%.

Financial income in the quarter continued to increase due to higher yields on cash reserves totaling 7 million.

Dror David: As expected, the effective tax rate in the fourth quarter was reduced to approximately 7% below the company's 14-15% model due to year-end tax adjustments and statute of limitations. Earnings per share in the fourth quarter exceeded the company guidance, reaching an all-time record high. This outcome reflects the effective and agile business model of the company, combining a unique and differentiated product portfolio, embedding a high customer value proposition with effective and prudent operational and financial management. Gap earnings per share were a record $1.20 per diluted share, and non-GAAP earnings per share were a record $1.36.

As expected the effective tax rate in the fourth quarter reduced to approximately 7% below the company's 14% to 15% more than due to year end tax adjustments and start to off limitation.

Earnings per share in the fourth quarter exceeded the company guidance, reaching an all time record high.

This outcome reflects the effective in a giant business model of the company, combining our unique and differentiated product portfolio embedding high customer value proposition with effective and prudent operational and financial management.

GAAP earnings per share were a record $1.20 per diluted share.

And non-GAAP earnings per share were a record one dollar and 36 cents.

Dror David: Moving on to the annual results for calendar year 2023, revenues decreased by nine percent year over year, reflecting the generally lower industry investment and capacity expansions in 2023. Annual product revenue distribution in 2023 was approximately 70% from logic and foundry and approximately 30% from memory, similar to 2022. Gross margins for the year came in at 57% on a GABE basis and 59% on a non-GABE basis, at the high end of the company target model of 57% to 59%.

Moving onto the annual results for calendar year, 2023 revenues decreased by 9% year over year, reflecting the generally lower industry investment and capacity expansions in 2023.

Annual product revenue distribution was in 2023 was approximately 70% from logic and foundry and approximately 30% from memory similar to 2022.

Gross.

Margins for the year came in at 57% on a GAAP basis, and 15, 9% on a non-GAAP basis at the high end of the company target model.

57% to 59%.

Dror David: Year over year, the company was able to increase gross margins by approximately 1% in a declining industry environment. We believe this result is a testament to the company's ability to deliver high customer value through a combination of technology leadership and superior cost of ownership. Operating expenses in 2023 slightly decreased year-over-year, reflecting management cost containment initiatives implemented as early as the industry cycle was identified at the beginning of 2023. Operating margins for the year came in at 26% on a gap basis and 30% on a non-gap basis, at the high end of the company's non-gap target financial model of 27% to 31%. Earnings per diluted share on an annual basis came in at $4.28 on a gap basis and $4.86 on a non-gap basis.

Year over year, the company was able to increase gross margins by approximately 1% in a declining industry environment.

We believe this result is a testimony to the company's ability to deliver high customer value through a combination of technology leadership and superior cost of ownership.

Operating expenses in 2020, three slightly decreased year over year, reflecting the management cost containment initiatives implemented as early as the industry cycle was identified at the beginning of 2023.

Operating margins for the year came in at 26% on a GAAP basis, and 30% on a non-GAAP basis at the high end of the company's non-GAAP target financial model of 27% to 31%.

Earnings per diluted share on an annual basis came in at $4.28 on a GAAP basis and $4.86 on a non-GAAP basis.

During 2023, the company generated 106 million in free cash flow and presented healthy parameters related to working capital management with days sales outstanding of approximately 80 days and inventory turnovers of approximately two times a year.

Dror David: During 2023, the company generated $106 million in free cash flow and presented healthy parameters related to working capital management with sales outstanding of approximately 80 days and inventory turnovers of approximately two times a year. In addition, during 2023, the company continued its infrastructure and capital investments, including a new cleanroom in Israel, which commenced manufacturing in mid-2023, and a new facility for the chemical division in Germany, which is expected to open by the end of 2024. We anticipate capital investments to remain elevated throughout 2024.

In addition during 2023 the company continued its infrastructure and capital investments, including a new clean room in Israel, which commenced manufacturing in mid 2023.

And the new facility for the chemical Division in Germany, which is expected to open by the end of 'twenty 'twenty four.

We anticipate capital investments to remain elevated throughout 2024.

Dror David: Finally, I would like to share the details of our guidance for the first quarter of 2024. Currently, we expect revenues to be between $134 million and $140 million, and gap earnings per diluted share to range from $1 to $1.12. Non-GAF earnings per diluted share to range from $1.21 to $1.33.

Finally, I would like to share the details of our guidance for the first quarter of 'twenty 'twenty four.

Currently we expect revenues to be between 134 million and.

140 million.

GAAP earnings per diluted share to range from $1 to $1.12.

non-GAAP earnings per diluted share to range from $1.21 to one dollar and 33 cents.

At the midpoint of the first quarter 'twenty 'twenty four estimate we anticipate the following.

Dror David: At the midpoint of the first quarter 2024 estimate, we anticipate the following: Gross margins to increase to approximately 57% on a GAAP basis and approximately 59% on a non-GAAP basis at the higher end of the company's non-GAAP target model. Operating expenses are expected to increase to approximately $45 million on the GEB basis and $40 million on the non-GEB basis, financial income to be similar to that of the fourth quarter, and the tax rate to be approximately 15%. With that, I will turn the call back to Gabi. Gabi?

Gross margins to increase to approximately 57% on a GAAP basis, and approximately 15, 9% on a non-GAAP basis at the higher end of the company's non-GAAP targets molding.

Operating expenses to increase to approximately 45 million on a GAAP basis, and 40 million on a non-GAAP basis.

Financial income to be similar to that of the fourth quarter.

And the tax rate to be approximately 15%.

With that I will turn the call back to Gabby Gabby.

Thank you Dror our prepared remarks are now concluded we would be happy to take your questions operator.

Gabby Weissman: Thank you, Dror. Our prepared remarks are now concluded. We would be happy to take your questions. Operator.

Okay.

Operator: Thank you very much. We will now begin the question and answer session. To ask a question, please press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.

Thank you very much.

We'll now begin the question and answer session to.

To ask a question.

Please press Star then one on your Touchtone phone.

If you are using a speakerphone please pick up your handset before pressing the keys.

Vivek Arya: And if at any time your question has been addressed and you would like to withdraw your question, please press star then two. Again, to answer the question Q, it's star 1. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Vivek Arya from Bank of America Securities. Vivek, please go ahead.

And if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Again, two entered the question queue its star one.

At this time, we will pause momentarily to assemble our roster.

Our first question comes from Vivek Arya from Bank of America Securities.

Please go ahead.

Thank you for taking my question and good to see the strong start to the year. The one thing that stands out as the sharp rebound in gross margins to 59% I was hoping you could help us give us a sense of that can you sustain this and then does it mean chemical metrology moves down just help us.

Dror David: Thank you for taking my question and it's good to see the strong start to the year. The one thing that stands out is this sharp rebound in gross margins to 59%. I was hoping you could help us, you know, first give us a sense of whether you can sustain this and then, second, does it mean chemical metrology moves down? Just help us kind of think about how we should think about gross margins, but more importantly, how do you think it informs us about the mix of your growth drivers? Sure, so obviously, we are going to increase revenues in the first quarter based on our guidance. So it doesn't necessarily mean that chemical revenues will reduce, but definitely, the percentage of revenues will be different.

Kind of give a shape of how we should think about gross margin, but more importantly, how do you think it informs us about the mix of your growth drivers this year.

Sure. So obviously, we are going to increase revenues in the first quarter are based on our guidance. So it doesn't necessarily mean that our chemical revenues, we'd reduce but definitely the percentage of revenues will be different and given the fact this portion of our business is working in.

Gabby Weissman: And given the fact this portion of our business is working in the packaging arena with a little bit lower gross margin, it had some negative impact in Q4, but we do expect a rebound in Q1. In terms of the whole year, we're definitely expecting to be within the non-gap target model of 57% to 59%, hopefully at the higher portion of this range for the year. And then just overall, the WFE environment, so far, what we have heard from your peers is kind of a low to mid-single-digit growth year for WFE. I was hoping, Gabby, if you could give us your sense of how you see the spending environment, especially first half versus second half and then leading edge versus trailing edge logic. I think on the last call you mentioned you saw somewhat of a shift towards the leading edge in the first half.

In the packaging arena with a little bit lower gross margins.

It has a it had some negative impact in Q4.

But we do expect a rebound in Q1.

In terms of the whole year, we're definitely expecting to be within the non-GAAP target model of 57% to 59% hopefully at the higher a portion of this oh this range for the year.

Okay, and then just overall on the W. At the environment, So far what we have heard.

From your peers is kind of a low to mid single digit growth year for WMC I was.

And maybe if you could give us your sense of how you see the spending environment, especially.

First half versus second half and then leading edge versus trailing edge logic I think on the last call. You mentioned you saw a somewhat of a shift towards leading edge in the first half. So just overall your views on how the industry spending environment can shape up this year because you are already starting the year.

Gabby Weissman: So just overall, your views on how the industry spending environment can shape up this year, because you're already starting the year, right, with year-on-year growth. And if I were to just annualize this, you would already be above, somewhat above where your peers are suggesting the industry growth environment to be. So any color there would be very helpful.

Right, but the year on year growth.

To just annualize that you would already be above somewhat above where your peers are suggesting the industry growth environment to be so any color that would be very helpful. Thank you.

Gabby Weissman: Thank you. So, it's a bit early to say, but we've seen a low, I would say mid-single digit WFP growth in 2024. Naturally, we are planning to outperform these figures, but that changes, and I think that it's very difficult to say whether it's going to be a lower number or around that number, but the bottom line is that we are very confident about our plan, and we have the ability to outperform the WFP in that respect.

Yeah.

So it's it's a bit early to say, but our we've we've seen a low I would say a mid single digit to double your fee growth in the 'twenty to 'twenty four naturally we are planning to outperform these are the figures, but that changes and I think that it's very difficult to say, whether it's going to be a lower.

Number or around that number but the bottom line is that we are we are very confident about our plan and we have the ability to outperformed the the double you'll see in that respect with regards to to add to our advanced nodes, especially on the logic are we are.

Gabby Weissman: With regard to advanced nodes, especially logic, we are seeing a recovery towards and higher investments towards the second part of 2024, so we're going to start with a higher percentage of trailing, and then it's going to probably shift towards the advanced nodes, especially on the logic and foundry side, probably towards the second part of 2024. And one last one, if I may, just any views on spending from your customers in, you know, China. So last year we saw very strong demand for trailing edge, right, and then later in the year demand for DRAM. How do you see China overall from an industry perspective in terms of its WFE spending this year? What are your assumptions, you know, flat, up, down, and within that, could you give us some views on how you see that mix of spending shaping from your Chinese customers?

We are seeing a recovery two words and higher investments towards the second part of 'twenty 'twenty four.

So we're going to start with a higher percentage of trailing and then it's going to probably shift two words, the advanced nodes, especially on the logics logic and foundry side.

Probably towards the second part of 'twenty 'twenty four.

Alright, and one last one if I may just any views on spending from your customers in China.

China velocity, we saw very strong demand for trailing edge right and then later in the year our demand for our DRAM, how do you see China overall from an industry perspective in terms of their Wi Fi spending the theater, what what are your assumptions you know flat up down and within that if you could give us some views on.

How you see that mix of spending on shaping from your China customers. Thanks very much.

Gabby Weissman: Thanks very much. Sure. So we expect demand to continue into 2024. While we're probably going to see increased levels of investments in the West starting to kick in later, but we definitely see a very stable demand from China, and we don't expect that to change anytime soon. And this mix will allow us to have a more diversified revenue stream amidst a growing business outlook. As I mentioned before, the mix between or the ratio between trailing and advanced, which also relates to China, will probably change in the second half.

Sure. So we expect demand to continue into 2020 four.

While we probably going to see a increased level of investments in the west are starting to kick in at the at the later parts, but we definitely see a very stable demand.

From China, and we don't expect that to change.

Anytime soon and and this mix will allow us to have a more diversified revenue stream amidst the growing business outlook as I said as I mentioned before the mix between the ratio between trailing in advance.

Which also relates to China will probably change towards the second half.

Thanks, and good luck.

Operator: Thanks and good luck. Thank you. And let me remind you, if you would like to ask a question, it's star number one. Our next question comes from Charles Shee from Needham & Company. Charles, please go ahead.

Thank you.

Thank you and let me remind you if you would like to ask a question its star one.

Our next question comes from Charles <unk> from Needham <unk> Company. Charles Please go ahead.

Charles Shee: Thanks for taking my question. So, Gabby, maybe you can give some color around how to think about the quarterly progression through this year because you did have this slight uptick in revenue in Q1. Should we be expecting more or less around that level? Because when I look at the performance of Nova last year, there were a couple of quarters where you actually reached that $130 million level.

Yeah. Thanks for taking my question.

So Gary Doer.

Maybe you can can you give some color around how to think about the quarterly progression. This year cause you did have boots.

Slight uptick revenue in Q1, Ah shall we be expecting more or less around that level, because when I looked at the performance.

No about last year, there was a couple of quarters, you actually reach that that that's up 130 million dollar level.

I assume we're not going back there, but any color in terms of the progression would be great I'll look that up.

Gabby Weissman: I assume we're not going back there, but any color in terms of the progression would be great, a little bit beyond the acute one. Thanks. So it's difficult to give some insight at this moment into the next quarters, but we do see potential for growth as a result of the advanced nodes investment, which is probably going to be tilted towards the second half, and obviously the increased investments in hybrid bonding and high bandwidth memory. So these kinds of investment engines are definitely giving some grounds to believe that there is potential in the second half for higher growth.

Q1 thanks.

So it's difficult to to give some insight at this moment towards the the the next quarters, but we do see potential for growth.

As a result of the advanced nodes investment, which is probably going to be tilted.

Towards the second half and obviously the increased investments in our hybrid bonding and high bandwidth memory. So these kind of investment engines are definitely giving some grounds to.

Believe that there is a potential towards the second half for a higher growth.

Gabby Weissman: Thanks, that's very helpful. I noticed that in your press release and the prepared remarks, it seems like there's something new in terms of your product adoption, which is the optical metrology solutions for high-bandwidth memory. Your peer, Antu, I think they also mentioned deploying some of the high-end OCD tools for high-bandwidth memory applications a little bit a while back.

Thanks, that's very helpful.

I noticed the ingold press release and the prepared remarks. It seems like there's something new you are in terms of your product adoption, which is the the optical metrology solutions.

For high bandwidth memory.

Youll Pierre I'm too I think they also mentioned about deploying some of the high end OCD tools or high bandwidth memory applications.

A while back can you kind of talk about I'll give a little more details what was that.

Gabby Weissman: Can you kind of talk about, give a little more details about this new adoption and why it happened, and what's the outlook for further adoptions and any financial implications? Thank you. So we've been working with our customers in that area for the last couple of years in order to make sure that we have a unique portfolio, a customized one to address the specific needs of both hybrid bonding and high bandwidth memory. And I'm very proud to say, as I mentioned before, that we are first to market and that our optical metrology product suite, including the PRISM as well as the integrated metrology, has been adopted in both those segments. Obviously, this is a beginning, and we see higher adoption and will see higher adoption as we continue in terms of some of those evaluations that are ongoing other than the customers that have already adopted the portfolio. This is definitely one of the growth engines that I alluded to in the previous answer toward the continuum of 2024.

About that this new adoption and why why it happened that what's the outlook capped off with adoption and any financing vacations and thank you.

Yeah.

So we've been working with or our customers are in that area for the last couple of years in order to make sure that we have a unique portfolio of customized want to address the specific needs in both hybrid bonding and high bandwidth memory and I'm very proud to say as I mentioned before.

That we were first to market and that the optical metrology product suite, including the prism as well as the integrated metrology.

Has been adopted and in both of those segments.

Obviously this is a this is a beginning and we see a higher adoption and we'll see a higher adoption as we continue and took some of those evaluations at the ongoing other than the customers that already adopted the portfolio materializing for us.

And this is definitely one of the growth engines that I alluded to in the previous answer towards the continuum of a 2024.

Yeah.

Operator: Thanks, Gabby. And again, if you would like to ask a question, please press star 1. There are no further questions at this moment, so I will turn the conference over to Gabby Weissman, President and CEO of Nova, for some closing remarks. Thank you. Thank you, operator, and thank you all for joining our call today. And the conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect. Enjoy the rest of your day.

Thanks Gabby.

And again, if you would like to ask a question. Please press star one.

Yeah.

Okay.

Okay.

There are no further questions at this moment, so I will turn the conference over to Gabby Weizmann, President and CEO of Nova for some closing remarks. Thank you.

Thank you operator, and thank you all for joining our call today.

Okay.

And the conference has now concluded. Thank you very much for attending today's presentation.

You may now disconnect enjoy the rest of your day.

Yeah.