Q2 2025 Nova Ltd Earnings Call
Welcome to the Nova limited second quarter, 2025 results conference call.
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I would now like to turn the conference over to Miss Mule, CEO of MSIR. Please go ahead.
Thank you, operator, and good day. Everyone, I would like to welcome. All of you to Nova's second quarter, 2025 Financial results conference call.
With us on the line today. Our Gabby Weissman, president and CEO and Guy Kisner CFO.
Before we begin, I would like to 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 pertains to this call.
If you have not received the copy of the release, please view it in the investor relations section of the company's website.
Gabby will begin the call with the business update followed by guy with an overview of the financials. We will then open the call for the question and answer session. I will now turn the call over to Gabby Weissman, Nova's president and CEO Gabby. Please go ahead.
Thank you, Mary, and thank you all for joining us today.
I will start the call by summarizing our second quarter performance highlights.
Following my commentary, Guy Kisner, Nova's Chief Financial Officer, will review the quarterly financial results in detail.
Nova delivered, another record quarter with Revenue at the top end of our guidance and profitability that exceeded guidance.
Our quarterly Revenue grew, 3%, sequentially and 40% year-over-year.
Performance was driven by multiple revenue streams with recorded revenue of our chemical Metrology Division and service business.
Our product portfolio and value proposition, which support technological Transitions and improvements in yield and productivity, resulted in record results. In the logic Foundry and advanced packaging segments.
In the first half of 2025, our Revenue grew, 45% compared to the same period last year.
Fueled by Logic capacity buildout across Advanced and mature nodes.
Dram and advanced packaging capacity, increases driven by higher Metrology. Intensity.
We continue to invest in expanding our business and market share building on the growing technological complexity of our customers processes.
No, visibility to thrive in a rapidly evolving industry, is rooted in a resilient and diversified business model.
Our multiple revenue streams are designed to balance fluctuations and sustained growth.
This Foundation is strengthened by long-standing customer Partnerships agile, operation and the steadfast commitment of our teams.
Utilize an emerging opportunities, navigate challenges, effectively, and execute on our long-term, strategic Vision with confidence.
AI is a secular growth engine driving, an increasing demand for a variety of Highly efficient devices resulting in more, sophisticated designs and Manufacturing processes which in turn Drive investment in advanced nodes, packaging and related Metrology.
Larger dice sizes, greater design, diversity and yield requirements are accelerating development cycles and creating a need for advanced Metrology at the additional steps.
Moreover there is a demand for advanced packaging Solutions specifically designed to accommodate and process Wafers of various forms and shapes.
All of these translate into demands for more methodology capabilities and create new opportunities.
Nova's recent performance offers compelling, validation of the alignment of our strategic Direction. With the market,
the strength and relevance of our portfolio are increasingly evident.
As we continue to deliver solutions, that not only aligned with customer priorities but also anticipate their future needs.
This reinforces our position as a trusted partner in enabling those success and ours in a shifting industry landscape.
More specifically for the June quarter, there are 4 areas I want to highlight today.
Nova is in a poor position to take advantage of the industry's shift to gate all around architecture.
We are already working with the 4 leads who are implementing this process.
Notably this quarter, we recognize revenue from a gate on around customer that adopted multiple Nova platforms across the entire portfolio with additional Solutions. Currently under evaluation
This quarter's record performance in advanced. Packaging has further reinforced our standing in this rapidly expanding segment.
With our chemical neurology division. Performing exceptionally well.
In addition, our Optical neurology portfolio for advanced packaging, which has expanded to include Nova, centronics platforms supports evolving, customer needs and captures the increasing demand in this critical segment.
To round out key market. Segments, Nova is also well, positioned in the memory Market, particularly in dram and high bandwidth memory.
Our leadership in chemical Metrology. Continues to expand supported by record results in high bandwidth memory and a recent win at a leading memory manufacturer, which expanded our market share in front-end chemical Metrology for interconnect applications.
In Optical neurology, a leading memory manufacturer has adopted the Nova synchronic platform for key applications in high bandwidth memory.
This recent acceptance is the result of the solutions, unique ability to address major challenges such as high wattage non-symmetric shapes and different surface conditions.
On the materials Metrology front. We recently introduced the active charge compensation feature on the Nova variflex platform for 399 applications.
This Innovative solution further, enhances accuracy in x-ray, Metrology by effectively addressing photo electron induced charge Distortion enabling precise analysis of critical, memory cell components such as nitrogen.
With shipments to 2, leading memory manufacturers this quarter. We believe that active charge compensation will further accelerate the adoption of the variflex platform in advanced 39 Manufacturing,
Finally.
Our service business continues to act as a growth driver for us.
With 10 consecutive quarters of Revenue, increase and yet. Another quarterly record.
Service, Revenue, grew 7% sequentially and 31% year-over-year.
And important driver of this performance is value added Services, which focus on productivity improvements in our install base and adding capabilities to address new applications.
In summary, our teams, demonstrated effective, execution and delivered, consistently strong results in all segments, markets, and regions.
Our near-term guidance remains solid, and we continue to focus on investing in our portfolio, which proves to be well matched with our customers, expectations and Technology inflections.
Strategic plan, which continues to guide our long-term priorities and Investments.
I invite you to reach out to our IR contacts to schedule a meeting.
We look forward to having meaningful conversations with you.
Now for some more details on our financial, let me hand over the call to guide.
Thanks Gabby.
Today, everyone, and thank you for joining out 2025 second quarter conference call.
I will Begin by reviewing our second quarter financial aid and then provide guidance for the third quarter.
Total revenues in the second quarter of 2025, reached a record level of 220 million.
Marking the fifth consecutive quarter of record-breaking results.
This performance reflects the growth of 3%. Quarter of a quarter and 40% year-over-year.
Revenue distribution was approximately 75% from logic and Foundry and 25% for memory.
Product revenues included for customers and for territories.
Which contributed each 10% or more to product revenues?
Highlighting the company's well, balanced and diversified Rich across markets and customers.
In the second quarter, blended gross margins were 58% on a GAAP basis and 60% on a non-GAAP basis.
In the upper end of our Target Model range of 57% to 60%.
The high growth margin in the quarter was attributed to a product mix weighted towards higher-margin offerings.
As expected operating expenses increases to 61.6 million on a gap basis.
And 56.9 million on a non-gaap basis.
Operating margins. In the second quarter, reached 30% on a gap basis and 34% on a non-gaap basis.
Surpassing the upper range of our Target model of 28% to 33%.
this Excellence result was driven by a healthy quarterly gross margins and the company's robust operational model
the effective tax rate in the second quarter was approximately 15.5%
Earning per share in the second quarter, on a gap basis where $2.14 per diluted share.
and earning per share on a non- Gear basis, where $2.20 per diluted share,
exceeding, the high end of our second quarter guidance.
Marking the 7 consecutive quarter of record breaking performance.
This achievement underscores, the effectiveness of our business strategy and the increase in value our solution deliver to customers and stakeholders alike.
Turning to the balance sheet.
We ended the second quarter with 856 million, in cash cash equivalent bank deposit and marketable securities.
Our free cash flow for a second quarter reached 43 million.
An additional 4.7 million was paid in connection with the acquisition of centronics, as part of the final purchase price adjustment.
Next.
I'd like to outline our guidance for the third quarter of 2025.
We currently expect revenue for the quarter to be between 215 million and 227 million.
Gap earnings by the chair are expected to range from $1.77 to $1.97.
Non-gaap earning per diluted share to rent from $2 and 2 and 22 cents.
at the midpoint of our third quarter estimates were anticipate the following
Gross margins of approximately 57% on a gap basis and approximately 59% on a non-gaap basis.
operating expenses on the Gap basis, to increase to approximately 63 million
operating expenses on the non Gap basis, to increase to approximately 57.5 million,
Financial income on a non-gaap basis, to remain similar to the to that of the second quarter.
%.
Before I conclude my remarks, I would like to know the following.
Nova's, first half 2025 revenues increased more than 45% over the comparable half of 2024.
Outperforming WFC growth forecasts.
The company's solid guidance for the third quarter of the year.
Positions Nova to continue on performing on a year-over-year basis throughout the rest of 20205.
In addition in our last turning call, we shared our expectation that the newly implemented tariffs could reduce gross margins by approximately 30 to 50 basis points.
Based on the latest updates and improved visibility. We now estimate, the impact will be closer to 20 basis points.
A more favorable outcome.
Than initially anticipated.
With that, we'll be pleased to take your questions.
Operator.
Thank you. We will now begin the question and answer session to ask a question. You may press star then 1 on your telephone keypad,
If you are using a speakerphone, please pick up your handset before pressing the keys.
To withdraw your question, please. Press star then to
The first question we have is from Atif Malik of City. Please go ahead.
Hi. Thank you for taking my questions. Um, first question for Gabby Gabby, you highlighted a gate all around as a major shift for you guys. Um some of your peers saw their Taiwan sales decline sequentially in the Dune quarter uh but the Japan sales go up. Um, I was just curious with respect to your aggregate negate all around sales. Um, how did uh, they appear in the June quarter and uh, what kind of trajectory you you see in second half for aggregate gate, all around wafer starts or sales across multiple regions and then I have a follow-up for guy.
Definitely, thank you so much for the question. Um, overall, we are currently positioned well, across all 4 Gala around customers, and we're very excited about this, uh, opportunity. Um, we also mentioned that, uh, we are, um, we have a plan to reach an aggregate of 500 million dollars from gal around Revenue, till the end of 2026 and uh, uh, we're on track to achieve that. We saw uh, a strong demand in the first half of uh this year. And we see stability in the second half from
Around. So overall we are very encouraged by that and by uh um, the momentum that uh, gave all around continues to uh, provide us
Great. And then guy, the gross margins were strong. 60% versus 58% guide and you you talked about the product mix. Um if you can just provide more color or the record chemicals business driving, the the upside to the gross margins. And was there any tariff impact to this? The 60% number for the June quarter.
So, the tariffs impact were marginal, um, the uh, Stronger result for the first half as I mentioned, was driven by a product mix. Uh, not necessarily the contribution for a chemical mology, but uh, it's a specific mix of a variety of our offering. Uh the drove this uh exceptional gross margin result.
Great. Thank you.
The next question we have is from Vic. Are you of Bank of America Securities? Please go ahead.
Hi, this is Michael Monty on from black Aria thanks so much for uh, taking your questions uh wanted to start on. Centronics, could you talk about the momentum? You receive in the business so far this year and more specifically how much did it contribute to growth in, uh, in in June? And how much is in contributing in September essentially, what I'm
I'm trying to parse out as uh how much the Organics business is growing, if you'd be able to offer that, thank you.
Expansion to various territories. So overall we are very optimistic and very bullish about the, the growth, and the potential. Um, the creative uh uh edition of centronics to our business.
Got it. Thank you. And, um, on, uh, gate all around. Uh, 1 of your, you know, larger. Uh, IDM customers is, is pretty. Meaningfully, uh, cut down their cap capex for next year. Um, I know, uh, you just mentioned that you're still on track to uh, uh, complete your, you know, 500 million sales to get all around by next year. Um, so could you just help us unpack? Maybe how impactful that customer was um, to achieving that goal. And if you know more broadly, you've seen any changes, uh, in the road map there with them or, or in any customers that maybe give us a little more pause uh, into next year. Thank you.
Thank you for the question. So, uh, overall I think that the, uh, exposure we have and the, the strong positioning across all, all 4, get all around customers, uh, provides us the ground to, uh, for confidence in our ability to achieve, uh, the overall, uh, growth and revenue that we forecast from Gaylord around, uh, we're well on track with that. And, uh, uh, we believe that, uh, next year is going to be even stronger than this year, in that respect.
Great, thank you. And if I could just ask 1 more quick question, um, sure. Uh, you know, you've talked about in the past, uh, this laptop app strategy, that will especially help Drive growth in your, uh, materials Control G segment where you're still sourced. Um, where are we in the strategy? Uh, if you take a step back, would you say this is something that's more impactful to growth in the next few years? Will it take longer to play out? Are there certain milestones in terms of, you know, uh, customer roadmap inflections that we should be looking for to see when this, you know, when this part of the business really in Flex, just how should we measure progress in that part of the strategy?
So it's an excellent question. And uh, I will divide it, uh, into a few areas um, which relate to our material Metrology portfolio and the lamp to Fab strategy. So, first with regards to XPS, our key efforts are on driving additional value for this tool in order to expand the adoption and increase the number of tools per fed and uh, uh, part of my uh Speech earlier related to uh, another addition uh, of active charge compensation, which is intended to open up a new uh uh. New area of applications for us, especially in the 3D and end and uh uh we continue in terms of our road map to uh, invest in adding value improving cost of ownership in order to continue and do so. And we are very pleased with the with attraction that we see in the adoption of uh xpf.
Has an extra asset across, uh, across Fabs with regards to, uh, the a new tool such as the, uh, uh, inline Sims the Metreon and the ramen, uh, the alexson. So we, uh, spoke about the, uh, additional key evaluations that, uh, uh, we, uh, we embarked on, uh, at the beginning of this year, that we expect to turn into, uh, uh, Revenue, uh, to very strategic evaluations for us. And we are well on track to achieve that. And with regard to the ellipse on, we already see repeated the orders with the very encouraging indications, uh, from multiple customers including a leading, uh, gal around customer, uh, with a potential for multiple tools. So, overall, I think that we have a very robust plan, in terms of lab to Fab focusing, of course, on material Metrology uh which is certain around uh uh adoption of uh uh the well positioned XPS and introduction. And
Expansion of the footprint of the Metreon, and Alps on which are uh, positions, especially for advanced notes.
Great. Thank you so much for the helpful caller.
Thank you.
The next question we have is from Blaine Curtis of Jeffrey's. Please go ahead.
Hi, Ezra winner, I'm for blind. Thanks for taking my questions. Uh, just kind of want to start a lot of your peers are seeing a lot of strength in China. Can you talk a little bit about your Geographic mix and what you're seeing there and what you think that will do into next year and then secondly, uh, in terms of hbm, I know it's not a big piece of your business but you did mention strength there which is also, uh, not exactly what we're seeing it appears. So can you talk about what's driving that string?
To him last year, it was about 15% of our business. And this year uh, we expect a higher percentage. Um, it's a new market for us. So hbm is is growing. And uh, in general, it's about a third of our Advanced packaging business.
We regards to the second question uh relating to uh China. So earlier this year we said that China will be a flat or slightly lower uh we now expect the uh nominal value to be moderately higher year of a year. Uh, whereas revenue is slightly skewed toward the first half, um, percentage. Wise China is forecasted to decrease your over year because of the higher investments in advanced nodes.
Got it. Thank you very much.
The next question we have is from Matthew pristo of Canto. Please go ahead.
Hey thanks for taking the questions guys, I guess to start in your dimensional Metrology business, can you offer an update on the competitive landscape there and any potential changes in shared Dynamics or adoption Trends over the last 3 months? Thanks.
Thank you, Matthew. So, um, with regards to dimensional, Metrology, uh, we have 2 uh key product lines, the integrated Metrology, and the Standalone OCD. Um, in terms of the competitive landscape there is not, uh, there's not much much change in that respect. We have, uh, uh, 1 key competitor on the integrated entry and we're competing with 2 on the Standalone OCD, with regards to integrated Metrology, we continue to lead, and we saw a strong momentum, uh, and result and results in the second quarter of the year. Uh, and we believe that that, uh, leadership, uh, will be, uh, uh, maintained with regards to Standalone OCD. We are extremely encouraged by the, uh, marketer gains that, uh, that we've seen in the market, uh, we have a unique, uh, technology, um, and the value proposition, uh, which drives our market share both in the, uh, front end in the advanced nodes, as well as in the advanced packaging. And we believe that there are good grounds to
To see, uh, continued expansion of that, uh, business for us.
thank you, and then maybe specific
To alexson and Metreon. How are you guys thinking about Revenue contribution from these systems in in 2025 and and potential for growth there in 2026? And maybe how is that Outlook changed over the last 3 months as well? Thank you.
So, alexson and matraen are well on track in terms of our business plan. Uh, we are seeing both, uh, uh, being adopted uh, by uh, Advanced not manufacturers. Uh, we're targeting both memory and the logic with these, uh, tools and, uh, we have a very strong focus on the evaluations, which will, which will result in becoming a process tool of record. And then, of course, the proliferation, uh, in lines in which it, uh, in which those Advanced nodes become, uh, high volume. Um, so we see growth growth year-over-year. Uh, obviously this is something that, uh, we need to focus on especially in, uh, in becoming these, uh, process tool of records for those, uh, customers. Uh, and, uh, and then of course, with the proliferation of high volume, we expect the relative part of that business in over to grow.
The last question we have is from Charles Chi of nidm and Company. Please go ahead.
Hi. Um, um, thanks uh, for taking my questions. Uh, Gabby. I got maybe the first 1, um, uh, you reaffirmed that that the 500 million, uh, uh, accumulated gate all around revenue from last year to next year. Uh, can you give us a sense on where you are for this year in terms of the progress towards that 500 million? Are you like 4 40% there? 45% there uh, probably not 50% there, but that's kind of give us some sense on where you are tracking towards that goal. Uh, let's say by the end of this year, thank you.
Thank you, Charles. So uh, first of all, we relate to the fact that uh uh 26 is going to be stronger than 25 which is in turn stronger than 24. This is a natural evolution of, uh, investments in Gator around. Uh, so, uh, this is still the case and, uh, we see that, uh, we are well on track in terms of this year uh, with the gate all around the revenue.
Of color. I mean we don't need it precise but uh we do want to see if it can give us some better sense about the way you are tracking towards this year.
Um I I still don't have those final numbers. I guess that this color could be provided better around the the end of this year.
Thank you. Look forward to that. Um, maybe, uh, uh, next question. Um, thanks for the China color. Uh, it provided, uh, um, obviously numbers have been going up. Um, uh, for you guys. Um, you guys did a great job. Um, but, uh, relative to 9 days ago, 180 days ago, let's say at the relative to to the beginning of the year.
Uh demand environment definitely is improving uh a little bit further. But uh um, if I met uh, between China versus the X China, uh, demand environment, where have you seen the greater oxide so far? Uh, the reason why I asked this is some of your USPS or more more or less saying yeah, the X China, uh, Outlook is more or less similar to what they see at the what they saw at the beginning of the year, but the China has shown good enough. Good amount of upside so far, is that something you guys are seeing similarly or or you actually have a little bit different Dynamics there. Thank you.
Thank you. We, we do have uh, different Dynamics. So it's very difficult to relate to peers as we're acting in different segments, and we have a different product portfolio. Uh, what I can say is that the, uh, uh, resilience we see is due to the fact that, uh, you know, we have now a free different divisions, uh, the chemical and material dimensional. They're all acting, uh, differently, and have their own Dynamics, plus the new edition of the cronix, that gives us a strong uh, footprint in uh, in in packaging and advanced packaging. Uh, so I I would say in general that uh we see uh different uh, Dynamics to result in uh, revenue streams, that may be different than other peers in the industry.
So it feels like a more or less a similar upside uh, acts China versus China.
Thank you.
Ladies and gentlemen, 1 final reminder, if you would like to ask a question, you may press star and then 1 to join the queue.
We will pause for a moment to see if you have any further questions.
At this time, it seems we have no further questions and that concludes the Q&A session. I would like to turn the conference back over to Gabby, Wiseman, Nova, president, and CEO.
For closing remarks. Thank you.
Thank you, operator. And thank you all for joining our our call today.
Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.