Nova (NasdaqGS:NVMI) FY Conference January 14, 2026 12:45 PM ET Company ParticipantsGuy Kizner - CFOConference Call ParticipantsNone - AnalystNoneAll right, good afternoon. This is the 28th Annual Needham Growth Conference. Joining me on the stage is from Nova. I'm thrilled to have Guy Kizner, the CFO, here on the stage with me. Thank you for joining today. I believe this is your second time at this conference.Guy KiznerRight.Yeah.Thank you, Charles. It's really great to be here. We very appreciate the fact ...

Financial Data and Key Metrics Changes - Nova achieved record quarterly revenue of $224.6 million in Q3 2025, reflecting a robust 25% year-over-year growth and a 2% quarter-over-quarter increase [3][10] - Blended gross margins were 57% on a GAAP basis and 59% on a non-GAAP basis, aligning with guidance [10][11] - Operating expenses increased to $63.5 million on a GAAP basis, with operating margin reaching 28% on a GAAP basis and 32% on a non-GAAP basis [11][12] - Earnings per share were $1.90 on a GAAP basis and $2.16 on a non-GAAP basis [12] - Free cash flow generated in Q3 was approximately $67 million, totaling about $170 million for the first three quarters of 2025 [12][13] Business Line Data and Key Metrics Changes - Revenue from memory devices reached record levels, driven by strong demand for advanced DRAM and high bandwidth memory [3][6] - Advanced logic revenue also saw records, primarily due to demand for gate all-around manufacturing processes [7] - Advanced packaging solutions experienced increased demand, particularly for critical dimension measurements [8][9] Market Data and Key Metrics Changes - The company expects wafer fab equipment (WFE) growth in the mid-single digits for 2026, with potential upside from AI-driven demand [5][18] - Revenue from China is expected to be nominally higher year-over-year, but its share of overall business is projected to decrease from 39% to around 30%+ [27][28] Company Strategy and Development Direction - Nova's strategy focuses on leveraging advanced technology to address challenges in AI applications and complex manufacturing processes [4][9] - The company is committed to expanding its footprint in the semiconductor process control market, with a focus on R&D investments and potential M&A opportunities [13][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to outperform WFE growth, citing strong growth engines and a favorable market environment [18][36] - The outlook for 2026 is expected to be second-half weighted, with both memory and advanced logic driving growth [36][42] Other Important Information - Nova opened a new production facility in Mannheim, Germany, which will triple its production capacity for advanced packaging optical metrology solutions [9] - The company completed a $750 million convertible notes offering, enhancing its financial flexibility for strategic growth initiatives [13] Q&A Session Summary Question: Can you walk us through the upside case to the wafer fab equipment outlook? - Management believes they have the right growth engines to outperform the mid-single digit WFE growth, with expectations for a more second-half weighted year in 2026 [18] Question: Can you discuss the gross margins and any impact from China restrictions? - Gross margins were reported at 59%, with guidance for 58% in the next quarter, and no significant impact from China restrictions was noted [20][21] Question: What are the moving pieces in Foundry and Logic versus memory sales? - Memory sales increased significantly, with DRAM driving the majority of that business, while Foundry and Logic saw a decline [24] Question: What is the company's positioning in the NAND cycle? - NAND remains muted, but management expects growth towards the second half of next year, with a strong position in the market [38] Question: What is the expected contribution from advanced packaging for 2025? - Advanced packaging is expected to contribute approximately 20% of revenues in 2025, up from 15% the previous year [37]

Financial Data and Key Metrics Changes - Nova achieved record quarterly revenue of $224.6 million in Q3 2025, reflecting a robust 25% year-over-year growth and a 2% increase quarter-over-quarter [3][10] - Blended gross margins were 57% on a GAAP basis and 59% on a non-GAAP basis, aligning with guidance [10][11] - Operating expenses increased to $63.5 million on a GAAP basis, reflecting investments in R&D and strategic evaluations [11] - Earnings per share were $1.90 on a GAAP basis and $2.16 on a non-GAAP basis [12] - Free cash flow generated was approximately $67 million for the quarter, totaling around $170 million for the first three quarters of 2025 [12][13] Business Line Data and Key Metrics Changes - Product revenue distribution was approximately 70% from logic and foundry and 30% from memory, with memory sales driven by strong demand for advanced DRAM and high bandwidth memory [10][3] - Record sales in memory were achieved, with significant contributions from Veriflex and Prism platforms [6][7] - Advanced logic sales were also at record levels, primarily due to demand for gate all-around manufacturing processes [7] - Advanced packaging solutions saw increased demand, particularly for critical dimension measurements [8] Market Data and Key Metrics Changes - The company expects wafer fab equipment (WFE) growth in the mid-single digits for 2026, with potential upside from AI-driven demand [5][4] - Revenue from China is expected to be nominally higher year-over-year, but the share of overall business from China is projected to decrease from 39% to around 30% [27][28] Company Strategy and Development Direction - Nova's strategy focuses on addressing unique process control challenges in manufacturing integrated circuit devices for AI applications [4] - The company is well-positioned to support customers with differentiated, scalable, and innovative solutions as the industry evolves [9] - Nova is actively pursuing inorganic growth opportunities in the semiconductor area, particularly in process control [32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to outperform the WFE growth and highlighted the importance of memory and advanced logic in driving future growth [18][36] - The company anticipates continued growth in advanced packaging, with a projected increase in revenue share from 15% to approximately 20% in 2025 [37] - Management noted that the business in China has normalized and expects this trend to continue into 2026 [43] Other Important Information - Nova opened a new production facility in Mannheim, Germany, which will triple production capacity for advanced packaging optical metrology solutions [9] - The company completed a $750 million convertible notes offering, enhancing its financial position for strategic investments [13] Q&A Session Summary Question: Wafer fab equipment outlook for next year - Management believes they have the right growth engines to outperform the mid-single digit WFE outlook, with expectations for a more second-half weighted year in 2026 [18] Question: Gross margins and impact from China restrictions - Gross margins for the quarter were reported at 59%, with guidance for 58% in the next quarter, and no significant impact from China restrictions was noted [20][21] Question: Foundry and Logic sales performance - Memory sales increased significantly, while Foundry and Logic saw a decline; however, leading-edge foundry sales hit a record [24][25] Question: Gate all-around business trajectory - The gate all-around business is expected to continue growing, with an aggregated business expectation of about $500 million from 2024 to 2026 [30][31] Question: Advanced packaging revenue contribution - Advanced packaging is expected to contribute approximately 20% of revenues in 2025, with continued growth anticipated in 2026 [37] Question: NAND cycle positioning - NAND revenues are currently muted but are expected to grow towards the second half of next year [38] Question: China market outlook - Management expects nominally solid business levels in China, with lower visibility for the second half of the year [45]

Financial Data and Key Metrics Changes - Nova achieved record quarterly revenue of $224.6 million in Q3 2025, reflecting a robust 25% year-over-year growth and a 2% increase quarter-over-quarter [3][11] - Blended gross margins were 57% on a GAAP basis and 59% on a non-GAAP basis, aligning with guidance [11] - Operating margin reached 28% on a GAAP basis and 32% on a non-GAAP basis, demonstrating the scalability of the business model [12] - Earnings per share were $1.90 on a GAAP basis and $2.16 on a non-GAAP basis [12] - Free cash flow generated was approximately $67 million for the quarter, totaling about $170 million for the first three quarters of 2025 [12][13] Business Line Data and Key Metrics Changes - Product revenue distribution was approximately 70% from logic and foundry and 30% from memory [11] - Record sales in memory devices were driven by strong demand for advanced DRAM and high bandwidth memory [3][5] - Advanced logic sales were also at record levels, primarily due to demand for gate all-around manufacturing processes [6] - Advanced packaging solutions saw increased demand, particularly for critical dimension measurements [7][8] Market Data and Key Metrics Changes - The company expects wafer fab equipment (WFE) growth in the mid-single digits for 2026, with potential upside from AI-driven demand [4][5] - Revenue from China is expected to be nominally higher year-over-year, but the share of overall business from China is projected to decrease [27][41] Company Strategy and Development Direction - Nova's strategy focuses on addressing unique process control challenges in manufacturing integrated circuit devices for AI applications [4][10] - The company is investing in R&D for long-term opportunities and strategic evaluations [12] - Nova is well-positioned to support customers with differentiated, scalable, and innovative solutions as the industry evolves [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to deliver long-term growth and value, with expectations for continued growth in advanced logic, advanced packaging, and DRAM [4][10] - The company anticipates a record year in 2025, with annual growth of approximately 30% [14][16] Other Important Information - Nova opened a new state-of-the-art production facility in Mannheim, Germany, which will triple production capacity for advanced packaging optical metrology solutions [9] Q&A Session Summary Question: Wafer fab equipment outlook for next year - Management believes they can outperform the mid-single digit WFE growth outlook, with improvements noted since September discussions [18][19] Question: Gross margins and impact from China restrictions - Gross margins were reported at 59% for the quarter, with guidance for 58% next quarter; no significant impact from China restrictions was noted [20][21] Question: Foundry and Logic sales performance - Memory sales increased significantly, while Foundry and Logic saw a decline; management expects continued growth in memory [24][25] Question: Gate all-around business trajectory - The gate all-around business is expected to grow significantly, with an aggregated business expectation of about $500 million from 2024 to 2026 [31][32] Question: M&A opportunities - The company is looking for inorganic growth opportunities primarily in semiconductor process control, with a dedicated team pursuing these opportunities [33][34] Question: Advanced packaging revenue contribution - Advanced packaging is expected to contribute approximately 20% of revenues in 2025, up from 15% the previous year [37] Question: NAND cycle positioning - NAND revenues are currently muted but expected to grow towards the second half of next year [38] Question: China market outlook - Business in China is expected to remain solid, with lower visibility for the second half of the year; normalization is anticipated to continue into the first half of 2026 [41][45]