[ad_1]
Nova Ltd (NASDAQ:NVMI) Q1 2023 Earnings Name dated Might. 11, 2023.
Company Contributors:
Miri Segal — Chief Government Officer MS-IR
Gabi Waisman — President & Chief Government Officer
Dror David — Chief Monetary Officer
Analysts:
Unidentified Participant — — Analyst
Vedvati Shrotre — Jefferies — Analyst
Mark Miller — The Benchmark Firm — Analyst
Presentation:
Operator
Good morning, and welcome to Nova’s Ltd. First Quarter 2023 Outcomes Convention Name and Webcast. All members will likely be in a listen-only mode. [Operator Instructions] After immediately’s presentation, there will likely be a chance to ask questions. [Operator Instructions] please observe, this occasion is being recorded.
I’d now like to show the convention over to Miri Segal, CEO of MS-IR. Please go forward.
Miri Segal — Chief Government Officer MS-IR
Thanks, operator, and good day everyone. I want to welcome all of you to Nova’s first quarter 2023 monetary outcomes convention name. With us on the road immediately are Mr. Gabi Waisman, President and CEO; and Mr. Dror David, CFO.
Earlier than we start, I want to remind our listeners that sure info supplied on this name might include forward-looking statements and the protected harbor assertion outlined in immediately’s earnings launch, additionally pertains to this name. If in case you have not acquired a duplicate of the discharge, please view it within the Investor Relations part of the corporate’s web site. Gabi will start the decision with a enterprise replace, adopted by Dror with an summary of the financials. We are going to then open the decision for the question-and-answer session.
I’ll now flip the decision over to Mr. Gabi Waisman, Nova’s President and CEO. Gabi, please go forward.
Gabi Waisman — President & Chief Government Officer
Thanks, Miri, and thanks all for becoming a member of our name immediately. I’m excited to carry this name with you for the primary time in my new position as Nova’s CEO, and I need to thanks all in your continued belief in Nova and its management crew.
Let me start the decision by talking briefly about our first quarter efficiency highlights. Following my commentary, Dror will evaluate the quarter’s monetary leads to element.
Nova’s efficiency within the first quarter demonstrates the rising resilience of our enterprise mannequin, amidst a risky and dynamic business setting. Our revenues surpassed the midpoint of the steering, reflecting our concentrate on continued execution in opposition to our long-term strategic targets. On the identical time, our strong profitability final result, pushed by software program revenues and a good product combine, attests to the distinctive worth of our portfolio and the agility of our operational mannequin.
As our business charts a path ahead framed by international business and geopolitical challenges, we stay targeted on our strategic plans to allow long-term development whereas diligently working to extend our operational effectivity. We’re working in a sophisticated setting with decrease visibility, which will increase the enterprise complexity for a lot of semiconductor business gamers. The slowdown within the conventional business drivers, with PC and cell slowing essentially the most is just partially counteracted by the rising significance of automotive, AI and industrial purposes. Reminiscence clients are taking vital measures in direction of reducing capex and stock ranges, whereas foundry and logic clients are extra reasonable on each accounts.
Mature mode markets proceed to gasoline demand and stability some relative interim softness in superior nodes. But, irrefutably, the significance of semiconductors has reached an unprecedented top, as they kind the muse of the digital economic system. Governments encourage incentivize and stress our business to construct native and generally regional technological and manufacturing management. Concurrently, a number of variants problem producers to efficiently navigate design inflection factors, together with rising die sizes, vertical complicated buildings, numerous designs, equivalent to chiplets and superior packaging, new supplies and supplies engineering.
The consequence of the rising complexities of IT manufacturing is the rising significance of course of management and significantly metrology to profitable and efficient manufacturing processes. Because of this current market reviews point out that the method management segments are among the many fastest-growing WFE phase. This quarter, our foundry and logic clients dominated the enterprise with greater than 80% of our gross sales.
General, superior node gross sales, together with reminiscence have been roughly half of our product income, led by orders from Taiwan and Korea. Of logic advance nodes, 85% have been derived from fab 5 nanometers and beneath. This can be a clear indication that whereas our clients might ponder short-term capability changes to satisfy softer demand, they’re dedicated to investing in next-generation applied sciences.
The opposite half stems from extra mature course of nodes with 28 nanometers taking the lion’s share, primarily led by Chinese language home clients and adopted by Taiwan. Our efficiency in China was particularly robust, pushed by the demand for a complete portfolio from Nova, which has a various manufacturing base. To fulfill the totally different metrology demand situations, Nova continues increasing its three metrology domains, investing in our progressive and extremely differentiated portfolio, which is a large and wholesome basis for future development.
Our ahead progress is additional exemplified by the scientific collaboration with our clients, evidenced by papers offered on the current SPIE convention. One such instance is a paper revealed with Intel, following a number of years of shut collaboration and analysis into cutting-edge optical crucial dimension metrology for superior logic nodes using combos of bodily modeling and machine studying.
One other shining instance is the award for collaboration in metrology granted for a 2022 joint paper with Imec and a consortium of course of distributors addressing a expertise crucial for enabling geometrical scaling in future nodes. The long-term basic development drivers of our business and of course of management encourage us to remain heading in the right direction with our funding plans in each infrastructure and R&D.
We concentrate on sustaining our differentiated providing and progressive method readying our capability to reply to future demand sprees and addressing clients’ very expertise highway maps and manufacturing funding plans.
Within the first quarter, we introduced the opening of our new extremely superior clear room facility in Israel that may present the required manufacturing setting to supply our most superior platforms. The brand new facility will develop Nova’s manufacturing capability and enhances the present services permitting us to enhance procedures, shorten cycle occasions and enhance yields. We may also quickly open an innovation and manufacturing middle in California to develop our supplies business attain and we’re constructing our new places of work and manufacturing facility in Germany. These infrastructure investments are backed by our wholesome money reserves and serve our technique to execute on our Nova’s $1 billion plan.
As mirrored by our outcomes this quarter, primarily the profitability final result, Nova’s embedded environment friendly operational mannequin is constructed to take care of cyclicality and demand modifications within the business. Whereas we’re attentive to market modifications, we proceed to imagine in our long-term development and outperformance.
Now let me shed some mild on the numerous product achievements of the quarter. First, we’re inspired by the report bookings for our supplies metrology platform VERAFLEX, ELIPSON and METRION and imagine our positioning on this area is a enterprise engine that’s pivotal to our strategic development. Our VERAFLEX platform gained entry to a number of new accounts this quarter, cementing that it has change into an important answer on the manufacturing movement of each fab. Further orders for our METRION and ELIPSON options sign rising curiosity in these distinctive breakthrough platforms and their potential.
Second, the demand for our next-generation platform can be mirrored in our optical CD enterprise. We lately delivered a number of PRISM two platforms to a world main reminiscence buyer who’s using the answer within the growth of its most superior reminiscence nodes in a number of areas. This quarter additionally highlights our continued success with superior software program gross sales, reaching a brand new quarterly report. Our software program enterprise is prospering as a result of clients are consistently in search of to acquire an extra edge to productiveness and yield.
Demand for our good fleet administration, top-notch generative AI and machine studying capabilities was fueled by new fabs gearing up for high-volume manufacturing in China and by main producers in Taiwan and Korea boosting capabilities for superior logic and reminiscence units.
Third, our chemical metrology division fashioned via the acquisition of ancosys final yr continues to make strategic strides in increasing its presence in each front-end and back-end sectors. We lately entered the certified vendor checklist of a serious OEM participant setting the stage for brand new alternatives within the front-end. We additionally secured an prolonged order from a number one IBM buyer for its superior packaging fabrication, increasing our market share within the logic sector.
Lastly, our wholesome service revenues grew year-over-year indicating the significance of our put in base, which we count on to succeed in 5,000 energetic instruments by the tip of this yr. We proceed standing by our clients via thick and skinny, clearly evident via the a number of service awards we acquired up to now months, particularly as they undertake conservative manufacturing utilization measures with cautious operating-related expenditures.
I want to contact on our progress on environmental, social and governance fronts. In March, we revealed our first ESG Perception evaluate reflecting the end result of a strategic course of that recognized the numerous ESG values and instructions for Nova and units clear targets and milestones for the subsequent few years.
Our imaginative and prescient is to change into a extra energetic influencer in creating sustainable and equitable future. For our ESG technique, we devised 4 pillars. First is governance, the place we try to raise moral and company governance strategies. The second pillar is folks and social influence by which we concentrate on each particular person and the encompassing communities. Third is our progressive method connecting our technical highway map to our distinctive tradition for long-term exterior influence. And our remaining pillar is setting and provide chain the place we goal environment friendly administration of our footprint, vitality and sustainable provide chain.
Nova’s sustainable development over time has been primarily based on our potential to mix a singular people-centric tradition with distinctive progressive expertise and superior social engagement packages for the good thing about societies round us. We’re working in direction of embedding ESG rules into our working mannequin, enterprise administration and decision-making processes.
Now let me flip briefly to our outlook on the business and its relevance to Nova’s efficiency. It’s already change into broadly acknowledged that in 2023 we are going to see capability changes as clients align their funding plans with decreased demand in some segments. Particularly, that is extra distinguished in reminiscence for each DRAM and NAND, whereas foundry and logic are additionally reasonably impacted.
Trying on the larger image, we anticipate the demand drivers equivalent to HPC, AI, business and automotive, will proceed to name for data-intensive workloads and a necessity for clever edge purposes and are anticipated to drive our business ahead in the long run. We imagine that Nova is nicely ready to take the precise actions and spend money on proper areas throughout this yr, together with some market share initiatives to arrange the corporate to develop and outperform as soon as the business is absolutely recovered.
To conclude my ready remarks, markets and macroeconomic dynamics are creating short-term uncertainties, impacting client demand and buyer selections. Though the approaching months will likely be extra risky and cyclic, we imagine that the elemental drivers of our business will propel development in the long term. Our clients know this nicely they usually proceed to push the envelope towards the subsequent expertise era.
Trying ahead, we anticipate some quarterly fluctuations in 2023 adopted by stabilization and development in 2024. We keep a transparent concentrate on constructing for the longer term, whereas tightly managing the presence, standing shoulder to shoulder with our clients and companions and dealing in direction of mutual success.
I’d prefer to take this chance and acknowledge the contribution and management of Mr. Eitan Oppenhaim. I recognize his mentorship and continued help as our Chairman of the Board. I’m assured that collectively we are going to guarantee Nova’s long-term success and I’m dedicated to the execution of Nova’s $1 billion strategic plan.
Now let me hand over the decision to Dror to evaluate our monetary leads to element. Dror?
Dror David — Chief Monetary Officer
Thanks, Gabi. Good day, everybody and thanks for becoming a member of our 2023 first quarter convention name. Whole revenues within the first quarter of 2023 have been $132 million, down 1% year-over-year. Product income distribution was roughly 80% from logic and foundry and roughly 20% from reminiscence. Product revenues included three clients and three territories that contributed 10% or extra every to the full.
Blended gross margin within the first quarter was 58% on a GAAP foundation and 60% on a non-GAAP foundation, topping the corporate goal mannequin of 57% to 59%. The excessive gross margin within the quarter was attributed to a good product combine, together with report degree software program revenues and the adoption of newer product configurations by a number of clients, demonstrating the excessive worth proposition of those merchandise to our buyer base.
We count on gross margins to progressively normalize into alignment with the corporate goal mannequin within the coming quarters. Working bills within the quarter have been $42 million on a GAAP foundation and $38 million on a non-GAAP foundation, lowering by roughly 10% quarter-over-quarter. This discount is a direct results of the price restraining actions applied by the administration to regulate to the present enterprise setting as was communicated in our earlier convention name.
Working margins within the first quarter have been 27% on a GAAP foundation and 31% on a non-GAAP foundation on the excessive finish of the corporate goal mannequin of 27% to 31%. This wonderful consequence was pushed by the mixture of wholesome quarterly gross margins and the expense management initiatives.
As anticipated, monetary earnings for the quarter elevated to roughly $5 million pushed by larger yields on money reserves. The efficient tax fee within the first quarter was roughly 14%. Earnings per share within the first quarter on a GAAP foundation have been $1.09 per diluted share and earnings per share on a non-GAAP foundation have been $1.23 per diluted share, each exceeding the excessive finish of our first quarter steering.
Lastly, I want to share the main points of our steering for the second quarter of 2023. At the moment, we count on revenues for the quarter to be between $117 million and $125 million, GAAP earnings per diluted share to vary from $0.75 to $0.89, non-GAAP earnings per diluted share to vary from $0.92 to $1.06.
On the midpoint of our second quarter 2023 estimates, we anticipate the next: gross margins of roughly 57% on a GAAP foundation and roughly 58% on a non-GAAP foundation throughout the firm goal mannequin; working bills on a GAAP foundation of roughly $42 million; working bills on a non-GAAP foundation of roughly $38 million, just like the earlier quarter, reflecting administration’s dedication to restrain bills regardless of a rising inflation setting; monetary earnings and the tax fee to stay just like the primary quarter.
To conclude my remarks, I need to point out the corporate’s money reserves, which grew to roughly $550 million on the finish of the primary quarter. This wholesome money degree permits us to proceed and execute development methods and infrastructure investments in addition to to proceed and execute the $100 million share repurchase program introduced and initiated in 2022.
With that, we will likely be happy to take your questions. Operator?
Questions and Solutions:
Operator
We are going to now start the question-and-answer session. [Operator Instructions] The primary query comes from Vivek Arya of Financial institution of America. Please go forward.
Unidentified Participant — — Analyst
Hello, that is [Indecipherable] on behalf of Vivek, and thanks for taking my query. Only one on gross margins. You’ve guided to 58% in June. That’s clearly a step down from March quarter. What actually drove the power in March? As a result of I do know you mentioned combine and new product adoption, however nonetheless it was at a decrease income run fee? And do you suppose that power can proceed into the second half and past? Thanks.
Dror David — Chief Monetary Officer
In order I discussed in my ready remarks, the principle drivers for the primary quarter excessive gross margins was considerably larger software program revenues, which clearly embed very excessive gross margins north of 80% and likewise some adoption of recent merchandise throughout the quarter, together with newer platforms, which embed larger common promoting costs and worth to clients. Clearly with the brand new merchandise we are going to see fluctuations going ahead. And in addition we count on software program revenues to normalize within the coming quarters.
On high of that, as Gabi talked about, we’re opening or have opened the brand new clear room in Israel in the long run of the primary quarter. So all-in-all, we do count on gross margins to normalize throughout the approaching quarters, throughout 2023. And we do count on gross margins to be throughout the goal mannequin for the yr, and likewise as I discussed within the second quarter.
Unidentified Participant — — Analyst
Understood. As a follow-up, I imagine you’ve mentioned that providers will develop this yr. Do you continue to abide by that? After which simply within the general demand for the enterprise, how are you seeing the demand ranges pattern over the second half as what sort of visibility do you’ve gotten particularly given reminiscence investments at a low level at present? Thanks.
Dror David — Chief Monetary Officer
So I’ll take the service income expectation and Gabi will allude to the enterprise. By way of the service, we do count on providers to develop in 2023. Clearly, as Gabi talked about, clients have gotten extra conscious to controlling their working bills lately. So we– at that time limit, we count on perhaps the service revenues will develop lower than anticipated in 2023. However general for the yr, we do count on them to proceed and develop.
Gabi Waisman — President & Chief Government Officer
And so as to add to Dror feedback and to deal with your query, we clearly solely present steering for the subsequent quarter, which is the second quarter of 2023. But within the present difficult setting, we try to take care of enterprise stability for the rest of the yr.
Unidentified Participant — — Analyst
Understood. Thanks a lot.
Operator
The following query comes from Vedvati Shrotre from Jefferies. Please go forward.
Vedvati Shrotre — Jefferies — Analyst
Hello. Thanks for taking my query. So I needed to get your places and takes into — I perceive you’re not guiding for the second half, however simply attempting to grasp the areas — the pockets the place you’re seeing power, the pockets the place you count on the weak point to proceed. So going off of that, you talked about your bookings for supplies metrology being excessive. Does that proceed into second half? After which even on the trailing node there may be some power there from Chinese language home clients. Does that proceed into the second half as nicely?
Dror David — Chief Monetary Officer
Yeah. So, once more, as Gabi talked about there may be a variety of volatility I feel in buyer selections and enterprise within the present setting. We see tasks and plans shifting between totally different quarters. Typically, we do imagine that China will proceed to be robust throughout the yr. However clearly reminiscence could be very, very dormant and likewise we see fluctuations in logic. General, once more, as Gabi talked about, our objective proper now’s to try for stability throughout the rest of the yr.
Vedvati Shrotre — Jefferies — Analyst
Acquired it. And for my follow-up, on the gross margin aspect, is without doubt one of the components that you just’re seeing extra materials metrology options being adopted, is that type of driving your margins larger on this quarter? After which how do you are feeling — I imply, is that the half that drives power within the — for the rest of the yr?
Dror David — Chief Monetary Officer
By way of gross margins the reply is unquestionably, sure. After we talked about the high-value merchandise to clients, this consists of clearly these materials merchandise, as a result of as you already know all of the merchandise providing that we provide into the supplies market, the VERAFLEX, the METRION, the ELIPSON are distinctive applied sciences for Nova and with a really excessive worth to clients. So that they positively have constructive influence on our gross margins.
Vedvati Shrotre — Jefferies — Analyst
Okay. Thanks.
Operator
[Operator Instructions] The following query comes from Mark Miller of The Benchmark Firm. Please go forward.
Mark Miller — The Benchmark Firm — Analyst
Thanks for the questions. Are you able to give us slightly coloration on what’s taking place in your X-ray enterprise?
Gabi Waisman — President & Chief Government Officer
So X-ray enterprise is actually two product strains that we provide that are as Dror mentioned distinctive to Nova and a part of our materials metrology providing. One is the XPS primarily based VERAFLEX platform and the opposite is the in-line because the METRION. Each are seeing robust demand, which we’re very inspired of and a robust worth providing, which I imagine will proceed.
If we’re 2023, in fact, we perceive that there are some short-term challenges. However general we’re very inspired by the penetration to extra clients and the expansion within the materials metrology and particularly in these merchandise, which is throughout our broad buyer base and new clients which are becoming a member of. So we see the momentum selecting up and that may positively help our enterprise this yr and development subsequent one.
Mark Miller — The Benchmark Firm — Analyst
Are you able to inform me about your tax scenario? It appears to be like just like the taxes are trending down. I’m simply curious.
Dror David — Chief Monetary Officer
Sure. So usually our efficient tax fee mannequin is round 14%, 15%. That is our expectation on an annual foundation. This can be a mixture of the principle territories the place we’ve got — we’re producing IP and income which is Germany, Israel and the US. Clearly, Germany is slightly bit larger by way of tax charges, however Israel and the US are literally fairly low. And we do count on to be inside our mannequin additionally in 2023, that means between 14% and 15% on an annual foundation.
Mark Miller — The Benchmark Firm — Analyst
Thanks.
Operator
This concludes Nova’s first quarter convention name and I’ll flip the decision over to Gabi Waisman, President and CEO for closing remarks.
Gabi Waisman — President & Chief Government Officer
So, thanks all for becoming a member of us. I’m planning to attend the approaching investor conferences in June in addition to the SEMICON West in July and invite you to contact our IR and set conferences. With that, we conclude the decision for immediately. Goodbye.
Operator
[Operator Closing Remarks]
[ad_2]
Source link
