Conference Transcript - NVMI 2026-06-02

Vedwati Srotray, Analyst — Evercore

So good morning, everyone, and welcome to Evercore's first annual TMT conference. Thank you all for joining today. I'm Vedwati Srotray, Semicap Equipment Analyst at Evercore, and it is my pleasure to welcome our guest, Gabby Weissman, President and CEO of NOVA, and Guy Kisner, CFO. Thank you. So NOVA is a leading supplier of metrology solutions for front-end semiconductor manufacturing as well as advanced packaging. With that, thank you very much for making the trip here and I really appreciate the time. So maybe to kick things off really quickly, so you know you've raised your WFE outlook, you know we're talking, we're seeing SK Hynek sort of talk about doubling capacity, so just talk about the visibility you're seeing right now and what that does for your revenue growth in second half 26 and 27.

Gabriel Waisman, CEO

So first of all, please allow me to thank you for inviting us and all of you for joining and taking the time to listen to us. I think that what we are seeing is definitely a better visibility. The market is growing and we'll talk about the WFE numbers that keep changing but we do see the momentum and think that the the influx of announcements by H.K. Hynex and more is a testament to the fact that there is a growing interest in semiconductor availability. Customers realize that it has an impact also on their supply chain so the need that they have today is give manufacturers such as us, their suppliers, the visibility in order to get ready on all fronts to supply the equipment and I think this visibility in turn gives us better confidence about the outlook for both this year and next year. We see the the growth in both areas, we have indicated the fact that we expect the second half to be stronger than the first half and we do see additional growth next year. So overall I think that there is a very strong tailwind to the market and it definitely gives us the opportunity to have a better planning horizon both for our capacity, our manpower, our supply chain and so forth. There are constraints of course, there are challenges, but this visibility gives us the means to have a better planning for execution that is much needed in order to supply to our customers.

Vedwati Srotray, Analyst — Evercore

Maybe on that, so given that order momentum and the demand backdrop you're seeing, how are you thinking about NOAA's capacity in terms of revenue potential today and what are expansion plans?

Gabriel Waisman, CEO

So our capacity is is part of our strategic plan. As you know we have our strategic plan ending at 2027 which was originally a billion dollar within organic growth. We updated it to organic growth by 2027 of a billion dollars and that was the baseline for our capacity planning. Obviously we keep updating that capacity plan and we have invested significantly in capacity in both 2024 and 2025 more than doubling our capacity across the board whereas we have four production centers today two in Germany one in Israel and one in the US and we announced another production center in Asia that is going to become operational by the end of this year that being said we are about to release our next strategic plan and we're already planning for capacity requirements for for that plan as well and one of the reasons why we keep our capital investments high is in order to accommodate for additional capacity which we anticipate will be required. It's a constant outlook as part of a three to five years plan because it requires investments in either building new clean rooms or having shells being equipped with the right jigs and equipment for production. So we are constantly looking at the growth rates in the market and adjusting our plans for capacity. We have the capacity to support our customers. The production center in Asia is definitely going to add much needed boost into overall capacity requirements, especially in that area. So we are well positioned in order to support our customers with the growth that they anticipate.

Vedwati Srotray, Analyst — Evercore

So on the Asia facility, have you kind of given any color on how big it is? What should we expect compared to your current facilities?

Gabriel Waisman, CEO

So we'll definitely give more colors towards the launch of that facility, but it is meaningful in terms of capacity and it gives us more than just capacity with our geopolitical world today being close to the customers having more diversified supply chains being able to have the ecosystem and of course with taxation implications I believe that that additional site is meaningful for us in terms of not only providing capacity but mitigating the entire geopolitical landscape that we see today.

Vedwati Srotray, Analyst — Evercore

Understood. Maybe shifting gears to the end market. So on foundry logic, you know, a lot has changed in the past two years when you provided that 500 million cumulative gate all around revenue target. Is there a potential upside to that target now? And what do you see happening in 2027?

Gabriel Waisman, CEO

So our plan was devised based on the fact that we wanted to have a foothold and a market share and position across all four players. So if we look at TSMC, Intel, Samsung, and Rapidus, they're all playing in the gator round, they're all investing, and our predominant target was to be present at all, not knowing exactly who is going to invest when and how much. Of course, we know who is investing the most, but we didn't have a crystal ball into understanding whether one of them is going to be more successful than the other or invest more at a certain period of time but generally speaking once you have the position and you know the overall capacity requirements of Gatorade Round you can deduct the overall business that you're going to have on an accumulative basis and I think we're well on track with that plan and that being said and looking at 2027 momentum which is it's going even further I think that there is a potential for an upside but we're well on track with the numbers that we've given the market for Gator around.

Vedwati Srotray, Analyst — Evercore

Now along with these two nanometer expansions we're also seeing like three nanometer capacity build outs. What are the NOVA implications here?

Gabriel Waisman, CEO

So one thing to remember is that NOVA is selling first and foremost to the high volume manufacturing market or part of the business. So wherever there is a capacity increase we tap into that in terms of our growth. Now, we're well positioned in that particular node and every capacity expansion definitely favors us. So this is good news. That being said, of course, gate all around is more intense in terms of metrology and we spoke about it moving from FinFET to gate all around. But since we have a very good position in this free nanometer space and we see this capacity investment as very favorable. We definitely tap into that growth and we're very encouraged by the additional capacity added.

Vedwati Srotray, Analyst — Evercore

Understood. And then maybe shifting gears to advanced packaging. So it's emerged as one of the fastest growing areas in WFE as well as for you, like you have your advanced packaging revenues almost growing 50% this year. So what are maybe going from here, what are the low-hanging share gain opportunities you have are there any markets that you want to tap into and and what's your positioning product positioning there?

Gabriel Waisman, CEO

So first it's it's very exciting five years ago we had no position in advanced packaging and and the growth has been staggering it's it's phenomenal what we see is many trends so let me be I'll try to be brief first of all we've invested inorganically in order to build a strong position both on the chemical metrology side as well as in the dimensional metrology targeting advanced advanced or advanced packaging in certain applications such as TSVs such as in the RDLs such in topography and warpage all of those are applications that are going to be more and more important as we move in the high bandwidth memory structures and definitely moving into a hybrid bonding and on top of that we have customized our front-end metrology tools into addressing high-end applications in the advanced packaging space tapping into the unique differentiating capabilities technological wise that we have for example with the spectral interferometry in the prism that offers very unique high aspect ratio capabilities in addition we start and I mentioned it before we we had the signs and now we see actual adoption of our material metrology portfolio into advanced packaging. So we are porting our front-end portfolio into advanced packaging. This is one and second we've added more advanced packaging portfolio as part of our acquisitions into that market so that we have a broad portfolio addressing multiple applications across that space and we're definitely seeing additional adoption and very encouraging signs of our position in the hybrid bonding. The more advanced packaging architectures will evolve, the higher the metrological needs are going to be, the better it is for Nova in introducing portfolio into that market.

Vedwati Srotray, Analyst — Evercore

Maybe on that, is there a certain gap you have between the cross margins for the back end versus the cross margins for the front end? and and do you see that converging over time?

Gabriel Waisman, CEO

So traditionally of course the the margins in packaging were lower than the margins in the front end but when we're looking at porting our portfolio from the front end there is no difference to the ASPs and there is no impact in terms of the gross margins and on the flip side where we're seeing our advanced packaging traditional portfolio being slow we see improvements on the margins there as well as part of the overall let's say nova strategy to provide more value to our customers and definitely having differentiation with our competition that helps drive this this higher value and better margins for for that portfolio so overall I see in

Vedwati Srotray, Analyst — Evercore

future I see improvements on the on the cross margin sides on the traditional advanced packaging portfolio and and maintaining our margins as it is for the front-end for our front-end tools going there understood and and then the other like when we do our channel checks one of the key thing is that's coming up is you know the CPU GPU ratios are changing in a sense it used to be one is to four and now it's it's kind of going at parity if not higher so what are the implications for Nova when it comes to that dynamic where you're going seeing strong demand for CPUs as well as the GPUs and yeah.

Gabriel Waisman, CEO

So I think that that's part of the AI driven architectures that we see across the board and the particular use of CPUs, GPUs is definitely part of that. It trickles down to the positioning of the different customers that manufacture those devices, those particular devices, and it goes back to the fact that having a strong position in each one give us the opportunity to tap into growth wherever it comes from. So I think that specifically for the CPUs it's also very encouraging for Nova as part of our position in that space and we definitely see this as an opportunity growing going forward.

Vedwati Srotray, Analyst — Evercore

Maybe in terms of that trickle-down effect like when does it translate to revenues for you or the order momentum given?

Gabriel Waisman, CEO

So it has to do with the lead time so when we look at lead time for our products it's between 3 to 12 months depending on the product the longer lead times are the x-ray ones and the shorter ones uh roughly speaking are the the opticals even though within that there's also uh some parity but um i think that that's where we're going to see that coming from understood so now in the wfe environment today like we're seeing very strong growth on DRAM and HBM pieces you know historically your revenues were more lever towards leading edge or foundry logic in that matter.

Vedwati Srotray, Analyst — Evercore

So as the DRAM pieces become a bigger part of the pie or memory becomes a bigger part of the pie, how do you drive that outperformance?

Gabriel Waisman, CEO

So we've seen the growth of memory share in the first quarter of the year to more than 30 percent and I think this is a testament to our position in DRAM which is most of the investment today. We hope free land will recover towards the end of the year, but we do see the position in DRAM as a growth area for us, especially on the material and chemical metrology. Long-term business model, generally speaking for ANOVA, is 60% logic foundry, 40% memory. That's a general statement, simply because metrology intensity in logic and foundry is higher than in memory. That being said obviously there's still a lot of room to grow in order to reach that long-term model which will require all the let's say engines of the memory market to work but we are seeing that the growth already and the strong position we have is definitely going to be to give us the right tailwind in the in the the next coming quarters coming from both the DRAM and the high bandwidth memory. And we do see the evolution in the technological space, whether it's four or six F square, and then moving to 3D DRAM. So there's a lot of additional growth expected as a result of not only capacity increase, but the technological inflections that are expected in this market.

Vedwati Srotray, Analyst — Evercore

Understood. And so you have characterized Ellipson and Metreon tools as your very important growth engines, right? And so as you look at the adoption curve from here, like what milestones should we track in the next 12 to 18 months for the ramp of these products?

Gabriel Waisman, CEO

So Ellipson and Metreon are both positioned for the most advanced nodes. Ellipson is our inline Raman tool and Metreon is our inline SIMS. The Ellipson is targeting strain, stress and the crystallinity application space and the inline sims is looking at the in-depth profile of material characterization. And I think that what we have moved through is a few steps of adoption of this new technology, which is part of our lab-to-fab strategy. And that emulates the historical move that we've made with the XPS, which is first we need to penetrate and introduce this technology to the most advanced manufacturers definitely the five big ones then we are looking at let's say a tool per fab and the next step and we've seen the the adoption and proliferation of that as we've also announced in the first quarter having a record business for our metreon tool and the next step to watch is having multiple tools per fab this is the same evolution we had with the XPS obviously it will happen faster than what happened with the XPS in the past in the past but having multiple tools per fab is the next step to watch for those two tools.

Vedwati Srotray, Analyst — Evercore

Understood and then on the long-term model so you know I think we all have kind of a good trajectory on the revenue growth you can deliver but like one of the important pieces for your strategy was driving R&D growth to support that revenue growth so maybe going from here with the volume growth you're seeing like does that operating margin target of 28 33 percent does that look conservative now i think you know originally we introduced the uh our target model back in 2022 um where we are going to you know continue to double our revenues every five years and currently we're well on track uh reaching this target and the operating margins targets that

Guy Kizner, CFO

we said currently we're operating on the high end of those operating margins given the fact that we're very close to reaching this target that we are set to ourselves. Once we reach the one billion dollar plan we're going to step back and really outline the next five years growth plan for us and obviously update the operating the the financial target model where our strategy will remain investing a lot in R&D. We believe that this is driving our growth and contributing to our growth margins that we're seeing and the value that we're bringing to our shareholders. So once we reach the 1 billion, we're going to look under our financial model going forward.

Vedwati Srotray, Analyst — Evercore

Understood. And maybe the last question I have. So M&A has been a very important part of your strategy. You have successful acquisitions at Silvera, Encosys, Centronics. How are you thinking about M&A today, what capabilities seem attractive to you, and maybe the size of the transactions that we can expect?

Gabriel Waisman, CEO

So as you know we had to convert back in September last year and we now have about 1.7 billion dollars in cash and most of it is dedicated or designated towards having M&A, so we have our acquisition, so we have the right firepower. It's one of the high focused areas but we're adamant about making the right acquisition obviously we are looking potentially at targets with at scale rather than or compared to the acquisitions the free acquisitions that we made in the past but it doesn't mean that we're not looking at smaller targets as well which could be one or more we are looking predominantly at process control as long as it has a strong anchor and semiconductor but could have positions in other segments or other markets as well. There could be exceptions to the rule but predominantly it's in process control and it needs to meet certain financial criteria as well as having technological differentiation and a cultural fit.

Vedwati Srotray, Analyst — Evercore

Great, that would have to be the last question. Gabby and Guy, thank you very much for coming to our conference thank you thank you so much really appreciate it