Nova Ltd.

Good day and welcome to NOVA's second quarter 2021 results. Today's conference is being recorded. At this time, I would like to turn the conference over to Mary Seagal, CEO of MSIR. Please go ahead.

Thank you, operator, and good day to everybody. I would like to welcome all of you to NOVA's second quarter 2021 financial results conference call. With us on the line today are Mr. Eitan Oppenheim, President and CEO, and Mr. 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 pertains 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. Eitan will begin the call with the business update, followed by a drawer with an overview of the financials. We will then open the call for the question and answer session. I'll now turn over the call to Mr. Eitan Oppenheim, NOVA's president and CEO. Eitan, please go ahead.

Thank you, Miri, and welcome everyone to our second quarter financial results conference call. I will start the call today by speaking about our second quarter results and performance highlights. Following my commentary, DRAW will review the quarter's financial results in detail and will conclude with the guidance for the third quarter of 2021. NOVA maintained its outstanding performance, delivering another strong quarter with compelling results that exceeded the company's revenue and profitability guidance. The acceleration in our business, as reflected in our continued robust performance, is propelled by our evolving offerings and our growing position across geographies, customers, and technology nodes. Our revenue reached another record high, demonstrating approximately 55% growth year-over-year, while our non-gap net income grew approximately 95% year over year to record level as well. Moreover, comparing our 2021 first half results to the same period last year shows a growth pace of around 45% in our revenues and more than 70% in our non-GAAP net income. Reflecting the leverage that is embedded in our business model and the value our innovative portfolio brings to our customers in this demanding period. The strong momentum and the exceptional performance we are demonstrating are the result of our consistent execution, which is led by our strategic plans to outperform and continue the company's profitable growth in the years to come. Our flexible operating model and the concentrated efforts to strengthen our resiliency across the company allow us to meet our customers' growing demand as we expect to increase our production output by more than 50% this year. As reflected in our financial results, we continue to reap the benefits of our well-executed plans as part of multiple strategic initiatives across technologies and customers. Based on the current positive semiconductor environment and the expectations for continuous demand in both the trailing and advanced nodes, combined with record quarterly bookings for our solutions, we expect another record year in 2021, forecasting approximately $390 million in revenue with an optional upside to cross the $400 million threshold. Achieving that, we represent around 50% growth year-over-year in our business volume. In the current market dynamics, our innovative approach, supported by our solid commitment to our customers, continues to strengthen our position and expand our exposure to a broader customer base across all geographies. This strong impetus we are experiencing in all semiconductor segments is propelled currently by strong demand for multiple traditional and high-end applications that are driving growing demand for stronger computation, extended data management, and powerful network infrastructure. The growing digitization of multiple industries continues to fuel the demand for silicon and support our expectations for elevated multi-year WFE spending. In addition, and against the backdrop of broad demand for semiconductors, increasing device complexity plays well into our growth plan in several new metrology applications, which open for us numerous opportunities to extend our available markets, increase attach rates, and also gain market share. The complexity embedded in building next-generation devices requires innovative solutions for inline in-die metrology, and in this space, we prevail with our combined solutions for both critical dimensions and materials control. On top of these two strong market drivers, which are the demand and the technical complexity, the push by different continents and nations to achieve semiconductor supply chain independence within the next several years expands regional investments, elevate the demand for capital equipment globally, and support even copious WFE spending. These tailwinds resonate well with our results with balanced contribution from the three big territories, Taiwan, Korea, and China, contributing 30% each. Moreover, our position in China continues to improve with several new expansions and penetrations, resulting in a new revenue record in this region. Furthermore, and based on several global manufacturer intentions to expand their position in the US, we expect a growing business momentum in North America as well throughout 2021 and 2022. In addition to the overall demand for new advanced devices, Customers are also focused on utilizing their investment by optimizing existing fabrication lines to improve performance and increase output. As a result, we are experiencing growth in systems delivery also to the trailing memory and logic nodes, driving revenue balance between the nodes in the first half, where around 40% coming from trailing edge nodes. Additionally, to better utilize this high-volume manufacturing line, we are offering our customers a broad range of solutions to upgrade the install base to extend the fleet lifespan and increase its productivity. This activity, over many customers, steered up our service business growth this year with another record high this quarter. Although we are pleased with all our achievements during the quarter, I would like to emphasize two major milestones closely connected to our strategy. The first one is the growing demand for optical CD standalone tools, mainly the Prism, across numerous customers. While our industry is going through extensive technical transition, either in multi-stack memory, scale DRAM, or new logic architectures, Nova's solution that includes multiple optical unique channels along with advanced software capabilities resonates well with our customers as the most suitable solution for faster and more accurate process in 3D devices. As a result of this growing traction, our standalone revenue hit a record high in the second quarter and we expect strong momentum for the rest of the year as well. The second milestone is the progress we made with our software sales towards our long-term business model. At this point, I would like to clarify that when we discuss our software growth engines, we exclude common systems sequence upgrades, service software version upgrades, or fault management solutions, and concentrate only on advanced modeling, deep learning, and fleet management. These three engines drive our business forward and brought in another software revenue record this quarter. Specifically in this space, we are very encouraged by the traction our NovaFit portfolio is gaining in the market. NovaFit, our deep learning solution suite, stands as a key differentiator in our offering to customers who strive to improve accuracy and increase yield while reducing time to market. Our solution handle massive amount of data very fast and deliver process insights based on accumulated knowledge and advanced algorithms. The ultimate goal of our offering is to calculate and analyze a growing amount of data during the process cycle from hundreds of tools along the different process steps and with that to predict the next measurement with the highest accuracy. One example of the immense importance of that to our customers is the device functionality testing. Today's fabrication process is so complicated that it takes several months from the time a silicon wafer is introduced in the manufacturing until a fully functional device is produced that can be released to electrical testing. To make production faster and more efficient, NovaFit analyzes data from over 200,000 optical measurements performed weeks and sometimes months before manufacturing is completed and can predict the electrical test results already during the front-end process with unmatched accuracy. Our ability to deliver solutions like that that is based on having different metrology sensors in the production lines in different steps. In a typical advanced node, we can have hundreds of integrated metrology tools, tens of optical CD standalone tools, and multiple x-ray systems. Encouraged by our consistent achievements and our ability to meet our NOVA 300 model, we recently announced during our Analyst and Investor Day the new strategic plan to organically grow the business to more than $500 million in revenues. The combination of favorable market conditions, increased complexity in device manufacturing, our solid business model, and a diversified portfolio support our expectations for further growth and outperformance. The plan, as presented during the Analyst and Investor Day, is based on four pillars. which are the basis for our success. The first one is the continuous investment in talent acquisition and talent management to nurture our cultures that combines inclusion, diversity, and transparency, along with aggressive approach towards execution and winning. The second pillar is our continuous elevated spending in R&D to keep rolling out new innovative metrology solutions to the market which focus on both hardware and software products. The Ellipson and the Prism are the harbingers of more new technologies to come in the short and the long periods while customers are using both new architectures and materials to improve performance. The third pillar is our increasing install base and the service revenue it drives. On average, we deliver hundreds of tools a year to the market. These are very accurate and highly advanced tools that measure thousands of wafers a day and are responsible for all major yield improvements globally. As part of our roadmap, we constantly develop upgrade packages for these tools, including hardware and software, to be able to provide our customers with more capabilities to handle more complex devices in existing traditional fabrication lines. The final pillar is the leverage we developed in our operational model, which supports our continued investment in new products and technologies while allowing us to deliver on our long-term profitability model. We can see this leverage materialized already this year as we increased R&D investment in new products and grew our production output approximately 50%, all while significantly increasing our profits. Before I hand over the call to draw to extend our financial highlights in more detail, let me just recap our performance this quarter. It has been a remarkable quarter in the first half of 2021, achieving multiple records and heights. Looking ahead, we see an abundance of opportunities to continue growing as our strategy to invest in innovative, unique technologies bears fruit in the form of an expanded portfolio and growing addressable market. I'm extremely proud of our teams across the globe who are rising to the challenge and performing at their best. With that, let me hand over the call to Dror to review our financial results in detail.