Nova Ltd.

Good day and welcome to NOVA's third quarter 2022 results. Today's conference is being recorded. At this time, I would like to turn the conference over to Mary Segal, 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 third quarter 2022 financial results conference call. With us on the line today are Mr. Eitan Oppenheim, President and CEO, and Mr. Dror David, NOVA's 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 Dror with an overview of the financials. We will then open the call for the question and answer session. Now I'll turn the call over to Mr. Eitan Oppenheim, NOVA's president and CEO. Eitan, please go ahead.

Thank you, Miri, and welcome everyone to our third quarter financial results conference call. I will start the call today by speaking about our quarterly performance highlights and the market dynamics as they relate to NOVA. Following my commentary, Dror will review the financial results in detail and present the guidance for the fourth quarter. NOVA reported another sequential growth quarter, evincing the agility and expanding diversification we have built into our business model. Following the introduction of NOVA's $1 billion plan, and the strong execution of our targets throughout the year, we are confident in the company's long-term performance despite some near-term challenges. Our achievements in the quarter and throughout the year were driven mainly by the unique value we consistently add to our customers and our growing position in the market. Although some of the traditional industry drivers, like PC and mobile, are showing some near-term weakness, we believe that long-term semiconductor demand will persist, propelled by multiple evolving drivers, which are increasing the heterogeneity of the industry and its demand profile. Since dimensional and material process control are becoming critical enabling factors for our customers, we continue developing our advanced metrology portfolio to capitalize on various horizontal and vertical emerging opportunities in the market. Our consistent outperformance in the last few years, driven by our unique organic engines and growing market exposure, support our expectations to continue our outperformance beyond the pure demand dynamics, which is a result of the near-term market cyclicality. Specifically for the quarter, our revenue results exceeded expectations and attained the high end of our guidance, including another sequential quarterly record, which represent around 28% growth year-over-year. Our profitability outcome reached the top end of the guidance, reflecting the efficiency embedded into our operational model as revenue grows. Highlighting the financial results for the third quarter and given our guidance for the fourth quarter, We currently aim to grow revenue approximately 35% year-over-year, overachieving our previous expectations while continuing to deliver strong outperformance versus CAPEX and WFE growth numbers for the year. During the quarter, we also held our Investor Day, in which we discussed at length our new strategic plan to attain $1 billion in revenue in five years. The plan's fundamentals to achieve growth while strengthening our resiliency and agility were based on the company's consistent performance in diversifying its business across products, markets, customers, and geographies. The achievements in the third quarter underscore few of those elements. The diversity of our customer base is well demonstrated by four major customers this quarter, representing our growing expansion in various leading players. Furthermore, the overall customer mix includes contribution from over 20 active customers across geographics, territories, and even new industry segments like advanced packaging, backend, and PCB. The second element is the continued diversification of our product portfolio and the adoption of new technologies. While we continue to proliferate our traditional OCD products and set new integrated methodology sales records, we also see growing traction with our new organic growth engines. During the year, as well as in Q3, we continue the momentum of our SI technology and delivered a growing number of Prism tools, both for R&D and high-volume manufacturing for critical 3D applications. Today we see that the Prism capabilities are garnering more advantages as high-aspect ratio applications become more challenging, specifically in memory where SSD layers are added, nanowires where 3D structures are fabricated, and TSV formation in front-end and back-end steps. Since acquiring ANCOSYS and based on our growing focus to lead the materials metrology space, we are encouraged by the solid contribution of our materials portfolio to the overall revenue mix this quarter. While we continue moving our next-generation XPS tools to inline and in-die measurements, we continue focusing on proliferating the Matrion and Ellipson systems to additional customers. Specifically, I would like to highlight, as shared in the press release during the quarter, that another logic manufacturer selected Novus Matrion for next-generation IC development. As part of our material strategy, we are also encouraged by the substantial progress in ANCOSY's product portfolio introduction in several markets. Based on our Q4 guidance, we now expect a record year for Anthosis, creating multiple growth opportunities for next year as well. The third area to emphasize in our diversification strategy is the hardening demand in trailing edge nodes and NOVA's solid positions in this segment. While some IC markets are softening, automotive, IoT, and industry-related applications remain stable. The continuous demand for mature generation devices drives new expansions to fulfill the demand. Nova is well positioned to capitalize on the growing opportunities among these customers whose contributions represented around 50% of our revenues in this quarter. And finally, the last diversification highlight is the growth in our service revenue contribution. Panning over 4,700 active tools to date in our install base, Nova continues to develop and offer our customers a portfolio of services ranging from ongoing support to new upgrades and productivity packages to keep improving utilization rates, metrology accuracy, and fleet matching. As a result, revenue contribution from services is expected to grow approximately 30% this year. Before I move on to the market environment and its relevance to our business, I would like to address the latest export restrictions announced by the US government. In October, the US government issued new regulations to restrict some aspects of the US semiconductor trade with China. The regulations are mainly related to export control for advanced nodes in both memory and logic. As we continue to evaluate the impact of such restrictions on our US-based activity and global re-export conditions, our initial assessment is that the direct impact on NOVA's overall business plan for 2023 is marginal and estimated at around 10 million US dollars in direct revenue, mainly from our US-based operations. As the foreign wafer fabrication entities in China acquired their temporary license to continue manufacturing, we continue to carefully monitor domestic customers' investment plan going forward. Furthermore, while the Chinese market becomes more volatile due to the new trade restrictions, we are encouraged by our growing business in the U.S., which demonstrates significant growth year over year. We anticipate this growth to continue next year as well, propelled by both new FABs and new expansion. Finally, as we look at the industry demand environment, although our long-term growth forecast for the industry remains intact, we expect softness in the near term due to access inventories driven by a slowdown in consumer electronics demand. The impact on semiconductor pricing, particularly in memory, along with other economic and geopolitical factors, is driving our customers to be more conservative in the near term. Although we are monitoring these trends carefully and increasing agility in our operating model, over the last few years, we have consistently demonstrated our ability to outperform the industry by proliferating our new technologies, expanding diversification, and market share gains. Considering all aspects, we remain positive about the company's long-term growth potential and reaffirm the strategic target we introduced on our analyst day in September. With that, I would like to recap our third quarter results. NOVA had a strong quarter against the backdrop of a dynamic market and an increasingly complex environment. Given our guidance for the fourth quarter, we are striving to achieve another record growth year for Nova. We believe that the company fundamentals that were strengthened this year will support us in continued outperformance in an overcoming in trim demand cycles in the years to come. With that, let me hand over the call to Dror. Dror?