NOVA (LFT) Q4 2024: Advanced Packaging Doubles, Now 15% of Product Revenue
NOVA’s Q4 capped a record year, with advanced packaging revenue more than doubling and now representing 15% of product sales, fueled by both chemical and dimensional metrology adoption. The Centronics acquisition expands the company’s reach into modular wafer-level packaging and specialty devices, positioning NOVA to sustain outperformance against wafer fab equipment (WFE) market growth in 2025. Management’s tone signals rising confidence in diversification, but execution on integration and China exposure will define the next leg of growth.
Summary
- Advanced Packaging Penetration: Advanced packaging revenue doubled, now 15% of product sales, broadening NOVA’s end-market exposure.
- Centronics Acquisition Integration: Modular metrology capabilities from Centronics unlock new wafer sizes and specialty device markets.
- 2025 Growth Outperformance: Management expects to outperform WFE growth, anchored by advanced logic and packaging adoption.
Performance Analysis
NOVA delivered record quarterly and annual revenue, with Q4 sales up 45% year-over-year and 9% sequentially, outpacing both internal guidance and broader industry indices. Profitability metrics exceeded target model ranges, as operating margin and EPS both reached new highs. The product mix was led by logic and foundry demand (72% of Q4 product revenue), with memory contributing the remaining 28%. Notably, China accounted for 39% of annual revenue, though management expects this share to moderate as growth shifts toward advanced nodes and packaging in other regions.
Gross margin performance remained robust (58% non-GAAP for the year), reflecting operational discipline and pricing power in differentiated solutions. Free cash flow of $218 million supported both share buybacks and the Centronics acquisition, with $60 million deployed for the latter. Service revenue grew 19% for the year, supported by higher tool utilization and capacity expansion, though guidance anticipates moderating to 10-15% growth in 2025. Operating expenses rose primarily from R&D investment, underscoring the company’s commitment to technology leadership.
- Record Growth Across Divisions: Dimensional, materials, and chemical metrology portfolios all posted record results, with standalone OCD and Metreon platforms leading adoption.
- Advanced Packaging Drives Mix Shift: Doubling of advanced packaging revenue signals a structural shift in end-market demand and solution relevance.
- Cash Generation Supports Capital Deployment: Strong free cash flow enabled both shareholder returns and inorganic expansion.
NOVA’s performance reflects both strong end-market demand and strategic execution, with the company well-positioned to leverage complexity-driven metrology needs in advanced semiconductor manufacturing.
Executive Commentary
"Our advanced packaging revenue more than doubled this year, reaching 15% of product revenue and signifying its growing importance to NOVA. Our integrated metrology solutions have been adopted by four of the top five advanced packaging manufacturers, while our standalone OCD market share in the segment grew significantly. With a recent addition of Centronics, we expect our revenues of advanced packaging to grow further."
Gabby Weissman, President and CEO
"Despite cost pressures and the industry-wide supply chain dynamics, we maintain robust profitability through operational efficiencies, pricing discipline, and continued focus on higher value solutions. Operating margin for the year came in at 28% on a gap basis and 33% on a non-gap basis. Achieving a record high EPS this year underscores our ability to drive profitable growth by effectively converting top-line expansion into bottom-line value."
Guy Kisner, CFO
Strategic Positioning
1. Advanced Packaging and Wafer-Level Diversification
Advanced packaging, which now constitutes 15% of product sales, is increasingly central to NOVA’s growth. The company’s integrated and standalone metrology platforms have penetrated four of the top five advanced packaging manufacturers. The Centronics acquisition extends NOVA’s reach into modular multi-sensor platforms and additional wafer sizes, broadening the addressable market beyond traditional 300-millimeter silicon wafers to specialty devices and emerging packaging formats.
2. Technology Leadership in Metrology
Dimensional and materials metrology solutions (measurement tools for physical and chemical properties of semiconductor devices) continue to win share in both logic and memory segments. Platforms like Metreon (full wafer epitaxial layer measurement) and Prism (standalone optical critical dimension, or OCD, metrology) are seeing accelerated adoption, including multiple evaluations and design wins with leading memory and logic customers. The launch of Nova Velocity (dual-chamber, high-productivity OCD) responds directly to customer demand for higher throughput and yield.
3. Capital Deployment and Balance Sheet Strength
NOVA’s cash generation enabled both organic and inorganic investment, with $218 million in free cash flow funding share repurchases and the Centronics deal. The company closed 2024 with $820 million in liquidity, maintaining flexibility for further strategic actions. Early conversion of convertible notes further de-risked the balance sheet.
4. Geographic and Segment Mix Evolution
While China remains a large revenue contributor (39%), management expects its share to decline as advanced node and packaging growth accelerates in other regions. Logic and foundry end-markets (72% of Q4 product revenue) are expected to outpace memory in 2025, with high-bandwidth memory (HBM) and DRAM driving the memory mix. Service revenue growth is expected to moderate but remain healthy as tool utilization increases globally.
Key Considerations
This quarter marks a pivotal transition for NOVA, as the company leverages both organic innovation and acquisition to deepen its role in advanced semiconductor manufacturing. The strategic context is defined by:
Key Considerations:
- Metrology Intensity Rising: Increasing device complexity and 3D architectures are driving demand for precise measurement solutions in both front-end and advanced packaging applications.
- Centronics Synergy Potential: Successful integration and cross-selling of Centronics technology will be key to unlocking incremental revenue in specialty packaging and non-silicon wafer markets.
- China Exposure Moderation: As advanced node investments shift geographically, NOVA’s ability to grow outside China will be a critical watchpoint for risk-adjusted growth.
- Margin Sustainability: Product mix, pricing discipline, and operational efficiency are sustaining high margins, but quarter-to-quarter fluctuations may arise as new platforms ramp and acquisitions are integrated.
Risks
Integration risk from the Centronics acquisition is front and center, as NOVA must maintain execution momentum while aligning product, sales, and operational teams. China revenue concentration exposes the business to geopolitical and regulatory volatility, though management expects this share to decline. Gross margin durability depends on successful ramp of new platforms and continued pricing power, with competitive intensity in metrology a persistent challenge. Service revenue growth may moderate as 200mm equipment utilization slows in China, though management downplays direct impact from recent restrictions.
Forward Outlook
For Q1 2025, NOVA guided to:
- Revenue between $205 million and $215 million
- Non-GAAP EPS between $2.00 and $2.16
- Gross margin of approximately 59% (non-GAAP), within the target model
For full-year 2025, management expects:
- Outperformance versus mid-single digit WFE growth
- Service revenue growth of 10-15%
Management highlighted:
- Advanced logic and packaging as primary growth drivers
- Centronics expected to be accretive on a non-GAAP basis within 12 months
Takeaways
NOVA’s record year and strong Q4 validate the company’s strategic pivot toward advanced packaging, with the Centronics acquisition set to unlock new TAM and specialty device exposure. Margin and cash flow strength provide strategic flexibility, but China exposure and integration execution remain key variables for investors to monitor.
- Product and End-Market Mix Shift: Doubling of advanced packaging revenue and broad-based adoption across logic and memory are changing NOVA’s growth profile.
- Strategic M&A Execution: Centronics integration will be a test of NOVA’s ability to scale new platforms and address new market segments without margin slippage.
- 2025 Watchpoints: Track service revenue momentum, China revenue mix, and proliferation of new metrology platforms as key indicators of sustained outperformance.
Conclusion
NOVA enters 2025 with strong momentum, underpinned by advanced packaging traction, robust financials, and an expanded product portfolio. Execution on integration and regional diversification will determine whether the company can sustain its outperformance in a moderating industry growth environment.
Industry Read-Through
NOVA’s results reinforce the growing centrality of advanced packaging and metrology in the semiconductor manufacturing value chain. As device architectures become more complex and 3D, demand for both dimensional and chemical measurement solutions is structurally rising. Peers with exposure to advanced packaging, modular metrology, or specialty wafer markets should see similar tailwinds, though execution and integration risk are rising across the sector as product portfolios broaden. China’s share of industry revenue remains a risk factor, and companies with diversified geographic exposure are better positioned as advanced node investments shift globally. Service revenue growth may moderate industry-wide as utilization normalizes, but differentiated technology and operational discipline will remain key to margin leadership.