NOVA (NVMI) Q4 2024: Advanced Packaging Doubles to 15% of Product Revenue, Extending Share Gains
NOVA closed 2024 with record growth, led by a doubling in advanced packaging revenue and robust share gains across logic, memory, and chemical metrology. The Centronics acquisition and next-gen platform launches position NOVA to outpace wafer fab equipment (WFE) growth in 2025, with management signaling continued margin discipline and expanded customer reach.
Summary
- Advanced Packaging Acceleration: Revenue doubled, now 15% of product sales, reflecting broad adoption and segment leadership.
- Platform-Driven Share Gains: High demand for Veriflex, Ellipson, and Metreon platforms fueled market share expansion in both logic and memory.
- 2025 Growth Levers: Centronics integration, new chemical metrology capacity, and advanced logic exposure underpin confidence in outgrowing WFE.
Performance Analysis
NOVA delivered a sixth consecutive quarter of revenue growth, closing 2024 with a 30% annual revenue increase and a 38% rise in non-GAAP net income. Fourth quarter revenue reached a record $194.8 million, up 45% YoY and 9% sequentially, with profitability exceeding the upper end of guidance. Gross margin remained robust at 58% for the year, supported by operational efficiencies and pricing discipline even as R&D investments increased.
Product revenue mix was 72% logic/foundry and 28% memory, with three customers and four territories each contributing over 10% of product revenues. China represented 39% of 2024 revenue, but management expects this share to decline as growth shifts toward advanced nodes and packaging in other regions. Service revenue grew 19% YoY, driven by higher tool utilization and capacity upgrades, with management guiding for 10-15% service growth in 2025.
- Advanced Packaging Doubling: Revenue from this segment more than doubled YoY, now 15% of product sales, driven by both chemical and dimensional metrology divisions.
- Platform Momentum: Veriflex, Ellipson, Metreon, and Prism platforms saw record sales and repeat orders, with new launches like Nova Velocity targeting productivity gains.
- Centronics Acquisition: $60 million deal expands into modular dimensional metrology, with integration expected to be accretive within 12 months.
Free cash flow reached $218 million, supporting buybacks and early note conversions, while maintaining a strong $820 million cash position. Operating margin hit 33% non-GAAP, reflecting successful scale and cost control even as R&D spend rose to support innovation.
Executive Commentary
"Our revenues grew 30% year-over-year and reached $672.4 million while non-GAAP net income grew 38%. We have cemented our position across multiple device segments and achieved numerous milestones across our product lines, including strategic penetrations into leading manufacturers, an evolving position in new segments, and a growing market share."
Gabby Weissman, President and CEO
"In a year where the industry experienced moderate growth, our ability to scale at this pace, demonstrate the strength of our business model. The value we bring to customers and the effectiveness of our long-term strategy."
Guy Kisner, Chief Financial Officer
Strategic Positioning
1. Advanced Packaging Penetration
Advanced packaging revenue more than doubled in 2024, now comprising 15% of product sales. Integrated metrology, the embedding of measurement tools into fab lines, is now present in all top five advanced packaging manufacturers, while standalone OCD (optical critical dimension) platforms like Prism gained significant share. The Centronics acquisition adds modular metrology for wafer-level packaging and specialty devices, broadening addressable market and diversifying wafer types beyond standard silicon.
2. Platform Innovation and Product Mix
Nova’s differentiated platforms—Veriflex, Ellipson, Metreon, Prism, and the new Velocity— are driving both market share gains and customer stickiness. Metreon’s adoption by a leading memory customer, initially for R&D, is expected to proliferate into high-volume manufacturing, echoing historical adoption curves of previous platforms. Nova Velocity’s dual-chamber design targets the highest productivity in standalone tools, already winning orders from leading logic manufacturers.
3. Geographic and Segment Diversification
China’s contribution remains high at 39%, but management expects a shift as advanced logic and packaging drive growth in other regions. Logic and foundry accounted for 72% of product revenue, with memory—particularly DRAM and high bandwidth memory (HBM)—also showing strength. Nova’s broadening customer and application base, including new specialty device markets via Centronics, increases resilience to regional or segment-specific slowdowns.
4. Service and Recurring Revenue Expansion
Service revenue rose 19% in 2024, propelled by higher tool utilization and demand for capacity upgrades. Management guides for continued double-digit service growth as installed base expands and new platforms proliferate.
5. Margin Discipline and Capital Allocation
Gross margin held at 58-59%, reflecting a focus on high-value solutions and operational efficiency. R&D spending increased to maintain technology leadership, while share buybacks and early convertible note conversions optimized capital structure. The Centronics acquisition aligns with existing margin targets and is expected to be accretive within a year.
Key Considerations
NOVA’s 2024 results reflect a blend of platform innovation, expanding addressable markets, and disciplined execution. Investors should weigh the following:
Key Considerations:
- Advanced Packaging as Growth Engine: Doubling of advanced packaging sales signals secular shift in semiconductor manufacturing and Nova’s rising relevance in this segment.
- Platform Adoption and Customer Proliferation: Repeat orders and new platform launches (Metreon, Velocity) suggest durable demand and multi-year revenue streams as tools proliferate across fabs and applications.
- Centronics Integration Upside: Acquisition expands product set and customer reach, with integration expected to be accretive and margin-neutral.
- Service Revenue Leverage: Growing installed base and higher utilization drive recurring service revenue, supporting cash flow stability.
- China Mix Shift: Exposure remains high, but management expects revenue mix to diversify as advanced node and packaging investments accelerate elsewhere.
Risks
High China revenue concentration (39%) exposes NOVA to geopolitical, regulatory, and cyclical risks, though management anticipates a shift toward advanced nodes outside China. Quarterly margin volatility may arise from product mix, and integration risks around Centronics could affect near-term execution. Industry-wide capex cycles and customer adoption rates for new platforms remain key external variables.
Forward Outlook
For Q1 2025, NOVA guided to:
- Revenue between $205 million and $215 million
- Non-GAAP EPS of $2.00 to $2.16
- Gross margin of approximately 59% (non-GAAP)
- Operating expenses (non-GAAP) of approximately $54 million
For full-year 2025, management expects:
- To outperform WFE growth (guided mid-single digits for WFE)
- Continued double-digit growth in advanced packaging and services
Management highlighted:
- Centronics will be accretive within 12 months and expands the addressable market
- Platform launches and new chemical metrology capacity will support growth and margin resilience
Takeaways
Investors should focus on NOVA’s ability to leverage platform innovation, expand share in advanced packaging, and execute on integration of Centronics for sustained outperformance relative to the broader WFE market.
- Advanced Packaging Momentum: Doubling of segment revenue and broader platform adoption signal durable growth drivers beyond legacy segments.
- Operational Leverage: Margin discipline and recurring service growth provide financial flexibility, even as R&D ramps to support innovation.
- Integration and Mix Shift: Successful Centronics integration and a declining China mix will be critical watchpoints for risk management and diversification in 2025.
Conclusion
NOVA enters 2025 with substantial momentum, underpinned by advanced packaging leadership, new platform launches, and a broadened product set following the Centronics acquisition. The company’s execution on innovation and margin discipline position it to outpace industry growth, though regional and integration risks remain key areas to monitor.
Industry Read-Through
NOVA’s results reinforce the growing importance of advanced packaging and metrology intensity in next-generation semiconductor manufacturing. The doubling of advanced packaging revenue and rapid adoption of new platforms point to secular shifts benefitting suppliers with differentiated measurement solutions. Peers with exposure to logic, HBM, and 3D architectures may see similar demand tailwinds, while those reliant on legacy segments or regions like China could face mix-related volatility. Continued consolidation and platform innovation are likely as the industry prioritizes precision, yield, and throughput in complex process nodes.