NOVA (SPH) Q4 2024: Advanced Packaging Revenue Doubles to 15% of Product Mix, Extending Outperformance Run
NOVA capped 2024 with record results, fueled by a surging advanced packaging business and strong execution across its diversified metrology portfolio. The company’s double-digit growth in both revenue and profitability outpaced the broader wafer fab equipment (WFE) market, as strategic share gains in logic, memory, and packaging segments took hold. Management’s guidance and commentary point to continued outperformance in 2025, with new product ramps and the Centronics acquisition set to further expand NOVA’s addressable market and earnings power.
Summary
- Advanced Packaging Momentum: Revenue more than doubled, now 15% of product mix and set for further growth with Centronics integration.
- Broad-Based Share Gains: NOVA captured new wins in logic, memory, and packaging, leveraging unique metrology solutions to expand market share.
- 2025 Outperformance Setup: Full-year guide and segment commentary signal continued growth well above WFE market pace.
Performance Analysis
NOVA delivered a sixth consecutive quarter of growth, posting record quarterly and annual revenue on robust demand for its metrology solutions. Q4 revenue surged 45% year-over-year and 9% sequentially, reflecting broad adoption across logic, memory, and advanced packaging. Product revenue mix stood at 72% logic and foundry, 28% memory, with three customers and four territories each contributing at least 10% of product revenue—a testament to customer and geographic diversification.
Gross margin remained strong at 58% non-GAAP, operating margin hit 33%, and EPS exceeded guidance. Operating expenses increased, primarily due to expanded R&D investment, but the company’s margin discipline and value-added product mix enabled profitability to surpass the upper target model range. Free cash flow reached $218 million, supporting both share buybacks and the early settlement of convertible notes. NOVA ended the year with $820 million in cash and deployed $60 million to acquire Centronics, a move that will be accretive within 12 months.
- Advanced Packaging Surge: Revenue doubled and now comprises 15% of product sales, with leadership across four of the top five manufacturers.
- Service Revenue Expansion: Services grew 19% in 2024, with 10–15% growth expected in 2025, reflecting rising installed base utilization.
- Productivity-Driven Platform Demand: New launches like Nova Velocity and Metreon drove high adoption in advanced nodes and memory fabs.
Overall, NOVA’s operational leverage and portfolio breadth enabled it to outperform a moderately growing industry, setting the stage for further gains in 2025.
Executive Commentary
"Our performance this year was driven by our materials metrology solutions record sales, coupled with a growing adoption across market segments. Additionally, the growing revenue from advanced packaging processes underscores the importance of our dimensional and chemical metrology solutions."
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."
Guy Kisner, CFO
Strategic Positioning
1. Advanced Packaging: Accelerating Penetration
Advanced packaging revenue more than doubled in 2024, now 15% of product revenue, as NOVA’s solutions achieved broad adoption across leading manufacturers. The Centronics acquisition adds modular multi-sensor platforms, extending NOVA’s reach into wafer-level packaging and specialty device markets, and diversifies the offering beyond traditional 300mm silicon wafers. Management expects this segment to continue double-digit growth in 2025, reflecting secular tailwinds from AI and high-bandwidth memory (HBM) demand.
2. Portfolio Differentiation Across Device Segments
NOVA’s product portfolio spans dimensional, materials, and chemical metrology—each posting record sales and market share gains. Notably, the Nova Prism and standalone OCD (optical critical dimension) platforms saw high double-digit growth, with unique capabilities enabling wins in gate-all-around and advanced logic nodes. The Metreon platform’s adoption by a leading memory customer for DRAM and NAND R&D, and ongoing evaluations with top-tier customers, signal continued momentum.
3. Geographic and Customer Diversification
Revenue split in 2024 was 39% China, 20% Taiwan, 18% Korea, and 14% US, with management expecting China’s share to decline as advanced node growth shifts to other regions. The company’s base is well diversified, with multiple customers and territories each representing significant revenue share, mitigating concentration risk as new nodes and packaging technologies ramp globally.
4. R&D and Operational Agility
Operating expense growth was concentrated in R&D, enabling NOVA to launch new platforms and maintain technology leadership. The opening of a new chemical metrology facility in Germany further expands capacity and positions the company to scale as demand rises. Management’s focus on operational efficiency and pricing discipline has preserved margin strength despite inflationary and supply chain pressures.
Key Considerations
NOVA’s Q4 and full-year results highlight a business capitalizing on secular semiconductor complexity and packaging transitions, while maintaining strong margin discipline and operational agility. The company’s ability to consistently outgrow the WFE market is rooted in product innovation, customer diversification, and strategic M&A.
Key Considerations:
- Centronics Integration: The recent $60 million acquisition is expected to be accretive within a year, expanding NOVA’s presence in advanced wafer-level packaging and specialty devices.
- Gate-All-Around Commitment: Management reaffirmed its $500 million cumulative revenue target from gate-all-around through 2026, with 2024 revenue tracking ahead of peer growth rates.
- Service Revenue Resilience: Despite industry concerns about China 200mm slowdown, NOVA expects 10–15% service growth in 2025, with no significant impact from recent restrictions.
- Metreon Adoption Trajectory: Initial R&D wins are expected to proliferate to high-volume manufacturing, with tool adoption per fab modeled after historical XPS ramp cycles.
Risks
Key risks include: Potential cyclicality in WFE spending, customer concentration in advanced nodes, and evolving China market exposure as regulatory and competitive dynamics shift. While management expects China’s revenue share to decline, a rapid contraction could pressure near-term growth. Integration risk from the Centronics acquisition and the challenge of sustaining margin leadership as product mix evolves should be monitored. Finally, quarterly gross margin may fluctuate with platform and customer mix, even as annual targets remain achievable.
Forward Outlook
For Q1 2025, NOVA guided to:
- Revenue between $205 million and $215 million
- GAAP EPS of $1.75 to $1.91, non-GAAP EPS of $2.00 to $2.16
For full-year 2025, management expects to:
- Outperform WFE market growth, driven by advanced logic and packaging ramp
- Maintain gross margin within 57–59% target model, with potential for quarterly fluctuation
Management highlighted:
- Centronics revenue will be consolidated starting Q1, with accretion expected within 12 months
- Advanced logic and packaging forecast as primary growth engines, with memory (especially HBM) also contributing
Takeaways
NOVA’s 2024 performance and outlook reinforce its status as a structural winner in semiconductor metrology, with advanced packaging, logic, and memory complexity driving both near- and long-term opportunity.
- Advanced Packaging Expansion: Doubling of revenue and Centronics integration position NOVA for continued segment leadership.
- Margin and Cash Flow Strength: Robust profitability and disciplined capital allocation support both organic and inorganic growth initiatives.
- 2025 Watchpoints: Track advanced node adoption, Centronics synergy realization, and service revenue durability as key drivers of ongoing outperformance.
Conclusion
NOVA’s record year was underpinned by innovation, operational execution, and expanding end-market relevance. With advanced packaging and logic ramps, plus the Centronics acquisition, the company is positioned to sustain superior growth and profitability in 2025 and beyond.
Industry Read-Through
NOVA’s results underscore the accelerating demand for advanced metrology as semiconductor architectures grow more complex, especially in AI, HBM, and advanced packaging. The company’s broad-based growth and share gains signal robust capital intensity and process control requirements across leading-edge nodes. Peers in wafer fab equipment, process control, and advanced packaging should expect rising competitive intensity and continued margin pressure, while suppliers with differentiated platform capabilities will benefit from secular tailwinds. The shift in geographic revenue mix, with declining China exposure, also reflects broader industry adaptation to regulatory and competitive realignment.