INVESTORS PRESENTATION Q4 2014 Eitan Oppenhaim – CEO & President , Dror David - CFO
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This presentation includes statements that constitute forward-looking statements within the meaning of safe harbor provisions of the Private Securities Litigation Reform Act of 1995 relating to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievements to be materially different than expressed or implied by these forward looking statements. You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are in some cases beyond our control and which could materially affect actual results, level of activity, performance or achievements. These risks and other factors include but are not limited to: our dependency on two product lines; our dependency on a small number of large customers and small number of suppliers; the highly cyclical nature of the markets we target; our inability to reduce spending during a slowdown in the semiconductor industry; our ability to respond effectively on a timely basis to rapid technological changes; our dependency on PEM; risks related to exclusivity obligations and non-limited liability that may be included in our commercial agreements and arrangements; our ability to retain our competitive position despite the ongoing consolidation in our industry; risks related to our dependence on a single manufacturing facility; risks related to the extremely competitive market we are operation in; risks related to changes in our order backlog; risks related to the financial, political and environmental instabilities in Asia; risks related to our intellectual property; new product offerings from our competitors; unanticipated manufacturing or supply problems; changes in tax requirements; changes in customer demand for our products; risks related to currency fluctuations and risks related to our operations in Israel. The matters discussed in this presentation also involve risks and uncertainties summarized under the heading “Risk Factors” in Nova’s most recent Annual Report on Form 20-F filed with the Securities and Exchange Commission. These factors are updated from time to time through the filing of reports and registration statements with the Securities and Exchange Commission. Any forward-looking statements contained in this presentation are made as of the presentation date and Nova Measuring Instruments Ltd. is under no obligation to revise or update these forward-looking statements. This following presentation includes financial measures that are not calculated in accordance with generally accepted accounting principals (GAAP). The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Nova's earning release, including a presentation of the most directly comparable financial measures calculated and presented in accordance with GAAP and a reconciliation of each GAAP to non-GAAP financial measure discussed in the presentation is available at the Investors section of the company’s website. Certain of the information contained herein concerning economic trends and performance is based upon or derived from information provided by third party consultants and other industry sources. We have not independently verified and cannot assure the accuracy of any data obtained by or from these sources. 2 Nova confidential & proprietary information
Founded in 1993 A Leading Dual-listed - NASDAQ / TA100 Metrology HQ in Israel 450 employees Innovator for Global presence - local teams Advanced 4 product lines (holistic metrology suite) Process 12M Trailing Rev - $125M USD Record year – 3 rd consecutive year Control Cash reserve - $114M USD 3 Nova confidential & proprietary information
NOVA’S Fundamentals Pure player in optical metrology for semiconductor process control Advanced product suite to address industry’s challenging transitions Strong financial balance sheet to support sustainable growth Continuous investment in R&D to meet customers’ aggressive roadmap Strong technical innovation to strengthen market position Customer partnership from development to production 4 Nova confidential & proprietary information
Optical CD - Disruptive Technology Optical CD metrology provides a non-destructive method for controlling critical parameters 3D profiles Complex stacks A8 Multiple parameters High aspect ratio Material characterization Thin layers Tri-Gate view Same View Using Using Electron Microscope Optical CD 5 Nova confidential & proprietary information
Semiconductors Everywhere Smart connected sensors Smart Driving Network Semi mobile infrastructure devices growth Continuous demand for improvement High performance Less power Greater functionality Data storage More storage Reduced cost 6 Nova confidential & proprietary information
Technology Challenges - Metrology Opportunity More design Novel materials rules & Strained Si, High-K MG, process steps eSiGe, III-V More mask layers & verification Complex 3D structures steps VNAND memory cell FinFET transistor Nanowire Cost Economics Advanced lithography More OCD Efficiency measurements Multi patterning Power DSA More parameters to control Advanced packaging Tighter specs Through Silicon Via 7 Nova confidential & proprietary information
Increasing Optical CD Intensity Increase in Design Rules 186% 155% 128% x4.8 100% x2.5 x2 40nm 28nm 20nm 14/16nm * x1 No. of Metrology Steps 40nm 28nm 20nm 14/16nm * forecast 5 No. of Critical Mask Layers Window [nm] 13 Parameters 4 Process Floating 10 3 7 2 4 1 1 40 nm 28 nm 20 nm 14/16 nm 40nm 28nm 20nm 14/16nm FinFET Gate 3D Planar Gate 2D No. of Process Steps 40nm 28nm 20nm 14/16nm 8 Nova confidential & proprietary information
Optical CD Opportunity Growing business opportunity in advanced nodes $30-36M $25-30M $15-17M $13-15M Planar 2X FinFET 1X Planar 2/1X VNAND 1Y 1. More parameters to control 1. More parameters to control 2. Complex Integration – Fin Profile 2. Shift from lithography to CVD / ETCH 3. Multi patterning lithography 3. High Aspect ratio 4. Complex Back End steps 4. Thin layers Shrink and density along with advanced lithography increase intensity in Foundry Source: Company estimates, Based on 25,000 wafer starts per month capacity 9 Nova confidential & proprietary information
Optical CD TAM - Growing Market Optical Metrology Market Total Metrology market 2,500 700 7.2% CAGR 4.3% CAGR 600 2,000 500 1,500 400 $M 300 1,000 200 500 100 0 0 2010 2013 2015F 2010 2013 2015F Optical Metrology Total Metrology Optical Metrology Source: Gartner Disruptive Technology - TAM of $1B USD in 5 years 10 Nova confidential & proprietary information
Product Portfolio 45% (LT Target) 45% Fleet Management (LT Target) 10% (LT Target ) 11 Nova confidential & proprietary information
Growing SAM in a Growing TAM 800 Optical Metrology TAM 91% 66% 600 Nova’s SAM 60% 400 27% 200 0 2010 2013 2015E 2017E Integrated Stand Alone Advanced Packaging Thin Film In Process 12 Nova confidential & proprietary information
Market Share Growth Strategy Identify key inflection points per node Focus on product and customer strategy Achieve competitive edge Gain in Gain in SA Gain in IM & Designed into leading Won first SA SA MS OCD MS SA OCD MS processes selection 14/16 28 nm 20 nm 10 nm 7 nm nm FEOL Etch BEOL FEOL Etch FEOL/BEOL Etch FEOL/BEOL (HKMG) Etch FinFET (Triple Patt.) Litho+Etch (EUV) 13 Nova confidential & proprietary information
Holistic Fab-Wide Strategy Nova fab share growth – linking all process steps with combined metrology From Integrated to Stand Alone Process Process Lithography CMP IM Expansion to all process steps SA - OCD SA - OCD Fleet Management Move closer to the process Hybrid Metrology Deposition Process Process Fleet approach Etch Insitu Insitu IM (feedback loops) SA - OCD SA - OCD Hybrid with other metrology means 14 Nova confidential & proprietary information
Record Revenue Levels 3 rd consecutive record year $140M * $120M $120M $112M $25M $96M $100M $30M $22M $80M $27M $26M $24M $60M $33M $40M $28M $27M $20M $35M $27M $23M $0M 2012 2013 2014 Q1 Q2 Q3 Q4 * Q4 2014 based on mid-range of guidance 2014 – on track to another growth year 15 Nova confidential & proprietary information
Outperforming the Peer Group Revenue Growth FY2011-FY2014 2014 Nova record revenues 20% 15% 10% 5% 0% 2011 2012 2013 2014* -5% -10% 2011 Peer Previous WFE Group -15% industry Range peak -20% -25% -30% Nova Revenues Average Peer Group** * 2014 - based on mid range of Q4/2014 guidance. Source: SEC filings & Yahoo Finance. 16 Nova confidential & proprietary information
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