A review of revenue growth and the switch to profit during 2009 at Nova Measuring Instruments Ltd. (Nasdaq:NVMI; TASE:NVMI) can explain the meteoric rise in the share price of the semiconductor process metrology solutions company. The question now hanging over the company is whether it can continue this growth in 2010.
Nova today published its revenue and profit guidance, which while predicting strong growth compared with 2009 as whole, actually shows stagnation compared with the fourth quarter.
The improvement in the global semiconductor industry during 2009 boosted Nova's results. The company posted $15.2 million revenue for the fourth quarter, 145% more than the $6.2 million for the corresponding quarter of 2008, and 34% than for the preceding quarter.
Revenue in 2009 as a whole edged up to $39.3 million from $39 million in 2008. Despite the stagnant revenue, the company posted a GAAP-based net profit of $2.6 million ($0.13 per share) compared with a net loss of $5.4 million in 2008. Non-GAAP net profit was $3.1 million ($0.15 per share), compared with a net loss of $4.2 million in 2008.
Most of the 2009 profit was in the fourth quarter, when Nova posted a GAAP-based net profit of $2.7 million ($0.13 per share), compared with a GAAP-based net loss of $1.6 million for the corresponding quarter, and a GAAP-based net profit of $1.7 million for the preceding quarter. Non-GAAP net profit was $2.8 million ($0.13 per share) for the fourth quarter, compared with a non-GAAP net loss of $2.3 million for the preceding quarter, and a non-GAAP net profit of $1.8 million for the preceding quarter.
Nova provided full-year guidance for 2010, predicting $58-$63 million revenue, and a net profitability of 10-14%. The profit margin guidance translates into a net profit of $5.8-8.8 million for the year.
Compared with the fourth quarter results, Nova's 2010 guidance reflects stable revenue and lower profit, even though the orders backlog reached a record $18 million at the end of 2009.
Nova president and CEO Gabi Seligsohn told "Globes" how the company switched to profit in 2009, despite the flat revenue. "The change in our business model, which included switching from sales through OEM agreements with other companies to direct sales to end customers greatly boosted our gross profit margins, which more than doubled to 49% of revenue in the fourth quarter," he said.
"In addition, we exploited the crisis to change the company's cost structure, which increased our profit margins."
Cash flow from operations was $2.1 million for the fourth quarter, and the company's cash reserves fell to $19 million at the end of the year.
Nova CFO Dror David said, "We have a clear plan how to continue our momentum in 2010, but it will need resources. We therefore expect our operating expenses to increase this year, which will affect our profit margins." As for Nova's guidance, he said, "Visibility for the second half of 2010 is still not good enough, so it would be wrong to provide other numbers."
Nova's share price rose 1.4% at the opening on Nasdaq today to $5.25, giving a market cap of $101 million. The share price rose 2.8% on the TASE today to NIS 20.
Published by Globes [online], Israel business news - www.globes-online.com - on February 17, 2010
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