Q4 2019 Nova Measuring Instruments Ltd Earnings Call

Feb 13, 2020 PM UTC 查看原文
NVMI - Nova Measuring Instruments Ltd
Q4 2019 Nova Measuring Instruments Ltd Earnings Call
Feb 13, 2020 / 02:00PM GMT 

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Corporate Participants
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   *  Dror David
      Nova Measuring Instruments Ltd. - CFO
   *  Eitan Oppenhaim
      Nova Measuring Instruments Ltd. - President, CEO & Director

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Conference Call Participants
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   *  Jaeson Allen Min Schmidt
      Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst
   *  Krish Sankar
      Cowen and Company, LLC, Research Division - MD & Senior Research Analyst
   *  Mark S. Miller
      The Benchmark Company, LLC, Research Division - Senior Equity Analyst
   *  Quinn Bolton
      Needham & Company, LLC, Research Division - Senior Analyst
   *  Miri Segal-Scharia
      MS-IR LLC - CEO

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Presentation
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Operator   [1]
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 Good day, and welcome to the Nova Measuring Instruments Fourth Quarter 2019 Results Conference Call. Today's conference is being recorded.

 At this time, I would like to turn the conference over to Miri Segal of MS-IR. Please go ahead, ma'am.

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 Miri Segal-Scharia,  MS-IR LLC - CEO   [2]
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 Thank you, operator, and good day to everybody. I would like to welcome all of you to Nova's Fourth Quarter and Full Year 2019 Financial Results Conference Call. With us on the line today are Mr. Eitan Oppenhaim, President and CEO; and Mr. Dror David, CFO.

 Before we begin, may I remind our listeners that certain information provided on this call may contain forward-looking statements. And the safe harbor statement outlined in today's earnings release also pertains to this call. If you have not received a copy of the release, please view it in the Investor Relations section of the company's website. Eitan will begin the call with a business update, followed by Dror with an overview of the financials. We will then open the call for the question-and-answer session.

 I'll now hand over the call to Mr. Eitan Oppenhaim, Nova's President and CEO. Eitan, please go ahead.

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 Eitan Oppenhaim,  Nova Measuring Instruments Ltd. - President, CEO & Director   [3]
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 Thank you, Miri, and thank you all for joining us. I will start the call today by speaking briefly to our December quarter results. I will then spend some time summarizing 2019 performance highlights. Following my commentary, Dror will review the financial results in detail, including the guidance for the first quarter of 2020.

 Nova reported strong results for the quarter, demonstrating the meaningful value our differentiated portfolio brings to our customers. Our sound performance drove revenue and profitability to exceed the company's guidance and propelled our quarterly revenue to a new record high. This was an outstanding conclusion to a volatile year during which we continue to strengthen our market position and expand our unique portfolio in order to support our long-term growth. Our results in the current market environment are further evidenced of our steady progress to widen the company's exposure to all semiconductor customers in all territories.

 As we enter a new calendar year, we are excited by multiple growth opportunities associated with the market reaction to our newly introduced products, which were invented to meet the new challenges our customer is going through while they improve the device performance and time to market.

 The new technical transition to multi-stacked VNAND, DRAM scaling to sub 20-nanometer as new dimensional structures in 5-nanometer logic and below, expand Nova's opportunity reach for both the materials and dimensional metrology portfolios.

 Following our major investments in new products and technologies, we believe that Nova is well positioned to strengthen its position furthermore in 2020. The company performance in the December quarter was primarily driven by our solid position across various segments and specifically in the logic foundry. We saw growing demand for our solutions during the quarter as our logic customers go through extensive technology development and capacity ramp-up in the most advanced technology nodes.

 Our strong position with the industry-leading foundry drove our product portfolio to reach record quarterly revenue, reflecting the tight partnership we have with this customer across various technology nodes over several years. Our continuous partnership starts in the early development stage of each node, continues through a pilot and mini lines and concludes in high-volume manufacturing. At any given moment, we are proactively investing in at least 3 concurrent cycles like that every year in the same customer.

 As we see it currently, the demand for logic devices will continue in 2020, while the overall market demand for AI and 5G-enabled infrastructure continued -- sorry, continues to grow. While the main achievement this quarter was the elevated shipment made -- placed to this customer for its 5-nanometer expansion. We started also to work with other leading logic customers to support their technical transition to 5-nanometer, 3-nanometer and below, which incorporates new architecture beyond FinFET and traditional material stocks.

 Our application footprint in these advanced nodes has expanded to include both front-end and back-end solutions in multiple steps utilizing all our newest portfolio solutions. The ongoing progress with leading logic and foundry customers solidifies our position in the segment and is reflected also by a multimillion-dollar order received from another logic provider to develop its next-generation chip. The order includes several new generation stand-alone platform, combined with our newest NOVAFit machine learning capabilities to effectively reduce time to solution and increase accuracy and the visibility.

 The growth in logic was further enhanced by our quarterly customer mix, which also included 2 leading Memory customers that kept growing Nova's position along the year. Our increasing position in Memory will enable us to accelerate our growth once the segment itself resumes high level of equipment spending. The progress we made throughout 2019 to expand our position is also reflected this quarter with our steadily growing hold in China.

 Our performance in the territory is highlighted by a couple of wins, with leading logic customers as well as continuous inroads with established Memory providers. Although we are not immune to the current developing situation in China and Asia, we believe that the Chinese market will continue to be a major growth driver for us in the long term. In this respect, I would like to address the coronavirus situation and its implications on Nova. As the virus continues to spread, our primary concern is with the health risk and well-being of all people affected by the situation locally and globally in all our sites. We are taking several measures and needed precautions in all our sites. Additionally, we are also taking active actions to secure our supply chain and future deliveries that may be affected if the situation deteriorates.

 Although we don't see currently major implications on the business forecast in the first half, we made some conservative assumptions and widened the first quarter guidance, which will allow us to digest any future uncertainties related to our Chinese customers.

 Finally, our service revenue also reached record quarterly high, with a growing contribution from proactive services and upgrades. Our continuous investment in enhancing our install base is bearing fruit, with various solutions that enhance productivity and improve metrology performance.

 Nova's solid results for the December quarter signify a positive endnote to a challenging year for the industry. The more balanced and wider exposure we built over the past several years allowed us to execute well in 2019, despite softness in Memory and the market headwinds.

 Following the challenging first half of 2019, we started in the second half to see encouraging signs of growing momentum towards the end of the year, with expedited 5-nanometer logic ramp up and a slight improvement in the overall business environment.

 As a result, we concluded the year better than previously anticipated. This demonstrates our long-term ability to execute well in a dynamic environment as well as the strength and resiliency of our operational model. Our well-balanced mix of device segments, different technologies and various customers keep strengthening our long-term fundamentals and support our ability to succeed in different market conditions. The solid performance we demonstrated in Memory, despite the weakness of the Memory customers this year, indicate our continued progress in gaining share. As a result, Memory still represents approximately 50% of the company's annual revenue.

 During 2019, we invested significantly in research and development to support the market rollout of new innovative and differentiated technologies. This investment is aimed at expanding our served markets, but is also important for solving new metrology challenges, which arise from the complexity of new generation semi devices. The accelerated rate of innovation in chip design evolves into a new array of needs in metrology. As part of Nova's strategic plan, we are extremely focused on executing our organic growth engine to enhance both the dimensional and materials metrology portfolio. Our goal is to develop new metrology solutions that will set us apart from the competition and allow our customers to overcome new emerging challenges as they move to a new generation of semiconductors.

 Our technology road map has 4 directions, all of which were brought to the market in 2019. First, is our new optical CD dimensional portfolio. Following the launch of our Nova PRIZM platform this year, we see promising traction backed up with initial orders received in Q4 2019. Nova PRIZM is a first of its kind metrology platform that combines traditional optical spectroscopy technologies with Spectral Interferometry technology. The new method can extract unique physical information from the measured device that is inaccessible by traditional optical techniques.

 As a leader in integrated metrology, we continue to deliver an array of solutions to the market from a simple thin film measurement done by one channel to complex OCD measurements done by multiple channels. Based on our strategy to solve complex high-end metrology needs, our newest i550 integrated platform reached annual record revenue with wide market adoption. The tool was designed as a unique hardware platform to enable broad usage of prediction and training software capabilities to accurate fast measurement.

 Second is the growing materials metrology portfolio. As part of our strategic plan, we intend to focus more on the evolving materials engineering markets. This segment is experiencing fundamental changes that create many fabrication and metrology challenges. We strongly believe that materials control will become increasingly important as new-generation devices are developed. The need for tighter materials control drive a faster transition of laboratory process control technologies into in-line production steps.

 Like we did with the XPS transition to a full in-line production tool, we intend to bring other methods from the relaxed laboratory environment into the demanding production environment. Some of these solutions are already developed and are evaluated on sites. We are very encouraged by the traction the new platforms are generating in the market, with initial orders already received in the fourth quarter of 2019. Obviously, the need to precisely characterize and control materials composition, thickness, stress and profiling are growing in advanced memory and logic node and require innovative solutions which are not yet introduced today in in-line production.

 Furthermore, customers require multiple measurements per wafer, enabling in-die monitoring with thin wafer uniformity. Our new platforms, which are tested on sites, aim to provide all of this.

 The last layer is our growing investment in software solutions. We are seeing growing adoption of our machine learning and modeling solutions in high-volume manufacturing. Our holistic strategy brings together the traditional physical modeling together with the machine and deep learning software, supported by a strong computational management layer. It allows our customers to tighten the process control, improve yield faster and shorten the time to market. Finally, our elevated spending in new products is a mutual evolution of the tight cooperation we have with our customers across multiple initiatives.

 Before I conclude my prepared remarks, I would like to briefly highlight the market dynamics as we see them currently, assuming no further material impacts by the coronavirus. Additionally to the recent growing investments by the leading Foundry for its 5-nanometer expansion, other logic customers also plan for capacity growth in multiple sites during 2020. Combined with the forecast for improvement in Memory prices, we anticipate that 2020 should be a growth year. We believe, as do many other semiconductor companies, that the long-term growth model for the industry stays intact and continues to be fueled by more applications that require better computation power and memory capabilities.

 To wrap up, as we enter a new calendar year, we are excited by multiple growth opportunities, which are associated with the technology transition our customers are experiencing. Given our innovative position, new product rollouts and our growing exposure to a broader range of opportunities, we believe that Nova is well positioned to capitalize on these opportunities in 2020. Our expectations based on the current market dynamics are that the combination of strength in logic demand for multiple customers, stronger momentum in Memory and our new portfolio introduction will drive a better environment for us to grow in 2020. Now let me hand over the call to Dror to review our financial results in detail. Dror?

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 Dror David,  Nova Measuring Instruments Ltd. - CFO   [4]
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 Thanks, Eitan. Good day, everyone. In my following prepared remarks, I will refer to both GAAP and non-GAAP results. You can find a detailed reconciliation per item at the end of the earnings press release. Total revenues in the fourth quarter of 2019 were $64.6 million, an all-time record for Nova, up 23% quarter-over-quarter and exceeding the company guidance range for the quarter.

 On the product revenue front, we saw a significant shift towards Foundry, which came in at approximately 80% of total product revenues. The increase in Foundry revenues was mainly driven by extensive deliveries into the most advanced Foundry technology node, including sampling from 2020 to 2019 as well as continued deliveries to the local leading Chinese foundries for trailing edge technology nodes.

 Service revenues significantly increased by 28% quarter-over-quarter to an all-time record level of $17.6 million in the fourth quarter. Blended gross margin increased in the fourth quarter to 54% on a GAAP and non-GAAP basis. Operating expenses in the quarter totaled $20.2 million on a GAAP basis and $18.3 million on a non-GAAP basis. This result is after offsetting R&D income in the amount of approximately $3.7 million.

 Looking forward, in 2020, we expect R&D income to be at a normalized level of between $1 million and $1.5 million per quarter. Operating margin in the quarter was 22% on a GAAP basis and 26% on a non-GAAP basis, significantly higher than the previous quarter, mainly due to the increase in business volumes.

 Effective tax rate in the quarter came in at approximately 19%. Earnings per share in the quarter were $0.43 per diluted share on a GAAP basis and $0.51 per diluted share on a non-GAAP basis, exceeding the high end of the company guidance.

 On the cash flow front, the company generated $15.5 million in cash from operating activities and invested $5.7 million in property and equipment, mainly in the company's new headquarter facilities in Israel.

 On an annual basis, the company reported revenues of $225 million. Product revenue distribution was approximately 50% from Foundry and approximately 50% from Memory on an annual basis. Blended gross margin in 2019 was 54% on a GAAP basis and 55% on a non-GAAP basis. Operating margins in 2019 were 16% on a GAAP basis and 21% on a non-GAAP basis. And the effective tax rate in 2019 was 11%. Earnings per share in 2019 were $1.23 per diluted share on a GAAP basis and $1.59 per diluted share on a non-GAAP basis.

 On the cash flow front, in 2019, the company generated $41 million in cash from operating activities and invested $21 million in property and equipment, mainly in the company's new headquarter facilities in Israel and the U.S. During the year, the company also repurchased shares in the amount of $7 million. The company concluded 2019 with cash reserves of approximately $190 million.

 Regarding our expectations for 2020, we would like to note the following: 2020 revenue stream is expected to include revenues from new products. The company already received initial customer purchase orders for the new Nova PRIZM optical CD stand-alone product and in addition, received a purchase order for one of its new technology products, which were not yet announced. Some of these orders were received based on application demos, and the revenue recognition from these orders is subject to final evaluation processes at the customers' site and final acceptance by the customer.

 We currently expect to start recognizing revenues from these orders in the second quarter of 2020. As previously communicated, we expect the market adoption of these and other new products to be gradual and to continue to require long and extensive evaluation periods by the customers. Service revenues are expected to increase in 2020 at a rate which is similar to the company installed base increase of approximately 5%. Gross margins are expected to improve relative to 2019, under the assumption of higher business volumes utilizing the existing infrastructure and generation of revenues from new products with higher gross margins. Effective tax rate is expected to be approximately 20% on a GAAP basis and 15% on a non-GAAP basis. Capital expenditures are expected to be approximately $10 million in 2020.

 Moving into the company outlook for the first quarter of 2020, we expect the following: revenues between $50 million to $60 million. This wider-than-usual revenue range includes possible business implications of the coronavirus situation. GAAP earnings per diluted share between $0.18 and $0.34. Non-GAAP earnings per diluted share between $0.26 and $0.42.

 At the midpoint of this first quarter guidance, we expect the following: service revenues are expected to reduce to the $14 million level. Blended gross margins are expected to be approximately 54%. Operating expenses are expected to be approximately $21.5 million on a GAAP basis and approximately $19.5 million on a non-GAAP basis. We expect to see a reduction in SG&A expenses while net R&D expenses are expected to increase, mainly due to normalized R&D income. Overall, net R&D expenses are expected to be between $11.5 million to $12 million on a GAAP basis and $11 million to $11.5 million on a non-GAAP basis.

 With that, I will turn the call back to Eitan.

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 Eitan Oppenhaim,  Nova Measuring Instruments Ltd. - President, CEO & Director   [5]
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 Thank you, Dror. With that, we will be pleased to take your questions. Operator?

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Questions and Answers
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Operator   [1]
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 (Operator Instructions) We'll take our first question from Quinn Bolton from Needham & Company.

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 Quinn Bolton,  Needham & Company, LLC, Research Division - Senior Analyst   [2]
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 Congratulations on the record results in the fourth quarter. I wanted to start with, first, the outlook for the Foundry -- advanced Foundry business in 2020. It looks like it's probably taking a step down in the first quarter, but wondering if you could give us your thoughts on how you see that advanced Foundry business playing out in 2020.

 And then the second question, you referenced the new orders for the Nova PRIZM tool. I think you said that was coming from a logic customer, just wanted to clarify that. And if it is, is that an existing logic customer? Or is that a new customer? If you could provide any more detail, it would be helpful.

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 Eitan Oppenhaim,  Nova Measuring Instruments Ltd. - President, CEO & Director   [3]
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 Thanks, Quinn, for the question. So first of all, regarding the Foundry market. So obviously, as we see it with other providers as well, the leading Foundry for 5-nanometer probably will reduce a bit the spending in the first half. But we're definitely looking on the sign in the market and anticipate that it will resume the third or the fourth phase somewhere in the third or the fourth quarter. That's regarding these customers. Beyond that, as I said in my prepared remarks, there is at least 2 customers that are going to spend more money on the advanced nodes in 2020. And we expect them to generate revenue for Nova as well additional to the leading Foundry. Regarding the second question, yes, it's a Foundry customer, but we can't reveal the name. So we don't -- we can't say who it is. It's an existing customer.

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 Quinn Bolton,  Needham & Company, LLC, Research Division - Senior Analyst   [4]
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 Great. And then just with that outlook for sort of the leading Foundry to be a little soft in the first half and then come back in either Q3, Q4, plus the additional 2 customers you've referenced, do you think, overall, Foundry logic business is up in 2020? Or do you think the growth really comes from a recovery in the Memory side of the business?

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 Eitan Oppenhaim,  Nova Measuring Instruments Ltd. - President, CEO & Director   [5]
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 So I think that Foundry will continue its growth in 2020. Again, according to what we see now, we'll continue with growth, modest growth actually in 2020. And as we see it, Memory, and firstly, the NAND customers will start resuming capacity as well somewhere in the third quarter, actually in the second half. Actually, it's a mix between that, yes.

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Operator   [6]
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 (Operator Instructions) We'll now take our second question from Krish Sankar from Cowen & Company.

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 Krish Sankar,  Cowen and Company, LLC, Research Division - MD & Senior Research Analyst   [7]
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 Congrats, Eitan and Dror on the good results. I have a couple of questions. Number one is, over the last year or so, certainly looks like you guys have gained some market share, and then you also have some interesting new products coming out. How do we think about this when Memory spending recovers? Will it be share gains that help drive outperformance? Or would it be the new products? Or is it a combination of both? And then I had a follow-up.

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 Eitan Oppenhaim,  Nova Measuring Instruments Ltd. - President, CEO & Director   [8]
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 So I think it's a combination. If you're looking right now on the diversification that we went through and the customer mix that we have and the allocation between the segments, if we could finish a year like that on a 50% basis for the Memory and the Foundry, I anticipate that when Memory and Foundry will both resume growth in high volume, we will probably will outperform the market.

 Secondly, you are right regarding the new products. So if -- when you're looking right now on the market and we look on the new products, we assume that the new products will allow us to do better than the market. So we assume that introducing those new products will allow us to continue the growth in -- to continue the long-term growth and resume again growth in 2020.

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 Krish Sankar,  Cowen and Company, LLC, Research Division - MD & Senior Research Analyst   [9]
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 Got it. Got it. That's pretty helpful. And then just a question on -- you kind of highlighted about how with the leading edge Foundry going to 5- and then eventually 3-nanometer, there are all these new challenges. And I think, Eitan, has spoken about your product being both on the material and dimensional metrology side. Would you say the challenges at 5 and 3 for -- from a process control inspection side, is it more material? Or do you think is it more dimensional? Or is it a combination? And then I have one last question.

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 Eitan Oppenhaim,  Nova Measuring Instruments Ltd. - President, CEO & Director   [10]
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 So I think that when you're looking right now on regular scaling between 7 and 5, actually, it's more dimensional increase in both intensity and the need. If you're looking right now on going below 5-nanometer actually to 3 and 2, you need to add also a change in structure to probably FinFET -- or sorry, nanowire from a different sort. And the materials are going through tremendous changes. So going to 5, it's more dimensional. If you go below 5, you start to get, actually, significant changes in materials, so we will see demand for the materials metrology higher.

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 Krish Sankar,  Cowen and Company, LLC, Research Division - MD & Senior Research Analyst   [11]
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 Got it. Got it. And then a final question for Dror. I think you mentioned services revenues could grow 5% this year if I am right. Kind of curious, clearly, your installed base has grown, that should help some of the -- some part of it. But as like the many customers start loading up your factories, shouldn't that drive incremental upside? Or is it all baked into the guidance?

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 Dror David,  Nova Measuring Instruments Ltd. - CFO   [12]
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 So I would say the following. Obviously, in recent years, before 2019, we saw a higher level of increase in service revenues, which was more at, I would say, probably between 8% and 10% annually. So there is a possible upside to this 5% projected growth in 2020. Obviously, it depends on many factors, including the one you alluded to. Our plan of record in general is that service revenues would grow eventually at a rate which is similar to the growth in the installed base. And in 2020, it's around 5%.

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Operator   [13]
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 Our next question comes from Mark Miller from The Benchmark Company.

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 Mark S. Miller,  The Benchmark Company, LLC, Research Division - Senior Equity Analyst   [14]
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 Let me add my congratulations on the record results this quarter. You indicated that you expect Memory to start accelerating in the second half of the year. Do you see that trend? A lot of people are expecting Memory, because of the 5G, really to be significantly stronger in 2021. I know that's sticking your neck out. But do you think that momentum will continue throughout the second half of the year into 2021?

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 Eitan Oppenhaim,  Nova Measuring Instruments Ltd. - President, CEO & Director   [15]
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 So anyway, with -- thanks, Mark, for the question. So when we're talking about Memory, we definitely look at 2 segments. One is the DRAM and the other one is the vertical NAND. When we talk about resuming capacity and spending in the second half, we're talking about, firstly, the VNAND to resume growth, and yes, it will continue to 2021. DRAM is still a question for us. So we don't see yet when the demand will reach to a point when we'll start to see demand for metrology growing.

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 Mark S. Miller,  The Benchmark Company, LLC, Research Division - Senior Equity Analyst   [16]
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 Do you expect your material calculation -- characterization, your X-ray will grow this year?

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 Dror David,  Nova Measuring Instruments Ltd. - CFO   [17]
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 Yes. In general, I would say, I think we can say that as Eitan mentioned, we are looking to grow in 2020. And this is based on increased demand on both elements of the business, both dimensional and materials.

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 Mark S. Miller,  The Benchmark Company, LLC, Research Division - Senior Equity Analyst   [18]
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 You significantly increased R&D early last year, that came down in the fourth quarter. Do you expect higher R&D expenses this year compared to 2019?

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 Dror David,  Nova Measuring Instruments Ltd. - CFO   [19]
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 Yes.

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Operator   [20]
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 (Operator Instructions) Our next question comes from Jaeson Schmidt from Lake Street.

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 Jaeson Allen Min Schmidt,  Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst   [21]
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 I know in your comments, you noted that some revenue from Q1 might have been pulled into Q4. Just curious if you could quantify how much you think was pulled in?

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 Eitan Oppenhaim,  Nova Measuring Instruments Ltd. - President, CEO & Director   [22]
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 So Jaeson, we can't say the numbers because we cannot reveal the information. And also, we don't know exactly the customers' plans and how we justify the purchasing. But if you're looking right now on this specific customer, we need to look on a long cycle of spending. So it starts in the beginning of the third quarter and probably will continue somewhere in Q1. And over this 8 to 9 months, there is a timing issue. So some of the equipment has been ordered soon, some of them ordered later. And this is why you see the variability of earnings between Q4 and Q1. And by the way, it's not new. TSMC is always spending, at least in the last few years, in the fourth quarter. And therefore, there's a timing issue always between December and January.

 And therefore, we should look on the spending from this customer over a period. So if you're looking right now on Q4 and Q1, it's probably -- this is the way to look at that. So we have massive orders came from these customers. Some of that was pulled into Q4, some of them stay in Q1, wherein the others -- the others was the opposite. But overall, I can tell you that looking right now on the strength of the results that we have, I think that we can assume that Nova actually strengthened the position over this customer, specifically in this node.

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 Jaeson Allen Min Schmidt,  Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst   [23]
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 Okay. That's helpful. And then sorry if I missed it, but how many 10% customers that you have in Q4?

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 Dror David,  Nova Measuring Instruments Ltd. - CFO   [24]
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 So in Q4, we had -- the company had 3 10% customers. Sorry, in Q4, we had, yes, 3 10% customers. It is important to note that as Eitan mentioned that the company did improve its position in Memory. So overall, for the annual results, the company had one new Memory customer as a 10% customer in 2019. And hopefully, when Memory investments will resume, we'll be able to even more enjoy that.

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Operator   [25]
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 We will now take a follow-up question from Quinn Bolton from Needham & Company.

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 Quinn Bolton,  Needham & Company, LLC, Research Division - Senior Analyst   [26]
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 Just wondering if you might be able to quantify any revenue impact from the coronavirus that you think shifted from Q1 perhaps into Q2 or Q3. Is that something you can quantify? Or should we be thinking about the $55 million midpoint of guidance is kind of what you think the natural demand would have been for the quarter?

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 Eitan Oppenhaim,  Nova Measuring Instruments Ltd. - President, CEO & Director   [27]
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 So Quinn, before going into this specific question and answer it specifically, wouldn't we have this virus spread and spreading over the last few days, probably we would have guided higher, okay? Nevertheless, we don't see any impact right now on deliveries or any kind of shift between quarters due to the coronavirus. But things are evolving fast, and we wanted to be conservative in our approach to digest some uncertainty if it happens. If I'm looking right now on the higher level, I think that besides the fact that we have customers in China, which is one element, the impacts can go also to the supply chain and also for the people and the restriction between the territories.

 So currently, we can restrict movement of people and secure our supply chain. So we don't see any delivery problems and shift between Q1 to Q2. But nevertheless, you know this virus is spreading fast without seeing the peak. So we want to be very cautious about our prediction and forecast.

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Operator   [28]
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 There appears to be no further questions at this time. So I'd like to hand the conference back to Eitan Oppenhaim for any closing remarks.

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 Eitan Oppenhaim,  Nova Measuring Instruments Ltd. - President, CEO & Director   [29]
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 Thank you, operator, and thank you all for joining our call today. By that, we conclude our fourth quarter and full year 2019 earnings conference call. Thank you.

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Operator   [30]
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 This concludes today's call. Thank you for your participation. You may now disconnect.




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