Nova Reports Third Quarter 2017 Results

REHOVOT, Israel, Nov. 1, 2017

Third Quarter 2017 Highlights:

• Quarterly revenue of $54.1 million, within company guidance
• GAAP net income of $11.5 million, or $0.40 per diluted share, exceeding guidance of $0.27 to $0.37 per share
• Non-GAAP net income of $13.1 million, or $0.46 per diluted share, exceeding guidance of $0.33 to $0.43 per share
• Continuous diversification with Memory customers generating 45% of quarterly revenue  
• On pace to achieve fifth consecutive record revenue year, driven by growing market adoption of both OCD and XPS metrology solutions

GAAP Results ($K)
	Q3 2017	Q2 2017	Q3 2016 ARIVA.DE Börsen-Geflüster Kurse Nova Measuring Instruments 161,00 € +5,23%
Revenues	$54,058	$56,126	$44,060
Net Income (Loss)	$11,502	$13,313	$(4,778)
Earnings (Loss) per Diluted Share	$0.40	$0.47	$(0.18)
NON-GAAP Results ($K)
	Q3 2017	Q2 2017	Q3 2016
Net Income	$13,101	$15,167	$9,449
Earnings per Diluted Share	$0.46	$0.53	$0.34

A reconciliation between GAAP operating results and non-GAAP operating results is provided following the financial statements that are part of this release. Non-GAAP results exclude amortization of acquired intangible assets, net adjustments of deferred tax assets, stock-based compensation expenses, expense related to royalty buyout agreement with the Office of the Chief Scientist and inventory write-off.

Management Comments

"Strength in both our Dimensional and Materials metrology product lines drove another solid quarter, supporting our expectations for a fifth sequential record year," commented Eitan Oppenhaim, President and Chief Executive Officer of Nova. "Our initiatives to diversify our customer base and expand our presence in the Memory segment continue to bear fruit with growing contribution from several Memory customers, including a leading Memory manufacturer that accounted for 30% of the product revenues.

"Nova is evolving to offer a wider range of solutions, expanding our addressable markets and supporting our plans for sustainable growth," continued Mr. Oppenhaim. "Following the successful integration of ReVera, today we can offer a unique and differentiated portfolio, which combines disruptive hardware and software capabilities and is appealing to a growing number of customers.

"With another record year clearly in our sights, we are progressing steadily toward our long-term growth targets while enhancing our product offering and expanding our market presence," concluded Mr. Oppenhaim.

2017 Fourth Quarter Financial Outlook

Management provided an outlook for the fourth quarter, the period ending December 31, 2017. Based on current estimates, management expects:

• $53 million to $57 million in revenue
• $0.29 to $0.37 in diluted GAAP EPS
• $0.34 to $0.42 in diluted non-GAAP EPS

2017 Third Quarter Results

Total revenues for the third quarter of 2017 were $54.1 million, a decrease of 4% compared to the second quarter of 2017 and a year-over-year increase of 23% relative to the third quarter of 2016.

Gross margin for the third quarter of 2017 was 61%, compared to gross margin of 59% in the second quarter of 2017 and compared to the gross margin of 22% in the third quarter of 2016, which included $12.9 million of expense related to royalty buyout agreement with the Office of the Chief Scientist and $1.9 million of expense related to inventory write-off.

Operating expenses in the third quarter of 2017 were $18.3 million, compared to $17.7 million in the second quarter of 2017 and compared to $16.6 million in the third quarter of 2016.

On a GAAP basis, the company reported net income of $11.5 million, or $0.40 per diluted share, in the third quarter of 2017. This is compared with $13.3 million, or $0.47 per diluted share, in the second quarter of 2017, and compared with net loss of $4.8 million, or $0.18 loss per diluted share, in the third quarter of 2016, which was inclusive of a non-recurring expense of $12.9 million related to royalty payment to the Israeli Office of the Chief Scientist and $1.9 million of expense related to inventory write-off .

On a non-GAAP basis, which excludes amortization of acquired intangible assets, net adjustments of deferred tax assets and stock-based compensation expenses, expense related to royalty buyout agreement with the Office of the Chief Scientist and inventory write-off, the company reported net income of $13.1 million, or $0.46 per diluted share, in the third quarter of 2017. This is compared with net income of $15.2 million, or $0.53 per diluted share, in the second quarter of 2017, and compared with net income of $9.4 million, or $0.34 per diluted share, in the third quarter of 2016.

Total cash reserves at September 30, 2017 were $144.6 million, compared to $91.7 million at December 31, 2016.

Conference Call Information

Nova will host a conference call today, November 1, 2017, at 9 a.m. Eastern Time, to discuss the financial results and outlook. To attend the conference call, please dial one of the following teleconferencing numbers. Please begin by placing your calls five minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number.

U.S. Dial-in Number: 1-800-310-1961
ISRAEL Dial-in Number: 1-809-245-905
INTERNATIONAL Dial-in Number: 1-719-325-2291
At:
9 a.m. Eastern Time
6 a.m. Pacific Time
3 p.m. Israeli Time

Please reference conference ID 1221502

The conference call will also be webcast live from a link on Nova's website at http://ir.novameasuring.com.

A replay of the conference call will be available from November 2, 2017 at 12 p.m. Eastern Time to November 9, 2017 at 11:59 p.m. Eastern Time. To access the replay, please dial one of the following numbers:

Replay Dial-in TOLL-FREE   1-844-512-2921
Replay Dial-in TOLL/INTERNATIONAL   1-412-317-6671
Replay Pin Number:  1221502

A replay will also be available for 90 days on Nova's website at http://ir.novameasuring.com.

About Nova: Nova delivers continuous innovation by providing advanced metrology solutions for the semiconductor manufacturing industry. Deployed with the world's largest integrated-circuit manufacturers, Nova's products deliver state-of-the-art, high-performance metrology solutions for effective process control throughout the semiconductor fabrication lifecycle. Nova's product portfolio, which combines high-precision hardware and cutting-edge software, supports the development and production of the most advanced devices in today's high-end semiconductor market. Nova's technical innovation and market leadership enable customers to improve process performance, enhance products' yields and accelerate time to market. Nova acts as a partner to semiconductor manufacturers from its offices around the world. Additional information may be found at www.novameasuring.com.

Nova is traded on the NASDAQ & TASE under the symbol NVMI.

This press release provides financial measures that exclude charges for amortization of acquired intangible assets, net adjustment of deferred tax assets, stock-based compensation expenses and expense related to royalty buyout agreement with the Office of the Chief Scientist and inventory write-off and are therefore not calculated in accordance with generally accepted accounting principles (GAAP). Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding Nova's performance because they reflect our operational results and enhances management's and investors' ability to evaluate Nova's performance before charges or benefits considered by management to be outside Nova's ongoing operating results. 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. Management believes that it is in the best interest of its investors to provide financial information that will facilitate comparison of both historical and future results and allows greater transparency to supplemental information used by management in its financial and operational decision making. A reconciliation of each GAAP to non-GAAP financial measure discussed in this press release is contained in the accompanying financial tables.

This press release contains 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 performance, such as statements regarding, but are not limited to, anticipated growth opportunities and projections about our business and its future revenues, expenses and profitability. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied in those forward looking statements. Factors that may affect our results, performance, circumstances or achievements include, but are not limited to, the following: our dependency on three product lines; our dependency on a small number of large customers and small number of suppliers; the highly cyclical and competitive nature of the markets we target and we operate in; 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 ability to recognize the benefits of ReVera acquisition and risks that the acquisition may disrupt current plans and operations and impact relationships with customers, distributors and suppliers; our dependency on PEMs; 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 our manufacturing facilities; risks related to changes in our order backlog; risks related to efforts to complete and integrate current and/or future acquisitions; risks related to the worldwide financial instabilities; risks related to our intellectual property; new product offerings from our competitors; unanticipated manufacturing or supply problems; risks related to government programs we participate in; risks related to taxation; changes in customer demand for our products; risks related to currency fluctuations, risks related to acquisitions we may pursue and risks related to our operations in Israel. We cannot guarantee future results, levels of activity, performance or achievements. The matters discussed in this press release also involve risks and uncertainties summarized under the heading "Risk Factors" in Nova's Annual Report on Form 20-F for the year ended December 31, 2016 filed with the Securities and Exchange Commission on March 3, 2017. These factors are updated from time to time through the filing of reports and registration statements with the Securities and Exchange Commission. Nova Measuring Instruments Ltd. does not assume any obligation to update the forward-looking information contained in this press release.

(Tables to Follow)

NOVA MEASURING INSTRUMENTS LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands) - (Unaudited)
		As of
ASSETS		September 30, 2017		December 31, 2016
Current assets
Cash and cash equivalents		20,020		20,406
Short-term interest-bearing bank deposits		123,833		70,546
Trade accounts receivable		33,554		42,626
Inventories		38,952		29,260
Other current assets		8,500		5,068
Total current assets		224,859		167,906
Long-term assets
Long-term interest-bearing bank deposits		750		750
Deferred tax assets		2,009		3,020
Severance pay funds		1,457		1,425
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