Nova Ltd (NVMI) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Nova Measuring Instruments second-quarter 2011 results conference call.

For your information today's conference is being recorded.

At this time I would like to turn the conference over to your host for today, Mr.

Kenny Green.

Please go ahead sir.

Thank you, operator, and good day to everyone.

I would like to welcome all of you to Nova Measuring Instruments' second-quarter 2011 results conference call and presentation.

And I would like to thank management for hosting this call.

With us on the line today are Mr.

Gabi Seligsohn, President and CEO; and Mr.

Dror David, CFO.

I would like to draw your attention to the presentation that accompanies today's call.

The presentation can be accessed and downloaded from a link on Nova's website at www.nova.co.il.

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 or News section of the Company's website at www.nova.co.il.

Gabi 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 would now like to had the call over to Mr.

Gabi Seligsohn, Nova's President and CEO.

Gabi, go ahead please.

Thank you, Kenny, and hello everyone and welcome to our second-quarter of 2011 earnings conference call.

The second-quarter was another remarkable quarter for the Company and marked the 10th consecutive quarter of growth in both revenues and profitability.

Our net profitability came in at 31% and our gross margins at 57.7%, both exceeding our long-term target model.

During recent quarters we have generated significant operating leverage, while also making investments into the development of new products and capabilities.

Last month we were pleased to announce two new groundbreaking products for the Optical CD metrology market, the Nova T600 and the NovaMARS 5.0.

These products, which are already shipping to leading customers, position us well to further strengthen our position and expand our footprint in the market.

Our focus with these products is on the forefront of technological challenges currently facing the industry, mainly the transition to three-dimensional gate structures, the move to high-k metal gate materials, and to vertical gate structures.

Furthermore, as previously communicated, we are progressing well with our plan to penetrate the 3D interconnect market, and have recently concluded the development of the first phase of that product.

We have already received excellent customer feedback to the tool capabilities, and expect to ship initial evaluation units during the second half of this year.

On the integrated metrology front we announced multiple tool orders received during the second-quarter from multiple customers for our Nova i500.

This tool has served us well in further extending our technological leadership over our competitor.

I am also pleased to report that our service group continued to demonstrate robust performance, delivering record revenues at $4.7 million and gross margins of 39%.

The changes we have made to our service business strategy, to which we referred to several quarters ago, has created a healthy mix between service contracts, time and materials and system upgrades.

With a continuously expanding active installed base, we believe there is significant value to be extracted for us and for our customers going forward.

Now let me turn to overall market trends as we see them.

During the second-quarter, unlike many in our industry, we evidenced a reduction in bookings following our strongest ever booking quarter.

There were several reasons for this softening in demand, which included capacity utilization rates at the foundries, which saw a decline.

The transition to high volume 28 nanometer manufacturing has been delayed.

DRAM orders were down as a result of a slower than anticipated PC market.

And inventory levels in the channels were high in expectation of reduced output from Japan following the March quake, where in actuality the disruption seems to have been minimal.

Our current understanding is that the wafer fab equipment industry as a whole is already seeing a reduction in business volumes.

At the same time, given the strong market -- the strong end market demand, which is continuing in the smartphone and major tablet markets, as well as in the high-end server market, we believe capital spending should come back by the end of the year or beginning of 2012.

In foundry the transition to the 28 nanometer technology node cannot hold off much longer for competitive reasons.

Despite the reduction in DRAM demand, cost considerations could dictate that the transition to the 3X technology node must continue.

On the NAND flash side continued growth depends largely on the tablet and smartphone markets, which continue to grow nicely, and the long-awaited shift to low cost solid state drives, which we believe must happen by 2012 as a result of competition between manufacturers bringing capacity online.

All of these technological trends bring with them significant process control challenges.

Challenges which we are well positioned to help solve with our advanced optical metrology solutions.

Recent discussions with all our leading customers have revealed that their biggest challenge are associated with etching sets, the number of which is growing steeply.

These challenges drive growth rates for optical metrology which far exceed those of other segments.

In foundry the move to three-dimensional gate structures create patterning and material processing challenges at litho, edge, CVD and CMP.

In DRAM the move to the 3X technology node dictates a transition to vertical gate structures and double patterning.

And in NAND flash customers are talking about quad patterning, rather than just double patterning, as a means to deal with the need to print lines at tighter densities and delay a little further the move to extreme UV lithography.

As we have said, optical CD is an enabling technology in that it provides process visualization of key characteristics of the process, which I just mentioned, which cannot be attained by further means.

It is therefore our belief that we are well-positioned to extract growth out of these opportunities as the combination of highly competitive products with widespread presence at leading memory and foundry customers means that when spending growth resumes we will be there to take advantage of it.

Now let me turn to our outlook.

In today's press release we stated our guidance for the third-quarter of 2011.

We expect revenues of $24 million to $27 million, with net profitability of 20% to 25%.

As stated, we are expecting a softer second half to 2011.

Many previously planned expansions have been pushed out, while a few of our customers who need to bring capacity online in order to compete continued spending during the second half both in foundry and in memory.

Regardless of manufacturing capacity increases the need to move to the next technology node dictates a significant need for our equipment, which we continue to design into our customer's next generation manufacturing schemes through collaborative efforts in their process development lines.

Optical CD applications continue to expand at an impressive rate.

Accordingly we expect the optical CD market to continue to outgrow the wafer fab equipment industry for the next several years.

Our plan and current expectations show that we remain on track to grow better than the overall industry during 2011.

And we feel good about our ability to perform within our long-term profitability model.

With that, operator, let me now turn it over to Dror for a closer view on the numbers.

Thanks, Gabi, and welcome everybody to Nova's quarterly conference call.

Before I start with an overview of 2011 second-quarter results, I would like to note that the numbers presented in the press release and in all the following discussions represent GAAP-based results.

Total revenues in the quarter were $29.6 million, around the mid point of our guidance, up 5% quarter-over-quarter and up 53% over the comparable quarter of last year.

Product revenues increased by 4%, driven by higher standalone optical CD revenues in the quarter.

Service revenues increased by 10% to a record quarterly level of $4.7 million, driven by higher time and material activities in the quarter, including upgrades.

Product bookings distribution in the quarter was 58% from the foundry segment and 42% from the memory segment, similar to the previous quarter.

On a regional basis during the quarter we saw a shift of bookings to the US and Europe, reflecting proliferation and repeat orders from recently penetrated accounts in those regions.

As a result, Asia-Pacific accounted for approximately 50% of bookings relative to approximately 80% in previous quarters.

US accounted for approximately 30%, and Europe accounted for 15%.

In addition to the above, booking-wise we had four customers which accounted for more than 10% of all our bookings.

During previous discussions on the target P&L model, we mentioned that we are targeting blended gross margin at or higher than 55% based on product gross margin of approximately 60% and service gross margin higher than 30%.

Blended margins in the quarter increased by 9 basis point reaching record levels of 57.7%.

Product gross margin came in at 61.2%, slightly lower than previous quarter due to a different product mix.

Services gross margin increased to a record level of 39%.

Following a few consecutive quarters of the major increasing R&D expenditures, we have seen some moderation in the current quarter.

This moderation is attributed to higher income from the Israel Office of the Chief Scientist, as well as lower expenses related to purchasing of prototype materials, which tend to fluctuate across the different stages of product development.

Overall operating expenses decreased by 2% relative to the previous quarter.

During the quarter we reported record net income of $9.2 million with operating margins of 30%, well above our target model of 20% to 25%.

Net margins were at a record level of 31%.

Diluted EPS in the quarter was $0.35, up $0.04 over the previous quarter based on a diluted share count of 27.2 million shares.

Cash flow from operating activities came in at $7 million in the second-quarter of 2011.

Moving into balance sheet key metrics, Accounts Receivable increased by $5 million in the quarter to the level of $20 million, mainly as a result of sales to different customers with different payment terms during the second-quarter of 2011.

DSOs remained healthy, yet slightly increased to 52 days.

Inventories increased from $12 million to $14 million in the current quarter.

And as a result inventory turns decreased to 3.9 times a year.

The increase in inventories is mainly related to new products, which were recently announced and are expected to be placed at customer sites during the second half of 2011.

We expect inventories to remain at these levels in the coming quarter, while on one hand we continue the proliferation of the new products into the field, and on the other hand we utilize inventories from existing products.

Deferred revenues significantly increased to $9 million by the end of the quarter.

This increase is mainly related to collection of standalone optical CD unrecognized revenues as the collection of these tools, especially during the penetration phase, sometimes proceeds final customer acceptance and revenue recognition.

Capital investments and depreciation in the second-quarter of 2011 came in at similar levels relative to the previous quarter.

I will conclude with cash reserves, which increased to $78 million at the end of the second-quarter of 2011, and provide us with the needed flexibility to execute on our business plans.

Gabi.

Thank you, Dror, and with that, operator, we would be happy to take any questions.

(Operator Instructions).

Edwin Mok, Needham.

Thanks for taking my question, and congrats for a good report.

Now first I want to ask you about the booking.

You mentioned that Asia-Pacific come down and US has increased.

Is that based on where you are shipping the equipment or given the headquarters of those companies?

It is based on the bookings.

Yes, but the question is actually if it is based on where the equipment is delivered to.

Indeed, it is not based on the headquarters of those companies.

It is based on the fabs in the territory that you were referring to.

I see.

So I can extrapolate and figure out what the US shipments goes to.

Great, very helpful there.

Then, Gabi, you talked about OCD [agreement] space that is outgrowing the industry.

Obviously, that is more of a longer-term trend for the industry.

In the back half, given that some of the foundries are really dialing back in terms of investments, can you see that potentially in the near term as impacting OCD investment as well, and as a result you [have more] in-line with your customer, whether it appears (inaudible)?

Well, I think first about it is important to note that my comment was in general, first of all.

But as a trend we see that OCD is continuing to grow wafer fab equipment.

And specifically during 2011 we expect that to be a third consecutive year in which we are outgrow the industry because OCD is growing so significantly.

So whether it trends exactly as the industry or not in the second half is yet not clear.

I will say, as we did indicate in the prepared commentary, that we are seeing softness in the market that will continue into the second half.

Indeed, you're right, the foundries have dialed back -- most foundries.

There is at least one that, obviously, I can't mention customer names, but there is at least one which is continuing vigorously to ramp up right now in order to bring capacity online.

But, in general, the trend has been a softening in the foundry space for the reasons that I had mentioned.

What is important though is that in all cases, in all foundries we have been working collaboratively in qualifying the next technology generation, which right now is mostly the 28 nanometer technology node.

The one after that we are already involved in as well.

What we expect is that that proliferation of 28 nanometer is being delayed, our expectation is that it cannot be delayed much further than what it has already been delayed, because demand will start coming with the next generation of smartphones requiring 28 nanometer technology node.

So that is why our expectation is that this transition needs to happen within the next 3 to 6 months.

So far order of magnitude for that technology node has not been significant.

There have been, and our customers have worked through yield issues, which I think they have now pretty much mostly worked through.

And so they should be ready to ramp up.

And I think the demand needs to come back in order for that to happen.

So what we believe is that there needs to be a technology transition, which will happen in multiple directions.

One is in the foundry, again, the 28 nanometer.

Number two, as I mentioned, in DRAM, and we can discuss that later a little bit more, but we do see a need to transition there.

Although the market in general is pretty soft for DRAM, we do think that there are cost considerations.

And NAND flash we see actually is continuing to be pretty robust following the process now in the next 3 to 6 months.

Great, very helpful color there.

So I have two questions.

First, I have to ask, what is your visibility going to the fourth-quarter right now?

And (inaudible) bookings (inaudible).

Have you seen just deliveries got pushed out to fourth-quarter or you have less visibility than that?

First of all, we give guidance for the next quarter, which is the third-quarter, which was stated quite clearly.

Regarding the fourth-quarter, I would say the visibility is not as good as it was, let's say, six months ago.

There is somewhat a reduction in visibility into the fourth-quarter.

We know what projects are supposed to happen in the fourth-quarter.

Those have been communicated to us.

But I think that customers have taken a very reserved approach in most cases and have held back on actually issuing the orders, and trying to delay those as much as they can.

So I would say that visibility is not as good as it was.

Before visibility was very good for, let's say, five months going forward.

It is probably pulled back a little bit one or two months.

So that is kind of the situation right now.

Again, when I say visibility I mean actual orders on hand.

I will say that, again, in general because of the depth of communication that we do have the customers we understand what it is that they need to order.

And what we're looking at anticipating is to see that those orders actually come in -- hopefully start coming in again towards the end of the third-quarter and into the beginning of the fourth-quarter.

I see.

It is very, very helpful.

So basically your customers are reluctant to release orders (inaudible) talking about.

But based on your understanding of the demand you might have a better fourth-quarter than how you guys are looking at third-quarter right now.

Is that fair to say that?

I think it is still get unclear.

And again it is difficult for me to give you an indication on the fourth-quarter and say that it is going to be better than the third-quarter.

It is not completely clear right now.

So to me a little bit early to say something like that.

Again, I think that the situation is developing almost on a daily basis.

There was one data point which was interesting last week when [Morris Jang] of CSMC spoke about the fact that he believes that people are working for their inventory in the third-quarter.

Which should be a good indication, but it is difficult at this point, Edwin, to say that we believe the fourth-quarter is better than the third.

We are not in a position to say that yet.

Great.

I understand that.

Can I ask about your customer mix.

In terms of, let's say, in the first half of this year versus second half, in just generalized term, what is your customer mix between foundry, DRAM and NAND?

And how do you expect that mix to change in the second half?

Foundry was very robust in the beginning of the year.

As you remember, many foundry customers have made a significant part of their spending, maybe 60%, 70% of their annual spend took place in the first half, mostly, I would say, probably in the first four months of the year.

And DRAM has been softer this year.

There have been situations in which we have had significant DRAM orders because some of the customers have initiated the transition to the 3X technology node.

For the second half I expect that we're going to see some foundry orders continuing, specifically a lease with one of our key customers that we see continuing to spend.

And, also, I think on the NAND flash side there will be some spending.

So trying to split it between NAND flash, let's say, and foundry as well as some DRAM, again as Dror mentioned in the quarter, I think bookings was probably 60/40 in favor of foundry, and may turn to 50/50 or 60/40 in favor of memory.

It is a little bit difficult for me to say at this point.

But, again, I think that as far as spending continuing -- and ramping continuing in some customer sites, again, there is at least one significant foundry, and there is at least one or two actually DRAM manufacturers that must continue spending right now, and we're seeing orders continuing from those.

Great, one last question and I will let you go.

On the (inaudible) side, briefly you guys talked about (inaudible) seven new customers that you have secured in 2009 and some (inaudible) revenue in 2010 and [more] this year.

I just wanted to understand if you're now shifting revenue to all seven customers.

And you have (inaudible).

I was just curious as to how many of these customers transition to this new product, and do you expect that transition to drive to some incremental growth there?

In all cases of penetrations we have seen repeat orders, which is, I think a great indication.

As far as the new product is concerned there are actually almost a handful of customers, of the leading customers, all of which were the -- well, actually, these are both the new penetration accounts as well as existing ones, that are taking the T600 and the MARS 5.0.

Actually we're extremely impressed with the traction that we have seen.

To announce a product at SEMICON and at the same time ship several units to customers is something that we are very happy with.

To us that is a very strong indication of how the market is perceiving this (inaudible) product.

It is also a result of the fact that we work very closely with these customers through the last year in order to introduce them to the content of the product.

They believe it could help them go to the 2X and the 1X technology nodes.

So we're actually pretty pleased.

And, again, those taking those tools are a combination of new accounts in the last 6 to 9 months and older accounts that we have been working with for quite a while.

So the T600 has better functionality (inaudible).

And you enable that for the 3D structure.

I was wanting do you generate better ASP and therefore better margin for these products compared to (inaudible)?

Well, what has happened from one technology generation to another with our standalone product offering is that generally we have seen an improving ASP as a result of improved performance and improving cost of ownership.

So in general this is a more advanced product with more capabilities, offering more advantages to customers.

So in general you see that there is an improvement there.

But, obviously, the cost of these products is also higher.

So, you know, I think we're pretty comfortable with the product gross margins that we are demonstrating right now.

And again, I think that in general what we are doing on a multiyear process is that as products rollout more capabilities come online, more cost of ownership improvements, et cetera, which allow customers to spend a little bit more on these products.

Great, that's all I have.

Thank you, Gabi.

Patrick Ho, Stifel Nicolaus.

Thanks a lot, a nice quarter, guys.

Gabi, just on a bigger picture basis, can you just subscribe the industry transition to the optical metrology and how you see it potentially displacing some of the acoustics-based metrology that is out in the marketplace right now, and maybe particularly -- specifically in the DRAM market and how that adoption may be occurring?

Sure.

Well, optical -- the way that we have approached the use of optical metrology for the copper area has not been by trying to measure what the acoustic measurement equipment measures.

Simply because the acoustic measurement is able to measure through opaque films, which is something that with an optical instrument you can obviously not do.

What we have done in order to approach that market is to move the location of process control and where the measurement is actually performed further down the line in the manufacturing process.

So rather than measure primarily before the CMP process and after PVD, actually you measure after CMP.

The advantage that that has offered to customers is very, very significant, because now -- and this has s been the case for the last few years, where we have really taken a dominant position in the copper interconnect market.

Now they're able to measure after CMP it gives them an indication of the parametric performance across the wafer at a time where it is very, very critical just before it moves into the lithography step.

So the approach has been actually to look at the process control needs rather than look at the metrology or measurement technique and try to displace it.

That has been a very successful process for us.

And again, in doing so, process control schemes have been developed both in memory and in foundry which are very, very extensive.

In some cases it has allowed customers to control the process on a wafer-by-wafer basis at very, very high throughput and with very, very good productivity numbers.

So that is what has happened in the copper metrology sector.

Your other part of the question, if you could reiterate?

You have answered it.

I was just wondering if specifically in the DRAM market, particularly some of the changes that are going there, but I think your answer kind of covered it.

Okay, very good.

The second question I have.

In terms of the service margins that you guys posted, obviously, very, very strong.

Is this something where it sustainable at higher levels versus your 30% target, or do you see it coming back down based on the mix within services and upgrades and the actual core services?

Is this just an aberration or is it something where it can be higher on a sustainable level?

Well, I will say two things.

One is, obviously, you're right that it is associated with a mix of revenues in a given quarter.

But also there is a critical mass associated with it, meaning the fact that we have grown from about $4.2 million, up $4.3 million to $4.7 million has also had an impact on the gross margin in that side of the business.

On a sustainable basis I think that we should be able to stay at between 30% and 40%.

I don't think that this is an aberration.

I think that somewhere between 35% and 40% at these kind of revenue levels we should be pretty comfortable.

You should also remember that a portion of the revenues and service are associated with upgrades.

And we have a very, very significant active installed base of about 1,200 tools, and so what changes from quarter to quarter many times is the degree or extent of upgrades.

And, obviously, there are quarters in which upgrades are more significant than others.

And the impact is felt very largely on the gross margin side.

But, I think again, that these levels of $4.5 million to $5 million you should see us remaining within the 35% to 40% gross margin level.

Great, and a final question.

I did notice that inventories kicked up slightly.

But given the current environment and how many moving parts there are, if that inventory could give you a little bit of buffer in case the customers want you to respond pretty quickly if the demand environment and their wafer start forecast change?

Is that that inventory buffer so you can respond quickly?

Yes, definitely the level of inventory is right now from the existing products gives us some flexibility should the market pick up.

And we have some unfinished goods.

But we do expect in the third quarter to see some reduction in inventories from the existing products.

You should also remember, Patrick, that the inventories include systems which are on evaluation, which is our business development growth engine, obviously.

Great, thanks a lot, guys.

(Operator Instructions).

Marcel Herbst, Herbst Capital Management.

Congratulations to a strong execution in the quarter.

You have been increasing your addressable market with solutions for additional process fab structures, etch, litho and CVD.

So my question is how is the pipeline looking in these particular areas?

And if his adoption are progressing to your expectations?

And also to put this in perspective, how much of this quarter's revenue came from those new areas?

I don't have a breakdown for you for the particular quarter.

We can look into that.

But I would say that on the standalone metrology front a lot of the business has gone in the direction of etch and high-end CVD in recent quarters.

As I mentioned, and maybe I will elaborate a little bit, one of the things that we have heard from our customers in all sectors that we serve, both the memory sectors and the foundry, is that one of their biggest challenges in being able to make the next technology generation shift is etching.

Etching is becoming very, very difficult, both in the backend and in the end of front end.

And the need to monitor the process more closely is increasing.

If you ask me, I believe that as a general trend I think the biggest growth for OCD will be happening in etch over the next few years.

I also believe it is not just going to be based on standalone metrology, but because of the fact that the tolerances for the etching process are shrinking so significantly we are starting to see a situation where there is variability between the different chambers on the etcher, and therefore there are going to start to be a need for more integrated metrology in the etching area.

So I think the next growth trajectory for OCD is definitely in the etch area.

On the CVD side it is very much associated with high-end CVD.

Here even I would talk about layers such as atomic layer depositions as they are being deposited into complex structures.

And being able to characterize those as part of an overall structure that you're measuring is becoming a very, very important need.

And it is one of the most determining critical factors for yield of the gate structures themselves.

So I think in general that is where a lot of the growth is happening.

A lot of our collaborations with customers in the past year have been in that area.

The penetration that we have had in at least a couple of the foundries has been primarily in that area.

So I am quite pleased with the progress we're making there.

I think there is a lot more growth coming from that area in the future.

Speaking of etch.

When do you think this is going to ramp up?

What is the projection, the growth projection there?

You mean metrology for etch?

Yes.

I think the big change for adoption of optical CD in etch is happening in foundry at 28 nanometers and below.

And in the NAND flash side I think it is happening at 2X.

And so it is actually pretty imminent.

It is already happening on a -- I would say on a pilot line level.

And as people move to high volume manufacturing I think the metrology for etch portion coming from optical CD is going to grow.

So would high-volume manufacturing be happening somewhere in the first half of 2012?

Is that a reasonable assumption?

You know, I will say what I think.

I think it needs to.

I think it needs to, because that is when I think the market has to start to ramp up.

And those next technology nodes -- the move to those technology nodes we think must happen toward the first half of 2012, because of the different market [prospects] that I have mentioned in my prepared commentary.

Okay.

One last question.

A quarter ago your working assumption was that the wafer fab equipment spending will grow at the expected rate of about 12% to 17%.

What are your current assumptions on that?

Well, what we have been hearing, reading materials, talking to CEOs of peer companies, and talking to customers, I think it is probably -- for the year for 2011 it is probably going to be somewhere lower than that simply because the second half is expected to be slower than the first half.

And so again what we are hearing is ranges that are lower than that, probably somewhere around the 5% to 10% right now for 2011.

That is kind of what we are hearing now for the whole year.

And so it very much depends on the degree of softness in the second half and whether orders do start coming back in the fourth quarter or not.

Excellent, thank you.

Edwin Mok, Needham.

Thanks for taking my follow-up question.

So two question.

One for one year (inaudible) and for the long term.

So [tomorrow] on the operating expense side it came down a little bit on June quarter, and part of it was completing this T600 product and the investment around that.

I was wondering do you have any kind of guidance in terms of where you think OpEx can go in the third quarter?

And assuming things get worse before they get better, do you have more leverage to reduce OpEx beyond the third quarter?

Well, regarding the third quarter, as Gabi mentioned before, we are rolling few major products into the field, so we do expect operating expenses to remain at the same level more or less in the third quarter.

Looking beyond that and what we should do in case things will change, of course, we have alternatives.

There are some expenses there which are variable.

So we do have leverage to reduce operating expenses if we should.

Maybe a different way to ask that is how much do you think -- how do you quantify the variable piece?

And some companies talk about incremental margins both up and down.

Is that a way you can quantify that?

The question was what is the extent of the variable aspect of the OpEx, is that what you're asking?

Yes, that is what I'm asking.

Yes, I would say that around 15%, 20%.

Great, very helpful just to at least have (inaudible) there.

Then, Gabi, just one question.

Regarding your exposure to the foundry customer, is there a way you can quantified how much -- you know, we are seeing some other companies like Lam talk about the design win that leading-edge 28 nanometer versus let's say a 65 nanometer penetration (inaudible).

That has been a good way to (inaudible) share gain and how (inaudible) customer ramp and leading-edge could drive revenue for them.

So I was wondering if you can help us maybe talk about their penetration in the 28 nanometer versus 45 and 65 and exposure for those technology nodes?

Well, you need to remember that not all foundries are already at the 28th and 32 nanometer technology nodes, even not at early stages.

Those that are there, Nova has had design wins -- actually has won the design of those technology nodes already.

And so we have been selected for those that are in the 28 nanometer technology node.

Definitely in the area of integrative metrology and also in several cases for standalone metrology.

It is difficult for me to quantify that for you for obvious reasons.

But I will say that we have had the necessary design wins there.

And that -- a lot of that is associated with why we feel confident about our ability to continue and grow when things turn around a little bit because of the extent of design wins that we have had there.

And we do expect that the next round of investments will happen in those technology nodes.

That is why it is so critical for us.

So maybe a different way to ask that.

If you think about, like (inaudible) going into 28 yet, so let's say 45 nanometer and beyond.

Would you think that your first-half shipment -- all bookings to foundry, and how much of that comes from 45 and beyond investment versus a 65 (inaudible) investment?

Is there anyway you can quantify it just roughly that (inaudible) 45 and beyond that have 45 and beyond, a way to [gauge] this direction?

I will say that about 80% and above of Nova's revenues this year are coming from 45 nanometers and below.

Great, that is exactly what I'm looking for.

Thanks very much, very helpful.

As we have no further questions at this time I would like to hand the call back over to Mr.

Seligsohn for any additional remarks or closing statements.

Thank you.

Thanks, operator.

And again I want to thank everyone for joining today's call.

We look forward to seeing some of you at a conference next week in the US and communicating further as we see progress.

Thank you.

Ladies and gentlemen, that will conclude today's conference call.

Thank you for your participation.

You may now disconnect.