Nova Ltd.
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(Translation of Registrant’s name into English)
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(Jurisdiction of incorporation or organization)
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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The
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Yes
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive – based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Page | |||
Introduction |
- iii- | ||
Cautionary Statement Regarding Forward Looking Statements and
Risk Factors |
- iii- | ||
Presentation of Financial and Other Information |
- vii- | ||
1 | |||
1 | |||
1 | |||
1 | |||
3A. |
Selected Financial Data |
1 | |
3B. |
Capitalization and Indebtedness |
1 | |
3C. |
Reasons for the Offer and Use of Proceeds |
1 | |
3D. |
Risk Factors |
1 | |
31 | |||
4.A |
History and Development of the Company |
31 | |
4.B |
Business Overview |
32 | |
4.C |
Organizational Structure |
45 | |
4.D |
Property, Plant and Equipment |
46 | |
46 | |||
46 | |||
5.A |
Operating Results |
51 | |
5.B |
Liquidity and Capital Resources |
53 | |
5.C |
Research and Development, Patents and Licenses, etc. |
55 | |
5.D |
Trend Information |
58 | |
5.E |
Critical Accounting Estimates |
58 | |
62 | |||
6.A |
Directors and Senior Management |
62 | |
6.B |
Compensation |
66 | |
6.C |
Board Practices |
69 | |
6.D |
Employees |
76 | |
6.E |
Share Ownership |
77 | |
6.F |
Disclosure of Registrant’s Action to Recover Erroneously Awarded Compensation.
|
78 | |
78 | |||
7.A |
Major Shareholders |
78 | |
7.B |
Related Party Transactions |
80 | |
7.C |
Interest of Experts and Counsel |
81 | |
81 | |||
8.A |
Consolidated Statements and Other Financial Information |
81 | |
8.B |
Significant Changes |
82 |
82 | |||
9.A |
Offer and Listing Details |
82 | |
9.B |
Plan of Distribution |
82 | |
9.C |
Markets |
82 | |
9.D |
Selling Shareholders |
82 | |
9.E |
Dilution |
82 | |
9.F |
Expenses of the Issue |
82 | |
82 | |||
10.A |
Share Capital |
82 | |
10.B |
Memorandum and Articles of Association |
82 | |
10.C |
Material Contracts |
83 | |
10.D |
Exchange Controls |
83 | |
10.E |
Taxation |
83 | |
10.F |
Dividends and Paying Agents |
100 | |
10.G |
Statements by Experts |
100 | |
10.H |
Documents on Display |
101 | |
10.I |
Subsidiary Information |
101 | |
10.J |
Annual Report to Security Holders |
101 | |
101 | |||
102 | |||
103 | |||
103 | |||
103 | |||
103 | |||
104 | |||
104 | |||
104 | |||
104 | |||
105 | |||
105 | |||
106 | |||
106 | |||
106 | |||
106 | |||
106 | |||
106 | |||
106 | |||
106 | |||
SIGNATURES |
118 |
• |
Increased cybersecurity threats and more sophisticated computer crime could disrupt our
business. |
• |
We depend on international sales, which expose us to foreign political and economic risks.
|
• |
We are subject to laws and regulations that could restrict our operations such as economic
sanctions and export restrictions. |
• |
Changes in global trade policies and other factors beyond our control may adversely impact
our business, financial condition and results of operations. |
• |
We may be affected by instability in the global economy and by financial turmoil.
|
• |
Because we derive a significant portion of our revenues from sales in Asia, our sales could
be hurt by instability of Asian economies. |
• |
Our business is subject to risks related with doing business in China. |
• |
Because of the technical nature of our business, our intellectual property is extremely
important to our business, and our inability to protect our intellectual property could harm our competitive position. |
• |
There has been significant litigation involving intellectual property rights in the semiconductor
and related industries, and similar litigation could force us to divert resources to defend against such litigation or deter our customers
from purchasing our systems. |
• |
We may incorporate open-source technology in some of our software and product, which may
expose us to liability and have a material impact on our product development and sales. |
• |
We operate in an extremely competitive market, and if we fail to compete effectively, our
revenues and market share will decline. |
• |
If we do not respond effectively and on a timely basis to rapid technological changes, our
ability to attract and retain customers could be diminished, which would have an adverse effect on our sales and ability to remain competitive.
|
• |
The ongoing consolidation in our industry may harm us if our competitors are able to offer
a broader range of products and greater customer support than we can offer or if our main suppliers cease delivery of important component
as a result of being acquired by a larger company. |
• |
The markets we target are cyclical and it is difficult to predict the length and strength
of any downturn or expansion period. |
• |
Our operations may be delayed or interrupted and our business could suffer if we violate
environmental, safety and health, or ESH, regulations. |
• |
Pricing and demand for our specific product lines could substantially reduce our sales.
|
• |
We depend on a small number of large customers, and the loss of one or more of them could
significantly lower our revenues. |
• |
Our inability to significantly reduce spending during a protracted slowdown in the semiconductor
industry could reduce our prospects of achieving continued profitability. |
• |
There can be no assurance that revenues from future products or product enhancements will
be sufficient to recover the development costs. |
• |
New product lines that we may introduce in the future may contain defects, which will require
us to allocate time and financial resources to correct. |
• |
If any of our systems fail to meet or exceed our internal quality specifications, we cannot
ship them until such time as they have met such specifications. |
• |
Our dependence on a single manufacturing facility per product line magnifies the risk of
an interruption in our production capabilities. |
• |
Our lease agreements for our Manufacturing Facilities include provisions that exempt the
landlord and others from liability for damages to our Manufacturing Facilities. |
• |
Shipment changes or cancellation may render our backlog not a reliable indicator of actual
sales and financial results. |
• |
We may not be able to successfully complete and integrate current and/or future acquisitions.
|
• |
We depend on continuous cooperation with Process Equipment Manufacturers (“PEMs”)
to enable sales of our systems which are integrated with the process equipment. |
• |
Some of our commercial agreements with PEMs and customers may include exclusivity provisions
and limitations on the use of certain intellectual property which could limit or prevent future business relationships with third parties.
|
• |
We depend on a limited number of suppliers, and in some cases a sole supplier. |
• |
The disclosure rules regarding the use of conflict minerals may affect our relationships
with suppliers and customers. |
• |
Our lengthy sales cycle increases our exposure to customer delays in orders, which may result
in obsolete inventory and volatile quarterly revenues. |
• |
Our inability to attract, recruit, retain highly skilled key personnel. |
• |
Political, economic and military instability in Israel may impede our ability to operate and harm our financial results. |
• |
Our convertible senior notes may impact our financial results, dilute existing shareholders,
and create downward pressure on the price of our ordinary shares. |
• |
Currency fluctuations could harm our profit margins. |
• |
We received certain research and development grants, which could impose restrictions on
our ability to use technology developed under these programs. |
• |
Certain shareholders may control the outcome of matters submitted to a vote of our shareholders,
including the election of directors. |
• |
The market price of our ordinary shares may be affected by a limited trading volume and
may fluctuate significantly. |
• |
We may be classified as a “passive foreign investment company” for U.S. income
tax purposes, which could have significant and adverse tax consequences to U.S. shareholders. |
• |
The rights and responsibilities of our shareholders are governed by Israeli law and differ
in some respects from the rights and responsibilities of shareholders under U.S. law. |
• |
Our shares are listed for trade on more than one stock exchange. |
3A. |
Selected Financial Data
|
3B. |
Capitalization and Indebtedness
|
3C. |
Reasons for the Offer and Use
of Proceeds |
3D. |
Risk Factors |
• |
instability in political or economic conditions, including but not limited to inflation,
recession, foreign currency exchange restrictions and devaluations, restrictive governmental controls on the movement and repatriation
of earnings and capital, and actual or anticipated military or political conflicts, particularly in emerging markets; Rising inflation
and elevated U.S. budget deficits and overall debt levels, including as a result of federal pandemic relief and stimulus legislation and/or
economic or market and supply chain conditions, can put upward pressure on interest rates and could be among the factors that could lead
to higher interest rates in the future. Higher interest rates could adversely affect our overall business or reduce our liquidity.
|
• |
intergovernmental conflicts or actions, including but not limited to armed conflict, trade
wars and acts of terrorism or war, including current war between Russia and the Ukraine; and |
• |
interruptions to the Company’s business with its largest customers, distributors and
suppliers resulting from but not limited to, strikes, and financial instabilities. For instance, trade restrictions, changes in tariffs
and import and export license requirements could adversely affect our ability to sell our products in the countries adopting or changing
those restrictions, tariffs or requirements. This could reduce our sales by a material amount. |
• |
trade protection measures, such as tariff increases, and import and export licensing and
control requirements; |
• |
potentially negative consequences from changes in tax laws; |
• |
difficulties associated with the Chinese legal system, including increased costs and uncertainties
associated with enforcing contractual obligations in China; |
• |
historically, lower protection of intellectual property rights; |
• |
changes and volatility in currency exchange rates; and |
• |
unexpected or unfavorable changes in regulatory requirements. |
• |
pending patent applications will be approved; or |
• |
any patents will be broad enough to protect our technology, will provide us with competitive
advantages or will not be challenged or invalidated by third parties. We also cannot assure that others will not independently develop
similar products, duplicate our products or, if patents are issued to us, design around these patents. Furthermore, because patents may
afford less protection under foreign law than is available under U.S. law, we cannot assure that any foreign patents issued to us will
adequately protect our proprietary rights. |
• |
result in our loss of proprietary rights; |
• |
subject us to significant liabilities, including triple damages in some instances;
|
• |
require us to seek licenses from third parties, which licenses may not be available on reasonable
terms or at all; or |
• |
prevent us from selling our products. |
• |
the contribution and value our solutions bring to our customers; |
• |
our product innovation, quality and performance; |
• |
our global technical service and support; |
• |
the return on investment (ROI) of our equipment and its cost of ownership; |
• |
the breadth of our product line; |
• |
our success in developing and marketing new products; and |
• |
the extendibility of our products. |
• |
our continuing need to invest in research and development; |
• |
our continuing need to market our new products; and |
• |
our extensive ongoing customer service and support requirements worldwide. |
Any acquisition may involve many risks, including the risks of: |
• |
diverting management’s attention and other resources from our ongoing business concerns;
|
• |
entering markets in which we have no direct prior experience; |
• |
improperly evaluating new services, products and markets; |
• |
being unable to maintain uniform standards, controls, procedures and policies; |
• |
failing to comply with governmental requirements pertaining to acquisitions of local companies
or assets by foreign entities; |
• |
being unable to integrate new technologies or personnel; |
• |
incurring the expenses of any undisclosed or potential liabilities; and |
• |
the departure of key management and employees. |
4.A |
History and Development of the
Company |
4.B |
Business Overview
|
Technology |
Product Line |
Key applications |
Product families |
• Broadband
Spectrophotometry
• Scatterometry
• Spectral
Reflectometry
• Imaging
and Image Processing |
Dimensional Optical CD Integrated Metrology |
Critical Dimensions
Thin films
|
Nova i Platform
Nova 3090
Nova 2040
Nova ASTERA |
Dimensional Optical CD Stand-Alone Metrology |
Nova T-platform
Nova MMSR | ||
• Spectral
Interferometry |
Nova PRISM | ||
• X-Ray
Photoelectron Spectroscopy
• X-Ray
Fluorescence |
X-Ray
Materials
Metrology |
Thin film
Composition
|
Nova VERAFLEX |
• Secondary
Ion Mass Spectrometry |
SIMS Materials
Metrology |
Composition depth-profiling
|
Nova METRION |
• Raman
Spectroscopy |
Optical Materials Metrology |
Strain
Crystallinity
|
Nova ELIPSON |
• Computational
Modeling for Metrology
Platforms |
Physical modeling (Modeling Software Solutions) |
Nova MARS | |
• Machine
Learning
• Advanced
Algorithms |
Mathematical modeling algorithms (Software solutions) |
Nova FIT | |
• Big
Data Analytics
• High
Power Computing |
Fleet Management (Software solutions) |
Nova FM
Nova HPC
QED | |
• Titration
– various types
• CVS,
CPVS, PCGA
• Spectrophotometry
• HPLC
• Dynamic
Surface Tension
• pH,
conductivity, density |
Chemical Process Control – Analysis and Replenishment |
Electroplating process applications in interconnect, advanced packaging, and PCB markets
|
Nova ancolyzer platform |
• Solid
dosing
|
Metal Replenishment
|
Powder dosing specialty metal oxide materials for electroplating applications
|
Nova DMR |
1. |
Dimensional Metrology |
2. |
Modeling and Software |
• |
Nova MARS - Nova MARS software package is a multi-channel metrology modeling engine designed
for the most advanced 3D structures in advanced process nodes of semiconductor manufacturing. It’s a complete modeling solution
for scatterometry and interferometry models’ development, material characterization and recipe optimization which is crucial for
facing increasing challenges in semiconductor metrology. The Nova MARS also injects physical and process related knowledge to solve complex
structures. |
• |
Nova FIT - Nova FIT modeling suite complements traditional modeling of Optical Critical
Dimensions by machine learning and data driven algorithmic solutions. The algorithmic suite works in conjunction with Nova MARS physical
modeling engine and Nova’s fleet management solution to improve metrology performance, speed up time to solution and expand metrology
envelope for enriched process control. Nova FIT embeds advanced machine learning and big data architecture into optical modeling, enhancing
the way customers utilize metrology measurement data to tighten process windows, avoid process excursions and improve yield. |
• |
Nova’s Centralized Fleet Management and Control - Nova’s Fleet Management and
Performance Monitoring Center simplify the management and enhance the productivity of Nova tools in the fabrication site. The platform’s
ability to process and analyze large amounts of fleet and metrology data using advanced data analytic tools provides our customers with
intelligent and predictive insights on tool performance and process trends. |
• |
Nova HPC - The Nova HPC is a High-Performance Computing solution, which is designed to accelerate
Nova MARS and Nova FIT work processes. Nova HPC significantly expedites application development by accelerating library-building, real
time regression and recipe-setting processes. Its advanced computing hardware design enables optimization of Nova’s proprietary
algorithm performance, thus enabling the most calculation-demanding application development. |
3. |
Materials Metrology |
• |
VERAFLEX - Nova’s VERAFLEX combines enhanced XPS (X-ray photoelectron spectroscopy)
capability with an optional unique low energy XRF (X-ray fluorescence) channel to address logic and memory device fabrication challenges.
This innovative inline technology is a surface-sensitive quantitative spectroscopic technique that is used to determine the elemental
composition and thickness of thin films. |
• |
Nova METRION -
Nova METRION- targets process control of 3D logic and
memory semiconductor devices. The technology enables advanced materials profile measurements by bringing secondary ion mass spectrometry
(SIMS) into semiconductor production lines on both monitor and product wafer. The Nova METRION provides quantitative and actionable results
on depth profiling of compositional information with high-depth resolution and precision. |
• |
Nova ELIPSON - Nova ELIPSON utilizes Raman spectroscopy, a vibrational spectroscopy technique,
to detect multiple material properties such as strain, crystallinity, phases, grain size and composition. The combination of a small spot
and high speed of this non-destructive, optical method makes it a metrology of choice for both memory and logic segments. |
4. |
Chemical Metrology – |
• |
Nova ancolyzer Damascene – the Nova ancolyzer Damascene is an industry-standard chemical
metrology solution for Damascene copper plating interconnects applications, qualified by leading global manufacturers for operation in
advanced nodes production processes. The solution supports a continuously growing range of copper baths and applications and offers a
fully automated analysis of bath components, overall plating performance, excursions, trends alarms and warnings, and overall process
control. |
• |
Nova ANCOLYZER – the ancolyzer is a fully automated online chemical metrology platform
designed with the most flexible architecture for advanced packaging processes. Nova’s ancolyzer offers superior analytical performance
and supports a wide variety of analytical techniques for process control. The platform’s flexible and scalable architecture is configured
to the specific process analysis and replenishment requirements. The platform’s superior accuracy and precision are coupled with
uncompromising reliability and the highest availability. |
• |
Nova DMR – the Nova DMR offers economical replenishment of metals in a plating bath.
This significantly extends the bath chemicals’ lifetime and improves the plater utilization. DMR provides fully automatic powder
container docking for uninterrupted operation and eliminates the constant increase in bath volume, reducing the need for bleed and feed
or full bath dump. Thus, reducing environmental impact and minimizing operational risks and costs. The platform integrates with Nova ANCOLYZER®
and can directly connect to any process tools. |
2020 |
2021 |
2022 |
||||||||||
Total revenues from five largest customers |
69 |
% |
70 |
% |
57 |
% | ||||||
Range of revenues from five largest customers |
5%-26 |
% |
4%-31 |
% |
6%-23 |
% |
• |
We have a medium-high maturity level ESG with Business Continuity Plan indicating high level
understanding of risk management and preparedness. |
• |
We demonstrate a wide range of Social and Governance activities, including but not limited
to, employees trainings on code of ethics, promoting gender equality, supporting employees and suppliers during COVID19, putting emphasis
on product quality, and more. |
4.C |
Organizational Structure |
Name of Subsidiary |
Place of Incorporation |
Nova Measuring Instruments, Inc. |
Delaware, U.S. |
Nova Measuring Instruments K.K. |
Japan |
Nova Measuring Instruments Taiwan Ltd. |
Taiwan |
Nova Measuring Instruments Korea Ltd. |
Korea |
Nova Measuring Instruments GmbH |
Germany |
Nova Measuring Instruments (Shanghai) Co., Ltd. |
China |
ancosys GmbH |
Germany |
100% owned by Nova |
Measuring Instruments GmbH |
4.D |
Property, Plant and Equipment
|
• |
Significant business growth to record levels, with meaningful growth in both products and
service sales. |
• |
Growth in systems’ production and deliveries at all our global sites. |
• |
Diversified customers mix, across multiple territories. |
• |
Expansion to adjacent semiconductor market, including advanced packaging and backend.
|
• |
Further market adoption of Nova’s advanced portfolio: |
o |
Materials, chemical and dimensional metrology solutions. |
o |
Hardware and software coupling. |
o |
Machine learning capabilities to compliment physical modeling. |
o |
Holistic offering, including Integrated and Standalone metrology. |
• |
Continuous proliferation of Nova’s newly announced solutions of ELIPSON, Metrion and
FE damascene chemical platform. |
• |
Continued evolution of our OCD solutions with new generation of Integrated and Standalone
metrology platforms (PRISM). |
• |
Continued investments in research and development programs aimed to generate new organic
growth engines for process control. |
• |
Introduction of advanced Machine Learning solutions (NovaFIT) to enhance metrology measurements
and to complement the traditional Physical modeling (NovaMARS). |
• |
Deepening collaboration with research institutes and customers' development centers, utilizing
a variety of our products, leading to our positioning as a long-term technology development and high-volume manufacturing partner.
|
• |
The acquisition of ancosys, a privately held company headquartered in Germany, which was
completed in January 2022. Ancosys is a leading provider of chemical analysis and metrology solutions for advanced semiconductor manufacturing.
|
• |
ESG (Environment, Social and Governance) – during 2022 the company has built and embraced
an enhanced Corporate Social Responsibility Strategy. We are determined as a company to play a vital role in creating a world that values
equality, safety and environmental health for the benefit of future generations to come. We are committed to proactively invest in embedding
social responsibility as part of our culture and business management to support our values. |
• |
Investing in organization development to enhance our human capital and the strength of our
global teams based on our values and culture. |
• |
Continue to strengthen our competitive market position, through unique innovation and technical
leadership. |
|
• |
Continue executing our innovation and development plans to meet future industry challenges.
|
• |
Continue executing our well-defined strategy to reach
$1 billion in revenues, organically and inorganically. The strategy defines the Company’s growth path in revenue, customers, technology
and financial performance. |
• |
Expand our total available markets by addressing new emerging metrology applications and
market segments, through solutions delivery to the challenging buildup of advanced Logic technology nodes, memory scaled VNAND nodes and
DRAM scaled devices at leading edge customers. |
• |
Continue delivery of metrology systems to the trailing edge technology nodes to support
new applications ramp up and expansions. |
• |
Continue the collaborations and joint research programs with leading semiconductor manufacturers
and relevant leading research institutes. |
• |
Continue our products innovation and diversification through several new product introductions
to extend the Company’s market leadership and total available market. |
• |
Continue our plans to generate revenues and competitive edge through SW algorithm and Machine
Learning solutions. |
• |
Strengthening the partnership with our customers and build a “Customer Centric”
approach to accommodate and deliver customers’ requirements along the semiconductor lifecycle. |
• |
Continue investing in developing new approach and methods to Inline materials process control.
|
• |
Continue the post merger integration of ancosys, and build an extensive roadmap for ancosys'
chemical metrology products in order to enhance Nova's existing product offering. |
• |
Create synergy between our product lines towards a combined offering for advanced applications,
which require dimensional, material and chemical metrology. |
• |
Grow our production facilities to meet semiconductor demand and
our strategic plans, and continue to develop modern and streamlined core business processes through new ERP and Service CRM infrastructure.
|
• |
Elevate our investment in ESG programs in order to promote social responsibilities programs
through our five pillars program (for details refer to Environmental, Social and Governance (ESG) chapter in Item 4.B in this
Annual Report). |
• |
Meeting strategic, development, operational and delivery targets in light of the global
macro economical, geopolitical and trade restriction issues across the globe. |
• |
Outbreak of another COVID-19 variant. |
• |
Overcoming supply chain challenges in light of continuous shortage, demand and cost.
|
• |
On time delivery of the required solutions to meet the current and future needs of our existing
and new customers. |
• |
Correctly understanding the market trends and competitive landscape to ensure our products
retain proper differentiation to win customer confidence. |
• |
Creating aggressive, innovative and competitive roadmap deliverables at reasonable costs
in order to properly control expenses. |
• |
Identifying the metrology evolution roadmap for future industry needs to meet process control
requirements and lead the market. |
• |
Achieving long-term growth targets while supporting extensive growth in all our activities.
|
• |
Building a solid global infrastructure to accommodate further growth. |
• |
Optical metrology has become an enabler for the industry over the last few years, sometimes
on the account of other metrology and process control methods. |
• |
Materials metrology has been widely adopted by leading memory and logic/foundry customers.
We expect further adoption in the next few years. |
• |
Nova’s unique metrology portfolio, combining optical, X-ray and chemical metrology
for both dimensions and materials. This provides the most advanced portfolio, combining the best innovative metrology capabilities with
the best reliability and return on investment. |
• |
The ability to provide a unique and differentiated technology portfolio sets Nova apart
from the competition and adding a competitive edge to our offering. |
• |
Our solutions are well accepted by leading customers that allow us to gain more market share
with additional process steps and new applications. |
• |
Our ability to closely team with our customers allows us to predict the industry evolution
and process control challenges and by that introduce innovative metrology roadmap to solve industry needs. |
• |
Our diversified portfolio, which is a result of continuous investment in research and development,
is becoming more attractive to our customers. |
• |
Extending our solutions’ base to include hardware and software elements in a coupled
offering. |
• |
Successful track record in completing and integrating inorganic products, as a result of
M&A, which allows us to diversify our product offering to expand our addressable markets. |
• |
Well controlled and efficient operating model to support our profitable growth and operational
resiliency. |
5.A |
Operating Results
|
2020 |
2021 |
2022 |
||||||||||
Revenues from product sales |
78 |
% |
81 |
% |
81 |
% | ||||||
Revenues from services |
22 |
% |
19 |
% |
19 |
% | ||||||
Total revenues |
100 |
% |
100 |
% |
100 |
% | ||||||
Cost of products sale |
30 |
% |
32 |
% |
34 |
% | ||||||
Cost of services |
14 |
% |
12 |
% |
11 |
% | ||||||
Total cost of revenues |
44 |
% |
43 |
% |
45 |
% | ||||||
Gross profit |
56 |
% |
57 |
% |
56 |
% | ||||||
Operating expenses: |
||||||||||||
Research and development expenses, net |
20 |
% |
16 |
% |
16 |
% | ||||||
Sales and marketing expenses |
11 |
% |
10 |
% |
9 |
% | ||||||
General and administrative expenses |
5 |
% |
4 |
% |
4 |
% | ||||||
Total operating expenses |
36 |
% |
30 |
% |
29 |
% | ||||||
Operating profit |
21 |
% |
27 |
% |
26 |
% | ||||||
Financial income, net |
*0 |
% |
(1 |
)% |
2 |
% | ||||||
Income before income taxes |
21 |
% |
26 |
% |
28 |
% | ||||||
Income tax expenses |
3 |
% |
4 |
% |
3 |
% | ||||||
Net income |
18 |
% |
22 |
% |
25 |
% |
5.B |
Liquidity and Capital Resources
|
2020 |
2021 |
2022 |
||||||||||||||||||||||
Domestic |
Abroad |
Domestic |
Abroad |
Domestic |
Abroad |
|||||||||||||||||||
Electronic equipment |
2,742 |
431 |
2,356 |
1,134 |
3,664 |
4,155 |
||||||||||||||||||
Office furniture and equipment |
28 |
510 |
22 |
283 |
66 |
1,055 |
||||||||||||||||||
Leasehold improvements |
1,865 |
867 |
371 |
650 |
8,934 |
436 |
||||||||||||||||||
Land and buildings |
- |
- |
- |
- |
- |
3,004 |
||||||||||||||||||
Total |
4,635 |
1,808 |
2,749 |
2,067 |
12,664 |
8,650 |
5.C |
Research and Development, Patents
and Licenses, etc. |
• |
Local Manufacturing Obligation. The terms of the
grants under the Innovation Law require that we manufacture the products developed with these grants in Israel. Under the regulations
promulgated under the Innovation Law, the products may be manufactured outside Israel by us or by another entity only if prior approval
is received from the IIA (such approval is not required for the transfer of less than 10% of the manufacturing capacity in the aggregate,
as declared to be manufactured out of Israel in the applications for funding, in which case a notice should be provided to the IIA). This
approval may be given only if we abide by all the provisions of the Innovation Law and related regulations. Ordinarily, as a condition
to obtaining approval to manufacture outside Israel, we would be required to pay royalties at an increased rate (usually 1% in addition
to the standard rate and increased royalties cap between 120% and 300% of the grants, depending on the manufacturing volume that is performed
outside Israel). We note that a company also has the option of declaring in its IIA grant application an intention to exercise a portion
of the manufacturing capacity abroad, thus, if the grant application is approved by IIA, such company will avoid the need to obtain additional
approvals and pay the increased royalties cap for manufacturing outside of Israel at portions which were mentioned in such approved grant
applications. |
• |
Know-How transfer limitation. The Innovation Law
restricts the ability to transfer know-how funded by the IIA outside of Israel, including by way of a license to a non-Israeli entity.
Transfer of IIA funded know-how outside of Israel requires prior approval of the IIA. The IIA approval to transfer know-how created, in
whole or in part, in connection with an IIA-funded project to third party outside Israel is subject to payment of a redemption fee to
the IIA calculated according to a formula provided under the Innovation Law that is based, in general, on the ratio between the aggregate
IIA grants to the company’s aggregate investments in the project that was funded by these IIA grants, multiplied by the transaction
consideration, taking into account depreciation mechanism, and less royalties already paid to the IIA. The regulations promulgated under
the Innovation Law establish a maximum payment of the redemption fee paid to the IIA under the above mentioned formulas and differentiates
between two situations: (i) in the event that the company sells its IIA funded know-how, in whole or in part, or is sold as part of an
M&A transaction, and subsequently ceases to conduct business in Israel, the maximum redemption fee under the above mentioned formulas
will be no more than six times the total grants received (plus accrued interest) for development of the know-how being transferred, or
the entire amount received from the IIA, as applicable; (ii) in the event that following the transactions described above (i.e., asset
sale of IIA funded know-how or transfer as part of an M&A transaction) the company undertakes to continue its R&D activity in
Israel (for at least three years following such transfer and maintain at least 75% of its R&D staff employees it had for the six months
before the know-how was transferred, while keeping the same scope of employment for such R&D staff), then the company is eligible
for a reduced cap of the redemption fee of no more than three times the amounts received (plus accrued interest) for the applicable know-how
being transferred, or the entire amount received from the IIA, as applicable. No assurance can be given that approval to any such transfer,
if requested, will be granted and what will be the amount of the redemption fee payable. |
• |
Licensing arrangements. Under the terms of the Innovation
Law, licensing know how developed under the IIA programs outside of Israel, requires prior consent of IIA and payment of license fees
to IIA, calculated in accordance with the licensing rules promulgated under the Innovation Law. The payment of the license fees does not
discharge the company from the obligation to pay royalties or other payments due to IIA in accordance with Innovation Law. |
5.D |
Trend Information
|
5.E |
Critical Accounting Estimates
|
6.A |
Directors and Senior Management
|
Name |
Age |
Position | ||
Avi Cohen (1)(2)
|
69 |
Interim Chairman of the Board of Directors | ||
Michael Brunstein
(3) |
79 |
Director | ||
Raanan Cohen (2)(3) |
67 |
Director | ||
Zehava Simon (1)(2) |
64 |
Director | ||
Dafna Gruber (1)(3) |
57 |
Director | ||
Sarit Sagiv (1)(2) |
54 |
Director | ||
Eitan Oppenhaim
|
57 |
Director, President and Chief Executive Officer | ||
Gabriel Waisman |
52 |
Chief Business Officer* | ||
Dror David
|
53 |
Chief Financial Officer | ||
Shay Wolfling
|
51 |
Chief Technology Officer | ||
Adrian S. Wilson |
51 |
President of US subsidiary & General Manager Material Metrology
Division | ||
Effi Aboody |
52 |
Corporate VP and General Manager Dimensional Metrology Division
|
(1) |
Member of the audit committee |
(2) |
Member of the compensation committee |
(3) |
Member of the Nominating governance and sustainability committee
|
6.B |
Compensation |
6.C |
Board Practices |
6.D |
Employees |
As of December 31, |
2020(*)
|
2021(*)
|
2022(*)
|
|||||||||
Total Personnel |
713 |
819 |
1,177 |
|||||||||
Located in Israel |
385 |
428 |
505 |
|||||||||
Located abroad |
328 |
391 |
672 |
|||||||||
In operations |
129 |
176 |
280 |
|||||||||
In research and development |
300 |
328 |
462 |
|||||||||
In global business |
263 |
240 |
311 |
|||||||||
In general and administration |
49 |
75 |
124 |
6.E |
Share Ownership |
6.F |
Disclosure of Registrant’s
Action to Recover Erroneously Awarded Compensation. |
7.A |
Major Shareholders
|
Name |
Number of Ordinary
Shares Beneficially
Owned |
Percentage of Ordinary
Shares
Beneficially Owned |
||||||
Wasatch Advisors Inc.
(1) |
2,882,156 |
10.05 |
% | |||||
Menora Mivtachim Holdings Ltd.
(2) |
2,299,934 |
8.02 |
% | |||||
FMR LLC (3)
|
2,252,097 |
7.85 |
% | |||||
Migdal Insurance & Financial Holdings Ltd.
(4) |
1,982,699 |
6.91 |
% | |||||
Harel Insurance Investments & Financial Services Ltd.
(5) |
1,964,559 |
6.85 |
% |
(1) |
The information is based upon Amendment no. 3 Schedule 13G/A filed with the SEC by
Wasatch Advisors Inc. on February 8, 2023 regarding holdings as of December 31, 2022. |
(2) |
The information is based upon Amendment no. 5 to Schedule 13G/A filed with the SEC by Menora
Mivtachim Holdings Ltd., Menora Mivtachim Pensions and Gemel Ltd., Menora Mivtahim Insurance Ltd., Menora Mivtachim Vehistadrut Hamehandesim
Nihul Kupot Gemel Ltd. and Shomera Insurance Company Ltd. on February 14, 2023 regarding holdings as of December 31, 2022.
|
(3) |
The information is based upon Amendment no. 1 to Schedule 13G/A filed with the SEC by
FMR LLC, its subsidiaries and Abigail P. Johnson on February 9, 2023 regarding holdings as of December 31, 2022. |
(4) |
The information is based upon Schedule 13G filed with the SEC by Migdal Insurance &
Financial Holdings Ltd. on January 26, 2023 regarding holdings as of December 31, 2022. |
(5) |
The information is based upon Amendment no. 9 to Schedule 13G/A filed with the SEC by Harel
Insurance Investments & Financial Services Ltd. on January 17, 2023 regarding holdings as of December 31, 2022. |
7.B |
Related Party Transactions
|
7.C |
Interest of Experts and Counsel
|
8.A |
Consolidated Statements and Other
Financial Information |
8.B |
Significant Changes
|
9.A |
Offer and Listing Details
|
9.B |
Plan of Distribution
|
9.C |
Markets |
9.D |
Selling Shareholders
|
9.E |
Dilution |
9.F |
Expenses of the Issue
|
10.A |
Share Capital |
10.B |
Memorandum and Articles of Association
|
10.C |
Material Contracts
|
10.D |
Exchange Controls
|
10.E |
Taxation |
Tax Year |
Development Region “A” |
Other Areas within Israel |
||||||
2011-2012 |
10 |
% |
15 |
% | ||||
2013 |
7 |
% |
12.5 |
% | ||||
2014-2016 |
9 |
% |
16 |
% | ||||
2017 onwards |
7.5 |
% |
16 |
% |
• |
An individual citizen or resident of the U.S. (as determined under U.S. federal income tax
rules); |
• |
a corporation (or another entity taxable as a corporation for U.S. federal income tax purposes)
created or organized in or under the laws of the U.S., any state thereof, or the District of Columbia; |
• |
an estate, the income of which is subject to U.S. federal income taxation regardless of
its source; or |
• |
a trust, if (a) a U.S. court is able to exercise primary supervision over its administration
and one or more U.S. persons have the authority to control all of its substantial decisions; or (b) the trust has in effect a valid election
in effect under applicable Treasury Regulations (as defined below) to be treated as a United States person. |
• |
persons who own, directly, indirectly or constructively, 10% or more (by voting power or
value) of our outstanding voting shares; |
• |
persons who hold the ordinary shares as part of a hedging, straddle or conversion transaction;
|
• |
persons whose functional currency is not the U.S. dollar; |
• |
persons who acquire their ordinary shares in a compensatory transaction; |
• |
broker-dealers; |
• |
insurance companies; |
• |
regulated investment companies; |
• |
real estate investment companies; |
• |
qualified retirement plans, individual retirement accounts and other tax-deferred accounts;
|
• |
traders who elect to mark-to-market their securities; |
• |
tax-exempt organizations; |
• |
banks or other financial institutions; |
• |
persons subject to special tax accounting rules as a result of any item of gross income
with respect to ordinary shares being taken into account in an applicable financial statement; |
• |
U.S. expatriates and certain former citizens and long-term residents of the United States;
and |
• |
persons subject to any alternative minimum tax. |
• |
fails to furnish its taxpayer identification number, or TIN, which, for an individual, is
ordinarily his or her social security number; |
• |
furnishes an incorrect TIN; |
• |
is notified by the IRS that it is subject to backup withholding because it has previously
failed to properly report payments of interest or dividends; or |
• |
fails to certify, under penalties of perjury, that it has furnished a correct TIN and that
the IRS has not notified the U.S. holder that it is subject to backup withholding. |
10.F |
Dividends and Paying Agents
|
10.G |
Statements by Experts
|
10.H |
Documents on Display
|
10.I |
Subsidiary Information
|
10.J |
Annual Report to Security Holders
|
• |
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect
our transactions and asset dispositions; |
• |
provide reasonable assurance that transactions are recorded as necessary to permit the preparation
of our financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being
made only in accordance with authorizations of our management and directors; and |
• |
provide reasonable assurance regarding the prevention or timely detection of unauthorized
acquisition, use or disposition of assets that could have a material effect on our financial statements. |
2021 |
2022 |
|||||||
Audit Fees |
570,000 |
713,000 |
||||||
Tax Fees |
64,000 |
50,000 |
||||||
Other Fees |
314,000 |
61,000 |
||||||
Total |
948,000 |
824,000 |
Period |
(a) Total Number
of Ordinary Shares Purchased |
(b) Average Price Paid per Ordinary Share |
(c) Total Number of Ordinary Shares Purchased as Part of Publicly Announced Plans or Programs |
(d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) |
||||||||||||
May 2022 |
1,586 |
$ |
91.96 |
1,586 |
99.86 |
|||||||||||
June 2022 |
45,471 |
$ |
90.73 |
69,765 |
93.58 |
|||||||||||
November 2022 |
181,973 |
$ |
82.45 |
251,738 |
78.58 |
|
Page
|
Reports of Independent Registered Public Accounting Firm (PCAOB ID No.
|
F-3 - F-6
|
F-7
|
|
F-8
|
|
F-9
|
|
F-10
|
|
F-11
|
|
F-12 - F-39
|
|
Kost Forer Gabbay & Kasierer
144 Menachem Begin Road, Building A,
Tel-Aviv 6492102, Israel
|
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
|
F - 3
Valuation of excess and obsolete inventory reserve |
||
|
|
|
Description of the Matter
|
|
The Company’s inventories totaled $116.6 million as of December 31, 2022. As described in Note 2i to the consolidated financial statements, the Company assesses the value of inventories, including raw materials, service inventory, work-in-process and finished goods, in each reporting period, and values its inventories at the lower of cost or net realizable value. Reserves for potential excess and obsolete inventory are made based on management's analysis of inventory levels, future sales forecasts, the expected consumption of service spare parts, and market conditions.
Auditing management's estimates for valuation of inventories involved subjective auditor judgment due to the significant assumptions made by management about the future salability of the inventories. These assumptions include the assessment, by inventory category (finished goods, work-in-process, service inventory and raw materials), of future usage and market demand for the Company's products.
|
|
|
|
How We Addressed the Matter in Our Audit
|
|
We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's excess and obsolete inventory reserve process, including management's assessment of the underlying assumptions and data.
Our substantive audit procedures included, among others, evaluating the significant assumptions stated above and the accuracy and completeness of the underlying data management used to value excess and obsolete inventory. We compared the cost of on-hand inventories to historical sales and evaluated adjustments to sales forecasts for specific product considerations, such as technological changes or alternative uses. We also assessed the historical accuracy of management's estimates and performed sensitivity analyses over the significant assumptions to evaluate the changes in the obsolete and excess inventory estimates that would result from changes in the underlying assumptions.
|
Valuation of Acquired Intangible Asset as a result of business combination (Developed Technology) |
||
Description of the Matter |
As described in Note 3 to the consolidated financial statements, on January 25, 2022, the Company acquired all of the outstanding shares of ancosys GmbH for a total consideration of $86.9M, net of cash assumed (the “Acquisition”). The Acquisition was accounted for as a business combination in accordance with ASC 805 “Business Combination”. The Company’s accounting for the Acquisition included determining the fair value of the identifiable assets acquired and liabilities assumed, which included primarily technology intangible asset ($45.3M).
Auditing the Company’s determination of the technology intangible asset for the Acquisition was complex due to the significant estimations required by management. The complexity was primarily due to the sensitivity of the fair value to certain significant underlying assumptions. The Company primarily used a Multiperiod Excess Earnings Method (MEEM) to measure the technology intangible asset. The significant assumptions used to estimate the value of the technology intangible asset included the discount rate, technology migration curves and certain assumptions that form the basis of the projected financial information (e.g., revenue and operating profit margin). These significant assumptions are forward looking and could be affected by future economic and market conditions. |
|
How We Addressed the Matter in Our Audit |
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for determining the fair value of the technology intangible asset.
For example, we tested controls over management’s estimation process supporting the recognition and measurement of the technology intangible asset, including the review of the valuation model and significant assumptions used in the valuation model.
To test the estimated fair value of the technology intangible asset, we performed audit procedures that included, among others, evaluating the Company’s selection of the appropriate valuation methodology, evaluating the significant assumptions used by management and testing the completeness and accuracy of the underlying data. For example, we compared the significant assumptions to current industry, market and economic trends, historical results of the acquired business and to other relevant third-party industry outlooks. We also performed a sensitivity analysis of the significant assumptions to evaluate the effects on the estimated fair value. We also involved our valuation specialists to assist with our evaluation of the methodology used by the Company and significant assumptions included in the fair value estimates, such as the discount rate utilized in the valuation of the technology intangible asset.
In addition, we evaluated the appropriateness of the related disclosures in relation to the Acquisition. |
/s/ KOST FORER GABBAY & KASIERER
|
Kost Forer Gabbay & Kasierer
144 Menachem Begin Road, Building A,
Tel-Aviv 6492102, Israel
|
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
As of December 31,
|
||||||||
2 0 2 2
|
2 0 2 1
|
|||||||
ASSETS
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
|
|
||||||
Short-term interest-bearing bank deposits
|
|
|
||||||
Marketable securities (Note 4)
|
|
|
||||||
Trade accounts receivable, net of allowance of $
|
|
|
||||||
Inventories (Note 5)
|
|
|
||||||
Other current assets (Note 6)
|
|
|
||||||
Total current assets
|
|
|
||||||
Non-current assets
|
||||||||
Marketable securities (Note 4)
|
|
|
||||||
Interest-bearing bank deposits
|
|
|
||||||
Restricted interest-bearing bank deposits and restricted cash
|
|
|
||||||
Deferred tax assets (Note 15)
|
|
|
||||||
Severance pay funds (Note 10)
|
|
|
||||||
Operating lease right-of-use assets (Note 12)
|
|
|
||||||
Property, plant and equipment, net (Note 7)
|
|
|
||||||
Intangible assets, net (Note 8)
|
|
|
||||||
Goodwill
|
|
|
||||||
Other long-term assets
|
|
|
||||||
Total non-current assets
|
|
|
||||||
TOTAL ASSETS
|
|
|
||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Current liabilities
|
||||||||
Convertible senior notes, net (Note 11)
|
|
|
||||||
Trade accounts payable
|
|
|
||||||
Deferred revenues
|
|
|
||||||
Operating lease current liabilities (Note 12)
|
|
|
||||||
Other current liabilities (Note 9)
|
|
|
||||||
Total current liabilities
|
|
|
||||||
Non-Current liabilities
|
||||||||
Convertible senior notes, net (Note 11)
|
|
|
||||||
Accrued severance pay (Note 10)
|
|
|
||||||
Operating lease long-term liabilities (Note 12)
|
|
|
||||||
Deferred tax liability (Note 15) |
||||||||
Other long-term liabilities
|
|
|
||||||
Total non-current liabilities
|
|
|
||||||
Commitments and contingencies (Note 13)
|
||||||||
TOTAL LIABILITIES
|
|
|
||||||
SHAREHOLDERS’ EQUITY (Note 14)
|
||||||||
Ordinary shares,
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Accumulated other comprehensive loss
|
(
|
)
|
(
|
) | ||||
Retained earnings
|
|
|
||||||
Total shareholders’ equity
|
|
|
||||||
Total liabilities and shareholders’ equity
|
|
|
F - 7
Year ended December 31,
|
||||||||||||
2 0 2 2
|
2 0 2 1
|
2 0 2 0
|
||||||||||
Revenues:
|
||||||||||||
Products
|
|
|
|
|||||||||
Services
|
|
|
|
|||||||||
Total revenues
|
|
|
|
|||||||||
Cost of revenues:
|
||||||||||||
Products
|
|
|
|
|||||||||
Services
|
|
|
|
|||||||||
Total cost of revenues
|
|
|
|
|||||||||
Gross profit
|
|
|
|
|||||||||
Operating expenses:
|
||||||||||||
Research and development, net (Note 2R)
|
|
|
|
|||||||||
Sales and marketing
|
|
|
|
|||||||||
General and administrative
|
|
|
|
|||||||||
Total operating expenses
|
|
|
|
|||||||||
Operating income
|
|
|
|
|||||||||
Financial income (expense), net (Note 18)
|
|
|
(
|
) |
|
|||||||
Income before taxes on income
|
|
|
|
|||||||||
Income tax expenses (Note 15)
|
|
|
|
|||||||||
Net income
|
|
|
|
|||||||||
Earnings per share:
|
||||||||||||
Basic
|
|
|
|
|||||||||
Diluted
|
|
|
|
|||||||||
Shares used in calculation of earnings per share:
|
||||||||||||
Basic
|
|
|
|
|||||||||
Diluted
|
|
|
|
Year ended December 31,
|
||||||||||||
2 0 2 2
|
2 0 2 1
|
2 0 2 0
|
||||||||||
Net income
|
|
|
|
|||||||||
Other comprehensive income (loss), net of tax:
|
||||||||||||
Cumulative Translation Adjustment |
( |
) | ||||||||||
Available-for-sale investments (Note 4):
|
||||||||||||
Unrealized gain (loss) on available-for-sale marketable securities, net
|
(
|
)
|
(
|
) |
|
|||||||
Cash flow hedges (Note 17):
|
||||||||||||
Unrealized gain (loss) from cash flow hedges
|
(
|
) |
|
|
||||||||
Less: reclassification adjustment for net gain (loss) included in net income
|
|
(
|
)
|
(
|
)
|
|||||||
Other comprehensive income (loss)
|
(
|
)
|
(
|
) |
|
|||||||
Total comprehensive income
|
|
|
|
Ordinary Shares |
Additional Paid-in Capital |
Accumulated Other Comprehensive Income (Loss) |
Retained Earning |
Total Shareholders' Equity |
||||||||||||||||||||
Number |
Amount |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares upon exercise of options
|
|
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Issuance of shares upon vesting of RSU
|
|
|
|
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Share based compensation |
- | |||||||||||||||||||||||
Equity component of convertible senior notes, net of issuance costs and tax |
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share repurchase at cost
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
(
|
)
|
Other comprehensive income
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares upon exercise of options
|
|
|
|
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares upon vesting of RSU
|
|
|
|
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Share based compensation
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elimination of the par value of the Ordinary shares (Note 1) |
-
|
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Other comprehensive loss
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
(
|
)
|
|
|
|
|
|
|
(
|
)
|
Net income
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
ASU 2020-06 adoption (Note 11) | - | ( |
) | ( |
) | |||||||||||||||||||
Issuance of shares upon exercise of options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares upon vesting of RSU
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share based compensation
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share repurchase at cost
|
( |
) | ( |
) | ( |
) | ||||||||||||||||||
Other comprehensive loss |
- |
( |
) |
( |
) | |||||||||||||||||||
Net income
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|||||||||
|
|
2 0 2 2
|
|
|
2 0 2 1
|
|
|
2 0 2 0
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|||
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of property, plant and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of premium and accretion of discount on marketable securities, net
|
|
|
|
|||||||||
Amortization of debt discount and issuance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect of exchange rate fluctuation
|
|
|
(
|
)
|
(
|
) | ||||||
Changes in assets and liabilities:
|
|
|
||||||||||
Trade accounts receivables, net
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
(
|
)
|
Inventories
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
(
|
)
|
Other current and long-term assets
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
Deferred tax assets, net
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
(
|
)
|
Operating lease right-of-use assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payables
|
|
|
|
|
|
|
|
|
|
|
||
Deferred revenues
|
|
|
|
|
|
|||||||
Operating lease liabilities
|
(
|
) |
(
|
) |
|
|||||||
Other current and long-term liabilities
|
|
|
|
|
||||||||
Accrued severance pay, net
|
|
(
|
) |
|
||||||||
Net cash provided by operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investment activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of subsidiary, net of acquired cash |
( |
) | ||||||||||
Change in short-term and long-term interest-bearing bank deposits
|
|
|
|
|
|
|
(
|
)
|
|
|
(
|
)
|
Investment in marketable securities
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
|
|
Proceed from sales and maturities of marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
(
|
)
|
Net cash used in investing activities
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
(
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the issuance of convertible senior notes, net of issuance costs
|
|
|
|
|||||||||
Settlement of a contingent consideration liability |
( |
) | ||||||||||
Purchases of treasury shares
|
|
|
(
|
)
|
|
|
|
|
|
|
(
|
)
|
Proceeds from exercise of options
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash
|
(
|
) |
|
|
|
|||||||
Increase (decrease) in cash, cash equivalents and restricted cash
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
|
|
Cash and cash equivalents - beginning of year
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash - end of year
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating right-of-use assets recognized with corresponding operating lease liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
A. |
Principles of Consolidation and Basis of Presentation
|
B. |
Use of Estimates in the Preparation of Financial Statements
|
F - 12 |
C. |
Financial Statements in U.S. Dollars
|
On consolidation, the assets and liabilities of foreign operations with functional currency other than dollar are translated into dollars at the rate of exchange prevailing at the reporting date and their statements of profit or loss are translated at exchange rates prevailing at the dates of the transactions. The exchange differences arising on translation for consolidation are recognized in other comprehensive income (“OCI”).
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the spot rate of exchange at the reporting date.
D. |
Cash, Cash Equivalents and Restricted Cash |
As of December 31,
|
||||||||||||
2022
|
2021
|
2020
|
||||||||||
Cash and cash equivalents
|
|
|
|
|||||||||
Long term restricted cash
|
|
|
|
|||||||||
Cash, cash equivalents and restricted cash
|
|
|
|
E. |
Short Term Bank Deposit
|
F. |
Marketable Securities
|
The Company accounts for marketable securities in accordance with ASC Topic 320, “Investments – Debt Securities”. The Company’s investments in marketable securities consist of high-grade treasury, corporate and municipal bonds.
F - 13 |
The Company classifies its marketable securities as either short term or long term based on each instrument’s underlying contractual maturity date. Marketable securities with maturities of 12 months or less are classified as short-term and marketable securities with maturities greater than 12 months are classified as long-term.
The Company accounts for Credit losses in accordance with ASU 2016-13, Topic 326 “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments” which modified the other than temporary impairment model for available for sale debt securities. The guidance requires the Company to determine whether a decline in fair value below the amortized cost basis of an available for sale debt security is due to credit related factors or noncredit related factors. A credit related impairment should be recognized as an allowance on the balance sheet with a corresponding adjustment to earnings, however, if the Company intends to sell an impaired available for sale debt security or more likely than not would be required to sell such a security before recovering its amortized cost basis, the entire impairment amount would be recognized in earnings with a corresponding adjustment to the security’s amortized cost basis.
The Company did not recognize an allowance for credit losses on marketable securities as there were no expected credit losses for the years ended December 31, 2022 and 2021.
|
G. |
Trade Accounts Receivables
|
H. |
Business Combination
|
Following the adoption of ASU 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” for all business combinations with acquisition date from January 1, 2022, the Company applies ASC 606 “Revenue from Contracts with Customer”, to recognize and measure contract assets and contract liabilities on the acquisition date.
Contingent consideration incurred in a business combination is included as part of the purchase price and recorded at a probability weighted assessment of the fair value as of the acquisition date. The fair value of the contingent consideration is re-measured at each reporting period, with any adjustments in fair value recognized in earnings under general and administrative expenses.
Acquisition related costs incurred by the Company are not included as a component of consideration transferred but are accounted for as an expense in the period in which the costs are incurred.
F - 14 |
I. |
Inventories
|
• |
Raw materials - based on the moving average cost method.
|
|
• |
Service inventory, work in process and finished goods - based on actual production cost basis (materials, labor and indirect manufacturing costs).
|
J. |
Property, Plant and Equipment
Property, plant and equipment are presented at cost, net of accumulated depreciation. Annual depreciation is calculated based on the straight-line method over the estimated useful lives of the related assets. Estimated useful life is as follows:
|
Years
|
|
Electronic equipment
|
|
Office furniture and equipment
|
|
Leasehold improvements
|
|
K. |
Goodwill and Intangible Assets
|
F - 15 |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Weighted Average Useful Life (Years)
|
||
Technology
|
|
|
Customer relationships
|
|
L. |
Impairment of Long-Lived Assets
|
M. |
Accrued Warranty Costs
|
N. |
Derivative Financial Instruments
|
In addition to the derivatives that are designated and qualify as a cash flow hedge, the Company enters into certain foreign exchange forward and option transactions to hedge suppliers. Gains and losses related to such derivative instruments are recorded in financial income (expenses), net.
See Note 17 for disclosure of the derivative financial instruments in accordance with such pronouncements.
O. |
Leases
|
F - 16 |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
P. |
Convertible Senior Notes
|
Prior to the adoption of the above-mentioned ASU 2020-06, issuers of certain convertible debt instruments, such as the Notes, that may be settled wholly or partially in cash upon conversion were required to separately account for the liability (debt) and equity (conversion option) components of the instrument. The liability component at issuance was recognized at fair value, based on the fair value of a similar instrument of similar credit rating and maturity that does not have a conversion feature. The equity component was based on the excess of the principal amount of the convertible senior notes over the fair value of the liability component and was recorded in additional paid-in capital. The equity component, net of issuance costs and deferred tax effects was presented within additional paid-in-capital and was not remeasured as long as it continues to meet the conditions for equity classification. The difference between the principal amount and the liability component represents a debt discount that was amortized to financial expense over the respective terms of the Notes using an effective interest rate method. The Company allocated the total issuance costs incurred to the liability and equity components of the convertible senior notes based on their relative values. Issuance costs attributable to the liability and equity components were $
F - 17 |
Q. |
Revenue Recognition
|
Contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative Standalone Selling Price (“SSP”). Judgment is required to determine the SSP for each distinct performance obligation. The Company uses a range of amounts to estimate SSP when it sells each of the products and services separately and needs to determine whether there is a discount to be allocated based on the relative SSP of the various products and services.
Remaining Performance Obligations
Remaining performance obligations (RPOs) represent contracted revenues that had not yet been recognized and include deferred revenues and invoices that have been issued to customers but were uncollected and have not been recognized as revenues. As of December 31, 2022, the aggregate amount of the RPOs was $
F - 18 |
R. |
Research and Development
|
S. |
Income Taxes
|
T. |
Share-Based Compensation
|
The Company policy, under ASC 718, the fair market value of each option grant is estimated on the date of grant using the “Black-Scholes option pricing” method with the following weighted-average assumptions as relevant for prior years:
2 0 2 1
|
2 0 2 0
|
||||
Risk-free interest rate
|
|
|
|||
Expected term of options
|
|
|
|||
Expected volatility
|
|
|
|||
Expected dividend yield
|
|
|
F - 19 |
The Company recognizes compensation expenses for the value of awards granted, based on the accelerated method. The Company account for forfeitures as they occur.
U. |
Earnings per Share
|
Earnings per share are presented in accordance with ASC 260-10, “Earnings per Share”. Pursuant to which, basic earnings per share excludes the dilutive effects of convertible securities and is computed by dividing income (loss) available to ordinary shareholders by the weighted-average number of ordinary shares outstanding for the period, net of treasury shares. Diluted earnings per share reflect the potential dilutive effect of options and RSUs. The number of potentially dilutive options and RSUs excluded from diluted earnings per share due to the anti-dilutive effect of out of the money options amounted to
Subsequent to the modified retrospective adoption of ASU 2020-06 (see note 2P), as of January 1, 2022, diluted earnings per share reflect the full dilutive effect of the Convertible Senior Notes. In 2021 and 2020, prior to the adoption of ASU 2020-06, shares amounted to
V. |
Concentrations of Credit Risk
|
The trade accounts receivable of the Company are derived from sales to customers located primarily in Taiwan R.O.C., Korea, China and USA. The management of the Company performed risk assessment on an ongoing basis and believes it bears low risk.
The Company entered into options and forward contracts to hedge against the risk of overall changes in future cash flow from payments of payroll and related expenses as well as other expenses denominated in NIS. The derivative instruments hedge a portion of the Company's non-dollar currency exposure. Counterparty to the Company’s derivative instruments is major financial institution.
The Company's debt marketable securities include investments in highly rated corporate debentures and governmental bonds. The financial institutions that hold the Company's debt marketable securities are major financial institutions located in the United States. The Company believes its debt marketable securities portfolio is a diverse portfolio of highly rated securities and the Company's investment policy limits the amount the Company may invest in an issuer.
F - 20 |
W. |
Fair Value Measurements
|
X. |
Certain prior period amounts have been reclassified to conform to the current period presentation. |
Y. |
Recent accounting guidance - Accounting standards adopted
In November 2021, the FASB issued ASU 2021-10, ASC Topic 832 “Disclosures by Business Entities about Government Assistance”. The standard require the following annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy: (1) Information about the nature of the transactions and the related accounting policy used to account for the transactions (2) The line items on the balance sheet and income statement that are affected by the transactions, and the amounts applicable to each financial statement line item (3) Significant terms and conditions of the transactions, including commitments and contingencies. The standard will become effective for fiscal years beginning after December 15, 2021. The Company adopted ASU 2021-10 on January 1, 2022. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.
|
F - 21 |
On January 25, 2022 , the Company acquired all of the outstanding shares of ancosys GmbH. (“ancosys”), a provider of chemical analysis and metrology solutions for semiconductor manufacturing for a cash amount of $
The agreement stipulated additional performance-based contingent consideration to shareholders of ancosys in an aggregate amount of up to $
The following table summarizes the fair value of the consideration transferred to ancosys shareholders as of the acquisition date:
Cash paid
|
|
|||
Fair-value of contingent consideration
|
|
|||
|
|
The table below summarizes the fair value of the acquired assets and assumed liabilities and the resulting goodwill as of the acquisition date:
Fair Value
|
Amortization
period
|
|||||||
Cash and cash equivalents
|
|
|
||||||
Trade accounts receivable |
|
|
||||||
Inventories |
|
|
||||||
Property, plant and equipment |
|
|||||||
Other tangible assets assumed |
||||||||
Current Technology |
||||||||
Customer Relationships |
||||||||
Goodwill |
||||||||
Total assets acquired |
||||||||
Deferred tax liability
|
||||||||
Other liabilities assumed |
||||||||
Total liabilities assumed |
|
|
||||||
Net assets acquired
|
|
|
Goodwill is primarily attributable to expected synergies arising from technology integration and expanded product availability to the Company’s existing and new customers. Goodwill is not deductible for income tax purpose.
The Company incurred approximately $
Pro forma results of operations related to this acquisition have not been presented because they are not material to the Company’s consolidated statements of operations. The amounts of revenue and earning of the acquiree since the acquisition date included in the consolidated income statements for the reporting period.
F - 22 |
The following is a summary of marketable securities amortized cost, unrealized gains, unrealized losses, and fair value as of December 31, 2022:
Marketable securities
|
Amortized
Cost
|
Unrealized
gains
|
Unrealized
losses
|
Fair Value
|
||||||||||||
Matures within one year:
|
||||||||||||||||
Corporate bonds
|
|
|
(
|
)
|
|
|||||||||||
Governmental bonds
|
|
|
(
|
)
|
|
|||||||||||
|
|
(
|
)
|
|
||||||||||||
Matures after one year:
|
||||||||||||||||
Corporate bonds
|
|
|
(
|
)
|
|
|||||||||||
Governmental bonds
|
|
|
(
|
)
|
|
|||||||||||
|
|
(
|
)
|
|
||||||||||||
|
|
(
|
)
|
|
The following is a summary of marketable securities amortized cost, unrealized gains, unrealized losses, and fair value as of December 31, 2021:
Marketable securities
|
Amortized
Cost
|
Unrealized
gains
|
Unrealized
losses
|
Fair Value
|
||||||||||||
Matures within one year:
|
||||||||||||||||
Corporate bonds
|
|
|
(
|
)
|
|
|||||||||||
Governmental bonds
|
|
|
(
|
)
|
|
|||||||||||
|
|
(
|
)
|
|
||||||||||||
Matures after one year:
|
||||||||||||||||
Corporate bonds
|
|
|
(
|
)
|
|
|||||||||||
Governmental bonds
|
|
|
(
|
)
|
|
|||||||||||
|
|
(
|
)
|
|
||||||||||||
|
|
(
|
)
|
|
Proceeds from maturity of available-for-sale marketable securities during the year ended December 31, 2022, were $
Proceeds from sales of available-for sale marketable securities during the year ended December 31, 2022, were $
Out of the $
NOTE 5 - INVENTORIES
A. |
Composition:
|
As of December 31,
|
||||||||
2 0 2 2
|
2 0 2 1
|
|||||||
Raw materials
|
|
|
||||||
Service inventory
|
|
|
||||||
Work in process
|
|
|
||||||
Finished goods
|
|
|
||||||
|
|
B. |
In the years ended December 31, 2022, 2021 and 2020, the Company wrote down inventories in a total amount of $
|
F - 23 |
NOTE 6 - OTHER CURRENT ASSETS
As of December 31,
|
||||||||
2 0 2 2
|
2 0 2 1
|
|||||||
Prepaid expenses |
|
|
||||||
Governmental institutions
|
|
|
||||||
Governments grants receivables |
|
|
||||||
Other
|
|
|
||||||
|
|
NOTE 7 - PROPERTY, PLANT AND EQUIPMENT, NET
As of December 31,
|
||||||||
2 0 2 2
|
2 0 2 1
|
|||||||
Cost:
|
||||||||
Electronic equipment
|
|
|
||||||
Office furniture and equipment
|
|
|
||||||
Leasehold improvements
|
|
|
||||||
Land and building |
|
|||||||
|
|
|||||||
Accumulated depreciation:
|
||||||||
Electronic equipment
|
|
|
||||||
Office furniture and equipment
|
|
|
||||||
Leasehold improvements
|
|
|
||||||
Land and building |
||||||||
|
|
|||||||
Net book value
|
|
|
Depreciation expenses amounted to $
As of December 31,
|
||||||||
2 0 2 2
|
2 0 2 1
|
|||||||
Original amount:
|
||||||||
Technology
|
|
|
||||||
Customer relationships
|
|
|
||||||
|
|
|||||||
Accumulated amortization:
|
||||||||
Technology
|
|
|
||||||
Customer relationships
|
|
|
||||||
|
|
|||||||
Net book value
|
|
|
F - 24 |
NOTE 8 - INTANGIBLE ASSETS (Cont.)
|
Year ended December 31,
|
|||||||||||
2 0 2 2
|
2 0 2 1
|
2 0 2 0
|
||||||||||
Technology
|
|
|
|
|||||||||
Customer relationships
|
|
|
|
|||||||||
|
|
|
Annual amortization expenses are expected as follows:
Year ending December 31,
|
||||
2023
|
|
|||
2024
|
|
|||
2025
|
|
|||
2026 |
|
|||
2027 and thereafter |
|
|||
Total |
|
As of December 31,
|
||||||||
2 0 2 2
|
2 0 2 1
|
|||||||
Accrued salaries and fringe benefits
|
|
|
||||||
Accrued warranty costs (See B below)
|
|
|
||||||
Governmental institutions
|
|
|
||||||
Governments grants payables |
|
|
||||||
Other
|
|
|
||||||
|
|
As of December 31,
|
||||||||
2 0 2 2
|
2 0 2 1
|
|||||||
Other current liabilities
|
|
|
||||||
Other long-term liabilities
|
|
|
||||||
|
|
As of December 31,
|
||||||||
2 0 2 2
|
2 0 2 1
|
|||||||
Balance as of beginning of year
|
|
|
||||||
Services provided under warranty
|
(
|
)
|
(
|
)
|
||||
Changes in provision
|
|
|
||||||
Balance as of end of year
|
|
|
F - 25 |
1. |
During any calendar quarter commencing after the calendar quarter ending on March 31, 2021 (and only during such calendar quarter), if the last reported sale price of the Company’s ordinary shares for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to
|
|
2. |
During the five business day period after any 10 consecutive trading day period (“measurement period”) in which the trading price, determined pursuant to the terms of the Convertible Notes, per $
|
|
3. |
If the Company calls such Convertible Notes for redemption in certain circumstances, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or
|
|
4. |
Upon the occurrence of specified corporate events.
|
F - 26 |
The adoption of ASU 2020-06 (see Note 2P) resulted in:
|
• |
An increase of $
|
• |
A reduction of $
|
|
• |
An increase to deferred tax assets, net of $
|
|
• |
A cumulative-effect adjustment of $
|
|
The adoption of this new guidance reduced interest expense by $
F - 27 |
NOTE 11 - CONVERTIBLE SENIOR NOTES, NET (Cont.)
As of December 31,
|
||||||||
|
2 0 2 2
|
2 0 2 1
|
||||||
Liability component: |
||||||||
Principal amount
|
|
|
||||||
Unamortized discount
|
|
|
(
|
)
|
||||
Unamortized issuance costs
|
(
|
)
|
(
|
)
|
||||
Net carrying amount
|
|
|
||||||
Equity component, net of issuance costs of $
|
|
|
Interest expense related to the Convertible Notes was as follows:
Year ended
December 31,
|
||||||||
2 0 2 2
|
2 0 2 1
|
|||||||
Amortization of debt discount
|
|
|
||||||
Amortization of debt issuance costs
|
|
|
||||||
Total financial expense recognized
|
|
|
NOTE 12 - LEASES
The Company has operating leases for facilities and vehicles. The Company recognized Operating lease right-of-use assets of $
F - 28 |
NOTE 12 - LEASES (Cont.)
Lease expenses amounted to $
Year
|
||||
2023
|
|
|||
2024
|
|
|||
2025
|
|
|||
2026
|
|
|||
2027
|
|
|||
2028 and thereafter
|
|
|||
Total lease payments
|
|
|||
Less imputed interest
|
(
|
)
|
||
Total
|
|
Operating cash flows for operating leases amounted to $
From time to time, the Company may be involved in various claims and legal proceedings. The Company reviews the status of each matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated the Company would accrue a liability for the estimated loss. As of December 31, 2022 and 2021, the Company is not involved in any material claims or legal proceedings which require accrual of liability for the estimated loss.
A. |
Rights of Shares: |
B. |
Share Repurchase: |
In March 2022, the Company announced a $
C. |
Equity Based Incentive Plans: |
F - 29 |
Year ended December 31,
|
||||||||||||
2 0 2 2
|
2 0 2 1
|
2 0 2 0
|
||||||||||
Cost of Revenues:
|
||||||||||||
Product
|
|
|
|
|||||||||
Service
|
|
|
|
|||||||||
Research and Development
|
|
|
|
|||||||||
Sales and Marketing
|
|
|
|
|||||||||
General and Administrative
|
|
|
|
|||||||||
Total
|
|
|
|
Shares Options
During 2022, the Company did not grant share options. The weighted average fair value (in dollars) of the options granted during 2021 and 2020, according to Black-Scholes option-pricing model, amounted to $
Summary of the status of the Company’s share option plans as of December 31, 2022, as well as changes during the year then ended, is presented below:
2022
|
||||||||
Share
Options
|
Weighted
Average
Exercise
Price
|
|||||||
Outstanding - beginning of year
|
|
|
||||||
Exercised
|
(
|
)
|
|
|||||
Expired and forfeited
|
(
|
)
|
|
|||||
Outstanding - year end
|
|
|
||||||
Options exercisable at year end
|
|
|
The aggregate intrinsic value represents the total intrinsic value (the difference between the Company's closing share market price on the last trading day of the fiscal year and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on the last trading day of the fiscal year. This amount changes based on the fair market value of the Company's shares.
F - 30 |
Range of
Exercise
Prices
|
Number
Outstanding
|
Weighted
Average
Remaining
Contractual
Life
|
Weighted
Average
Exercise
Price
|
Number
Exercisable
|
Weighted
Average
Exercise
Price
|
|||||||||||||||||
(US dollars)
|
(in years)
|
(US dollars)
|
(US dollars)
|
|||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
2022
|
||||||||
Number of
RSUs
|
Weighted
average
grant date
fair value
(USD)
|
|||||||
Unvested - beginning of year
|
|
|
||||||
Granted
|
|
|
||||||
Vested
|
(
|
)
|
|
|||||
Canceled
|
(
|
)
|
|
|||||
Unvested at year end
|
|
|
The total intrinsic value of RSUs vested during the years 2022, 2021 and 2020 was $
NOTE 15 - INCOME TAXES
A. |
Income Tax Regulations (Rules on Bookkeeping by Foreign Invested Companies and Certain Partnerships and Determination of their Taxable Income), 1986:
|
|
As a "Controlled Foreign Cooperation" (as defined in the Israeli Law for the Encouragement of Capital Investments-1959), the Company's management has elected to apply Income Tax Regulations (Rules for Maintaining Accounting Records of Foreign Invested Companies and Certain Partnerships and Determining Their Taxable Income)-1986. Accordingly, its taxable income or loss is calculated in US Dollars.
F - 31 |
B. |
Law for the Encouragement of Capital Investments-1959:
|
Part of the Company’s investment in equipment has received approvals in accordance with the Law for the Encouragement of Capital Investments, 1959 (“Approved Enterprise” status) in three separate investment plans. The Company has chosen to receive its benefits through the “Alternative Benefits” track, and, as such, is eligible for various benefits. These benefits include accelerated depreciation of fixed assets used in the investment program, as well as a full tax exemption on undistributed income in relation to income derived from the first plan for a period of
On April 1, 2005, an amendment to the Investment Law came into effect (“the Amendment”) and has significantly changed the provisions of the Investment Law. The Amendment limits the scope of enterprises which may be approved by the Investment Center by setting criteria for the approval of a facility as a Privileged Enterprise, such as provisions generally requiring that at least
In 2008, the Company submitted a request to approve a new plan (fourth plan) as a Privileged Enterprise in accordance with the Amendment to the Investment Law. The commencing year was 2010, and the expiration year was 2021.
In 2011, new legislation amending to the Investment Law was adopted. Under this new legislation, a uniform corporate tax rate will apply to all qualifying income of certain Industrial Companies (Requirement of a minimum export of
F - 32 |
Under the transition provisions of the new legislation, the Company may decide to irrevocably implement the new law while waiving benefits provided under the current law or to remain subject to the current law.
In August 2013 "The Arrangements Law" (hereinafter—"the Law") was officially published. The following significant changes affecting taxation were approved:
1. The tax rate on a company in Development area A, effective January 1, 2014 is
2. The tax rate on dividend distributed, generated from "preferred income" or by a company that has an approved enterprise increased effective January 1, 2014 from
C. |
The New Technological Enterprise Incentives Regime - Amendment 73 to the Investment Law
|
In December 2016, the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years), 2016 which includes Amendment 73 to the Law for the Encouragement of Capital Investments ("the 2017 Amendment") was published. According to the 2017 Amendment, Technological preferred enterprise, as defined in the Law for the Encouragement of Capital Investments, 1959 ("the Encouragement Law"), with total consolidated revenues of less than NIS
D. |
The Tax Cuts and Jobs Act, 2017:
|
On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “US Tax Act”) that instituted fundamental changes to the taxation of multinational corporations. The Tax Act includes significant changes to the U.S. corporate income tax system, including a Federal corporate rate reduction from
F - 33 |
In 2022 Congress enacted the CHIPS and Science Act. Among other provisions, the law includes an "advanced manufacturing investment credit". This is a 25% investment tax credit for investments in semiconductor manufacturing and includes incentives for the manufacturing of semiconductors, as well as for manufacturing of specialized tooling equipment required in the semiconductor manufacturing process. Taxpayers are allowed to treat the credit as a payment against tax ("direct pay").
E. |
Deferred Taxes:
|
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Deferred tax assets
Significant components of the deferred tax assets are as follows
As of December 31,
|
||||||||
2 0 2 2
|
2 0 2 1
|
|||||||
Deferred tax assets:
|
||||||||
Net operating loss carryforwards
|
|
|
||||||
Tax credits carryforward
|
|
|
||||||
Reserve and allowances, mainly research and development expenses carryforward
|
|
|
||||||
Operating lease liabilities
|
|
|
||||||
Deferred tax assets before valuation allowance
|
|
|
||||||
Valuation Allowance
|
(
|
)
|
(
|
)
|
||||
Deferred tax assets after valuation allowance
|
|
|
||||||
Deferred tax liabilities:
|
||||||||
Convertible senior notes
|
|
(
|
)
|
|||||
Operating lease right-of-use assets
|
(
|
)
|
(
|
)
|
||||
Intangible assets
|
(
|
)
|
(
|
)
|
||||
Reserve and allowances
|
(
|
)
|
(
|
)
|
||||
Deferred tax liabilities
|
(
|
)
|
(
|
)
|
||||
Deferred tax assets, net
|
|
|
F - 34 |
Deferred tax assets by domestic and foreign are as follows:
Year ended
December 31,
|
||||||||
2 0 2 2
|
2 0 2 1
|
|||||||
Domestic
|
|
|
||||||
Foreign
|
|
|
||||||
|
|
Under ASC 740-10, deferred tax assets are to be recognized for the anticipated tax benefits associated with net operating loss and tax credits carry-forwards and deductible temporary differences; unless it is more-likely-than-not that some or all of the deferred tax assets will not be realized.
Deferred Tax liability
The $
F. |
Income before taxes on income included in the consolidated statements of operations:
|
|
Year ended December 31,
|
|||||||||||
2 0 2 2
|
2 0 2 1
|
2 0 2 0
|
||||||||||
Domestic
|
|
|
|
|||||||||
Foreign (mainly US)
|
|
|
|
|||||||||
|
|
|
G. |
Income tax expenses (tax benefits) included in the consolidated statements of operations:
|
|
Year ended December 31,
|
|||||||||||
2 0 2 2
|
2 0 2 1
|
2 0 2 0
|
||||||||||
Domestic
|
|
|
|
|||||||||
Foreign (mainly US)
|
|
|
|
|
||||||||
|
|
|
||||||||||
Current
|
|
|
|
|||||||||
Deferred
|
(
|
)
|
(
|
)
|
(
|
) | ||||||
|
|
|
F - 35 |
H. |
Tax Reconciliation:
|
The following is a reconciliation of the theoretical tax expense, assuming that all income is taxed at the ordinary statutory average corporate tax rate in Israel and the actual tax expense in the statement of operations, is as follows:
Year ended December 31,
|
||||||||||||
2 0 2 2
|
2 0 2 1
|
2 0 2 0
|
||||||||||
Income before taxes on income
|
|
|
|
|||||||||
Statutory tax expenses
|
|
|
|
|||||||||
Effect of non-benefited income New Technological or Preferred Enterprises statuses in Israel
|
|
|
|
|||||||||
Permanent differences, including difference between the basis of measurement of income reported for tax purposes and the basis of measurement of income for financial reporting purposes, net
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Change in tax reserve for uncertain tax positions
|
(
|
) |
(
|
) |
|
|||||||
Effect of foreign operations taxed at various rates
|
|
|
|
|||||||||
Foreign Derived Intangible Income benefit
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Tax credits
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Trapped Profits agreement net effect
|
|
|
|
|||||||||
Adjustments for previous year’s tax
|
(
|
)
|
(
|
) |
|
|
||||||
Change in valuation allowance
|
|
|
|
|||||||||
Other
|
|
|
|
|||||||||
(
|
) |
|
|
|
||||||||
Actual tax expenses
|
|
|
|
I. |
Effective Tax Rates:
|
The Company’s effective tax rates differ from the statutory rates applicable to the Company for tax year 2022, primarily due to stock-based compensation deductible expenses, tax credits and foreign derived intangible income benefit in the US.
The Company’s effective tax rates differ from the statutory rates applicable to the Company for tax year 2021, primarily due to stock-based compensation deductible expenses, tax credits and foreign derived intangible income benefit in the US.
J. |
Tax Assessments:
|
In December 2021 the Parent Company has received final tax assessments for the years 2016-2019 from the Israeli Tax Authorities.
F - 36 |
K. |
Undistributed earnings of foreign subsidiaries:
|
The Company considers the earnings of certain subsidiaries to be indefinitely invested outside Israel on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and the Company’s specific plans for reinvestment of those subsidiary earnings. The Company has not recorded a deferred tax liability of approximately $
L. |
Uncertain Tax Positions:
|
The taxation of the Company's business is subject to the application of multiple and sometimes conflicting tax laws and regulations as well as multinational tax conventions. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty.
As of
December 31,
|
||||||||
2 0 2 2
|
2 0 2 1
|
|||||||
Balance at the beginning of the year
|
|
|
||||||
Increase related to prior year tax positions
|
|
|
||||||
Decrease related to prior year tax positions
|
(
|
)
|
(
|
)
|
||||
Increase related to current year tax positions
|
|
|
||||||
Balance at the end of the year*
|
|
|
The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expenses.
M. |
Income from Other Sources in Israel:
|
Income not eligible for benefits under the New Technological Enterprise Laws mentioned in ”C” above are taxed at the corporate tax rate of
F - 37 |
A. |
Sales by Geographic Area (as Percentage of Total Sales):
|
Year ended December 31,
|
||||||||||||
2 0 2 2
|
2 0 2 1
|
2 0 2 0
|
||||||||||
%
|
%
|
%
|
||||||||||
Taiwan, R.O.C.
|
|
|
|
|||||||||
China |
|
|
|
|||||||||
USA
|
|
|
|
|||||||||
Korea
|
|
|
|
|||||||||
Other
|
|
|
|
|||||||||
Total
|
|
|
|
B. |
Sales by Major Customers (as Percentage of Total Sales): |
Year ended December 31,
|
||||||||||||
2 0 2 2
|
2 0 2 1
|
2 0 2 0
|
||||||||||
%
|
%
|
%
|
||||||||||
Customer A
|
|
|
|
|||||||||
Customer B
|
|
|
|
C. |
Long-lived assets by geographic location:
|
As of
December 31,
|
||||||||
2 0 2 2
|
2 0 2 1
|
|||||||
%
|
%
|
|||||||
Israel
|
|
|
||||||
US
|
|
|
||||||
Other
|
|
|
||||||
Total long-lived assets (*)
|
|
|
F - 38 |
A. |
Hedging Activities
|
B. |
Derivative Instruments
|
Derivative Assets
Reported in
Other Current Assets
|
Derivative Liabilities
Reported in
Other Current Liabilities
|
|||||||||||||||
December 31,
|
December 31,
|
|||||||||||||||
2 0 2 2
|
2 0 2 1
|
2 0 2 2
|
2 0 2 1
|
|||||||||||||
Derivatives designated as hedging instruments in cash flow hedge
|
|
|
|
|
Year ended December 31,
|
||||||||||||
2 0 2 2
|
2 0 2 1
|
2 0 2 0
|
||||||||||
Loss (gain) on derivative instruments
|
|
|
|
|
|
|
Year ended December 31,
|
||||||||||||
2 0 2 2
|
2 0 2 1
|
2 0 2 0
|
||||||||||
Interest income
|
|
|
|
|||||||||
Financial expense related to the Convertible Senior Notes (Note 11)
|
(
|
)
|
(
|
)
|
(
|
) | ||||||
Exchange rate gain (loss), net
|
|
|
(
|
)
|
(
|
)
|
||||||
Bank charges
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Total
|
|
|
(
|
) |
|
Number | Description |
101.INS | Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document |
101.SCH | Inline XBRL Taxonomy Extension Schema |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase |
104 | Cover page formatted as Inline XBRL and contained in Exhibit 101 |
NOVA LTD. By: /s/ Eitan Oppenhaim Eitan Oppenhaim President and Chief Executive Officer |