Nova Ltd.
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(Translation of Registrant’s name into English)
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• |
Our business could be disrupted by catastrophic events, such as the outbreak of
COVID-19. |
• |
Increased information technology security threats and more sophisticated computer crime
could disrupt our business. |
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We are dependent on international sales, which expose us to foreign political and
economic risks that could impede our plans for expansion and growth. |
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Changes in Global trade policies and other factors beyond our control may adversely
impact our business, financial condition and results of operations. |
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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 or our involvement in related litigation could harm
our competitive position. |
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We may incorporate open source technology in some of our software and products,
which may expose us to liability and have a material impact on our product development and sales. |
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We operate in an extremely competitive market, and if we fail to compete effectively
or to respond to the rapid technological changes, our revenues and market share will decline. |
• |
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. |
• |
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 |
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Because most of our current sales are dependent on few specific product lines, factors
that adversely affect the pricing and demand for these product lines could reduce our sales. |
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We depend on a small number of large customers, and the loss of one or more of them
could significantly lower our revenues. |
• |
There can be no assurance that revenues from future products or product enhancements
will be sufficient to recover the development costs or to ensure the sale of related inventory. |
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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. |
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Our dependence on a single manufacturing facility per product line magnifies the
risk of an interruption in our production capabilities. |
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We may not be successful in our efforts to complete and integrate current and/or
future acquisitions, which could disrupt our current business activities and adversely affect our results of operations or future growth.
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We depend on a limited number of suppliers, and in some cases a sole supplier. Any disruption,
delay or termination of these supply channels may adversely affect our ability to manufacture our products and to deliver them to our
customers. |
• |
Our operations may be disrupted by loss of key personnel or failure to attract, recruit,
retain and develop qualified employees due to intense competition for highly skilled personnel. |
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Our lengthy sales cycle increases our exposure to customer delays in orders, which
may result in obsolete inventory and volatile quarterly revenues. |
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Political, economic, and military instability in Israel may impede our ability to
operate and harm our financial results. |
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Our convertible senior notes may impact our financial results, result in the dilution
of existing shareholders, create downward pressure on the price of our ordinary shares, and restrict our ability to take advantage of
future opportunities. We may not have the ability to raise the funds necessary to settle conversions, and the accounting method for
the Convertible Notes could adversely affect our reported financial condition and results |
• |
Our profit margin may be seriously harmed by currency fluctuations. |
• |
We participate in government programs under which we receive research and development
grants. Some of these programs impose restrictions on our ability to use the technologies developed under these programs. The reduction
or termination of these programs would increase our costs. |
• |
We experience quarterly fluctuations in our operating results, which may adversely
impact our share price. |
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Our investment portfolio may be adversely affected by market conditions and interest
rates. |
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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.
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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 |
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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. |
• |
pending patent applications will be approved; or |
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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. |
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result in our loss of proprietary rights; |
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subject us to significant liabilities, including triple damages in some instances;
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require us to seek licenses from third parties, which licenses may not be available
on reasonable terms or at all; or |
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prevent us from selling our products. |
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the contribution and value our solutions bring to our customers; |
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our product innovation, quality and performance; |
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our global technical service and support; |
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the return on investment (ROI) of our equipment and its cost of ownership;
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the breadth of our product line; |
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our success in developing and marketing new products; and |
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the extendibility of our products. |
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our continuing need to invest in research and development; |
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our continuing need to market our new products; and |
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our extensive ongoing customer service and support requirements worldwide.
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Any acquisition may involve many risks, including the risks of: |
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diverting management’s
attention and other resources from our ongoing business concerns; |
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entering markets in which we have no direct prior experience; |
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improperly evaluating
new services, products and markets; |
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being unable to maintain uniform standards, controls, procedures and policies;
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failing to comply with governmental requirements pertaining to acquisitions of local
companies or assets by foreign entities; |
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being unable to
integrate new technologies or personnel; |
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incurring the expenses of any undisclosed or potential liabilities; and |
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the departure of key management and employees. |
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
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Nova VERAFLEX |
•
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Secondary Ion Mass Spectrometry
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SIMS Materials
Metrology |
Composition depth-profiling
|
Nova METRION |
• |
Raman Spectroscopy |
Optical Materials
Metrology |
Strain
Crystallinity |
Nova ELIPSON |
• |
Computational Modeling for |
Physical modeling (Modeling Software Solutions) |
Nova Mars | |
Metrology Platforms | ||||
•
• |
Machine Learning
Advanced Algorithms |
Mathematical modeling algorithms (Software solutions) |
Nova FIT | |
•
• |
Big Data Analytics
High Power Computing
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Fleet Management
(Software solutions)
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Nova FM
Nova HPC
QED |
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 compliments 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 a 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 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.
|
2019 |
2020 |
2021 |
||||||||||
Total revenues from five largest customers |
67 |
% |
69 |
% |
70 |
% | ||||||
Range of revenues from five largest customers |
3%-27 |
% |
5%-26 |
% |
4%-31 |
% |
Environment |
Building a Sustainable Future
We strive to play our part in building a better future by protecting our environment and
making a positive impact on the planet for the next generations to inherit. |
Community Relations |
Lifting our Communities
We welcome members of the community into our family and provide them with the resources
required to promote equality, belonging and self-worth |
Diversity |
Expanding Cultural Diversity
We’re committed to building a diverse organization with a unique sense of belonging.
We strive to expand our multidisciplinary platform with diverse talents and inspire the various segments of society. |
Inclusion |
Empowering Every Voice
Our organization fosters an inclusive, open-minded and accepting environment. We respect
all individuals and ensure everyone is seen, heard, feel valued and respected. |
Ethics & Governance |
Championing our Employees
People at Nova always come first. We strive to create an ethical, safe and motivational
workplace for our employees, one in which they belong, while their privacy, interests and well-being are protected. |
• |
Communicating with business leaders across all Nova departments and sites on ESG
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Developing and coordinating the strategies which underpin the company's ESG objectives
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Conducting research into best practices to further ensure Nova’s positive
impact on local communities and the environment, and |
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Representing and raising public awareness regarding our ESG commitment |
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The company is at an ESG medium-high maturity level with Business Continuity Plan
indicating high level understanding of risk management and preparedness |
• |
The Company demonstrates wide range of Social and Governance activities, including
employees’ trainings on code of ethics, promoting gender equality, supporting of employees and suppliers during COVID19, putting
emphasis on product quality, and more. |
1. |
Environment: |
2. |
Social: |
• |
We set a goal to increase the number of our female recruits by 10 percent during
the year, a goal we have successfully achieved worldwide. As a result, the absolute number of female recruits in 2021 was doubled from
2020 and tripled from 2019. |
• |
We implemented inclusive language across several companywide documents and procedures
|
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We conducted training to our leadership and HR teams on DE&I challenges and
opportunities |
• |
We established employee resource groups devoted to the issue of DE&I |
• |
We nominated a Disability Services and Compliance Officer to provide care and support
for individuals with disabilities and assist them to integrate into the organization, and |
• |
We adjusted Nova’s website to the latest accessibility requirements and standards.
|
• |
Supporting youth at risk - through working with our partners, we have reached approximately
500 youths around Israel, supporting them with a unique program that runs “Night Vans" equipped with professional counsels who meet
youths and provides support to the youths on their “own territory", helping them integrate into society. |
• |
Keeping our communities physically safe from harm - we have supported the addition
of a new mobile bomb shelter in the heavily bombarded City of Ashkelon in Israel. |
• |
We offered Nova employees opportunities to volunteer and contribute to supporting youth via private tutoring
in English and STEM (science, technology, engineering and mathematics) professions or other endeavors and topics which are close to their
hearts and can help and inspire the youth. |
• |
We have strategically partnered with organizations in Taiwan and the U.S., that
are best connected to the local communities and can help us promote aspects of STEM education among children and youth and empowering
women. |
3. |
Governance: |
• |
Board Practices: |
• |
Our board of directors consists of seven (7) members, of whom six (6) are independent and three (3) are women. In 2021, 26 meetings
of our board of directors and its committees were held, with the directors’ attendance rate being higher than 90%. |
• |
The Audit Committee of our board of directors
currently consists of four (4) members, all independent directors, three (3) of whom are women and two (2) of whom hold deep financial
expertise. The primary function of the committee is to assist the board of directors in fulfilling its oversight responsibilities by reviewing
financial information, internal controls and the audit process. In addition, the committee is responsible for oversight of the work of
our independent auditors, as well as the implementation of our internal enforcement plan and governance policies. The committee meets
at regularly scheduled quarterly meetings. |
• |
The function of our Nominating Committee
of the board of directors’ includes responsibility for identifying individuals qualified to become board members and recommending
that the board of directors consider the director nominees for election at the general meeting of shareholders. The Committee currently
consists of three (3) members, two (2) of whom are independent directors. |
• |
The committee overseeing our pay practices is the Compensation Committee
of our board of directors, whose function includes assisting the board of directors in discharging its responsibilities relating to compensation
of the Company’s officers, directors and executives and the overall compensation programs and reviewing and approving, or if required
by law, approving, and recommending for approval by the board of directors, grants and awards under the Company’s equity incentive
plans. The primary objective of the committee is to oversee the development and implementation of the compensation policies and plans
that are appropriate for the Company in light of all relevant circumstances, and which provide incentives that fit the Company’s
long-term strategic plans and are consistent with the culture of the Company and the overall goal of enhancing shareholder’s value.
The Committee currently consists of four (4) members, all independent directors and two (2) of whom are women. |
• |
Compensation Policy: |
• |
Shareholder Control & Ownership: |
• |
Ethical Business Conduct: |
• |
Code of Conduct. All of our directors,
officers, service providers and employees must conduct themselves in accordance with our Code and seek to avoid even the appearance of
improper behavior. The code is intended to promote the following:Compliance with Laws, Regulations and Company Policies; Avoiding conflict
of interests and personal exploitation of corporate opportunities; Competition and Fair Dealing, handling of business inducements, and
preventing anti-trust violations; Prevention of Discrimination and Harassment and promoting healthy and safe work environment; Preserving
complete and accurate business information and records and engaging in an accurate accounting practices, and confidentiality of the company’s
information; handling of public fillings and Protection and Proper Use of Company Assets; The Code sets principals and standards for:
Insider trading policies, Anti-fraud, Anti-corruption policies, Whistleblower Policy. The Code is available on our employees portal, and
each employee must familiarize with upon joining the company, and on an annual basis. The code is also posted on Nova’s website.
Employees are clearly encouraged to report violations to the compliance team, senior management, or other officers as deemed appropriate.
If matters concern accounting or auditing issues, employees can directly report to the Audit committee of the board of directors. Whistleblowers
who make reports in good faith of suspected violations are protected from retaliation such as demotion or termination of employment because
of reporting. Any Employee who wants to bring an ethical issue to light, can also write an anonymous complaint to the Corporate Secretary.
|
• |
Insider Trading Policy. Nova has adopted
an Insider Trading Policy that all employees must be familiar with and adhere to. Officers and employees may not trade in Nova’s
securities while in the possession of “material non-public information” concerning Nova, its customers and suppliers, or during
any quarterly or special blackout periods. Officers, Employees, and their immediate family members may trade in Nova’s securities
only outside of the clearly defined blackout periods. A failure to comply with the Policy could result in a serious violation of the securities
laws and may involve both civil and criminal penalties. |
• |
Anti-Fraud and Anti Bribery Policies.
We are committed to ethical behavior and values. It is amongst our first priorities to establish a corporate and working culture that
enhances the value of ethics and promote the individual responsibility as well. To this effect, the Company has established an Anti-Fraud
and Anti-Bribery Policies and Guidelines and a Complaint Procedure, which set the highest standards for personnel conduct related to ethical
behavior and alertness. The cornerstone in preventing fraud is the creation of an environment that fosters morality, integrity and business
conduct. Our Anti-Fraud policy outlines the responsibilities of all the involved parties with respect to fraud prevention, the actions
to be taken if fraud is suspected and the mechanism of verifying suspicion of fraud, the reporting process and the recovery action plan.
Our Anti-Bribery sets forth rules governing the giving, offering or receiving of anything of value to or from any non-Nova personnel with
the intention of obtaining, securing, promoting or retaining any business activity. The purpose of the policy is to make sure that Nova
and its employees do not violate applicable corruption laws and to protect the reputation of the Company. In addition to the anti-fraud
policy, in 2021, we implemented an anti-fraud steering committee and forum which oversees and identifies fraud risks across the Company,
and implemented an anti-fraud program which is tested and verified on a yearly basis. |
• |
Accounting and Tax Transparency:
Our approach to global taxation for all types of taxes is to consistently comply with
legal, regulatory, and internal control requirements as well as support our business and commercial strategy. We are committed to adhere
to all applicable global tax laws, filings, and reporting disclosures. We account for tax risks in accordance with the applicable accounting
standards and have internal controls in place over our tax reporting processes. Our transfer pricing policies are aligned with the guidelines
of the Organization of Economic Co-operation and Development (OECD), as well as with all of the jurisdictions in which we operate. We
apply the arm’s length principle when conducting intercompany transactions. We have an established network of internal and external
tax and finance professionals who are knowledgeable in various direct and indirect taxes and who monitor ongoing tax law and business
changes, so that we may adapt processes and deliverables accordingly. This network, along with our framework regarding internal policies
and controls, seeks to ensure the complete and accurate communication of tax positions and risks, through established governance and reporting
processes to our management and board of directors. Further details on our accounting and tax practices can be found in Items 10.E of
this Annual Report. |
• |
Considering the relevance of social development goals for our ESG overall strategy, as
well as the wider community in which we operate |
• |
Further exploring how a broader ESG approach can underpin good practice for our
company and its impact |
• |
Documentation, standardization and publication of company policies |
• |
Setting KPI’s and goals for the following years to assess company’s
progress |
• |
Further investigating ESG priorities such as safety, belonging of our employees,
sustainability development and collaborating with the local community. |
Name of Subsidiary | Country 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 |
Name of Subsidiary
|
Country
of Incorporation |
Ownership |
ancosys GmbH |
Germany |
100% owned by Nova Measuring Instruments GmbH |
ancosys Korea LLC |
Korea |
100% owned by ancosys GmbH |
ancosys Instrument Taiwan Ltd |
Taiwan |
100% owned by ancosys GmbH |
ancosys Inc. |
Delaware |
100% owned by ancosys GmbH |
• |
Significant business growth |
• |
Meaningful growth in both Products and Service sales |
• |
Growth in systems’ production and deliveries by all our global sites.
|
• |
Diversified customer mix, including several major leading customers. |
• |
Further market adoption of Nova’s advanced portfolio by wafer fabrication
customers: |
o |
Hardware and Software coupling |
o |
Unique Optical and X-Ray solutions |
o |
Holistic offering, including Integrated and Standalone metrology |
o |
Materials and Dimensions solutions |
• |
Continuous proliferation of Nova’s recent optical solutions – PRISM
and ELIPSON. |
• |
Continued investments in research and development programs aimed to generate new
organic growth engines for advanced process control. |
• |
Introduction of 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 and provides quantitative and actionable results on depth profiling of compositional
information with high-depth resolution and precision. |
• |
Introduction of several new generations of Dimensional and Materials metrology platforms.
Introduction of Machine Learning solutions (NovaFIT) to enhance metrology measurements and to complement the traditional Physical modeling
(NovaMARS). |
• |
Deepening collaboration with several 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, closed
in January 2022. ancosys is a leading provider of chemical analysis and metrology solutions for advanced semiconductor manufacturing.
|
• |
ESG (Environment, Social and Governance) – during 2021 the company has built
& 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 the organization development to enhance the human capital and the strength
of the global teams based on our values and culture. |
• |
Continue to strengthen our competitive and market position, through unique innovation
and technical leadership. |
• |
Continue executing our innovation and development plans for meeting future industry
challenges. |
• |
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 advanced metrology systems to the trailing edge technology
nodes to support new applications ramp up. |
• |
Executing our plans to meet Nova’s long-term strategy, which defines the Company’s
growth path in revenue, customers, technology and financial performance, to support our profitable growth. |
• |
Continue leading the emerging metrology markets with innovative and disruptive solutions.
|
• |
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. |
• |
Build an extensive roadmap for ancosys' chemical metrology products in order to
enhance Nova's existing product's offering. |
• |
Create synergy between Nova and ancosys' technologies towards a combined offering
for advanced applications, which require dimensional, material and chemical metrology. |
• |
Grow our clean room and production facilities to meet the semiconductor demand cycle
around the globe. |
• |
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
COVID-19 global pandemic and the various influences across the world. |
• |
Overcoming supply chain challenges in light of 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 entire industry over the last few
years, sometimes on the account of other metrology capabilities. |
• |
Material Metrology has been widely adopted by leading memory and logic/foundry customers.
|
• |
Nova’s unique metrology portfolio, combining Optical and X-Ray metrology for
both dimensions and materials, provide the most advanced solution, 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 and advanced metrology solutions 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 P&L and operating model to support our profitable growth and
operational resiliency. |
2019 |
2020 |
2021 |
||||||||||
Revenues from product |
74.3 |
% |
77.7 |
% |
81.0 |
% | ||||||
Revenues from services |
25.7 |
% |
22.3 |
% |
19.0 |
% | ||||||
Total revenues |
100.0 |
% |
100.0 |
% |
100.0 |
% | ||||||
Cost of revenues products |
29.9 |
% |
29.2 |
% |
31.1 |
% | ||||||
Cost of revenues services |
15.9 |
% |
14.1 |
% |
11.9 |
% | ||||||
Total cost of revenues |
45.8 |
% |
43.2 |
% |
43.0 |
% | ||||||
Gross profit |
54.2 |
% |
56.8 |
% |
57.0 |
% | ||||||
Operating expenses: |
||||||||||||
Research and development, net |
19.8 |
% |
19.7 |
% |
15.8 |
% | ||||||
Sales and marketing |
12.5 |
% |
10.9 |
% |
9.5 |
% | ||||||
General and administrative |
4.5 |
% |
4.6 |
% |
4.2 |
% | ||||||
Amortization of intangible assets |
1.2 |
% |
0.9 |
% |
0.5 |
% | ||||||
Total operating expenses |
38.0 |
% |
36.1 |
% |
30.0 |
% | ||||||
Operating income |
16.2 |
% |
20.6 |
% |
27.0 |
% | ||||||
Financial income (expenses), net |
1.4 |
% |
0.3 |
% |
(0.8 |
)% | ||||||
Income before income taxes |
17.6 |
% |
21.0 |
% |
26.2 |
% | ||||||
Income tax expenses |
1.9 |
% |
3.2 |
% |
3.8 |
% | ||||||
Net income |
15.6 |
% |
17.8 |
% |
22.4 |
% |
2019 |
2020 |
2021 |
||||||||||||||||||||||
Domestic |
Abroad |
Domestic |
Abroad |
Domestic |
Abroad |
|||||||||||||||||||
Electronic equipment |
3,975 |
418 |
2,742 |
431 |
2,356 |
1,134 |
||||||||||||||||||
Office furniture and equipment |
2,192 |
604 |
28 |
510 |
22 |
283 |
||||||||||||||||||
Leasehold improvements |
11,231 |
2,849 |
1,865 |
867 |
371 |
650 |
||||||||||||||||||
Total |
17,398 |
3,871 |
4,635 |
1,808 |
2,749 |
2,067 |
• |
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. |
Name |
Age |
Position |
Michael Brunstein
(3) |
78 |
Chairman of the Board of Directors
|
Avi Cohen
(1)(2) |
68 |
Director |
Raanan Cohen (2)(3) |
66 |
Director |
Zehava Simon (1)(2) |
63 |
Director (External Director until May 2018)
|
Dafna Gruber (1)(3) |
56 |
Director (External Director until May 2018)
|
Sarit Sagiv (1)(2) |
53 |
Director |
Eitan Oppenhaim
|
56 |
Director, President and Chief Executive Officer |
Dror David
|
52 |
Chief Financial Officer |
Shay Wolfling
|
50 |
Chief Technology Officer |
Adrian S. Wilson |
50 |
President of US subsidiary & General
Manager Material Metrology Division |
Effi Aboody |
51 |
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 committee |
As of December 31, |
2019(*)
|
2020(*)
|
2021(*)
|
|||||||||
Total Personnel |
646 |
713 |
819 |
|||||||||
Located in Israel |
349 |
385 |
428 |
|||||||||
Located abroad |
297 |
328 |
391 |
|||||||||
In operations |
108 |
129 |
176 |
|||||||||
In research and development |
251 |
300 |
328 |
|||||||||
In global business |
247 |
263 |
240 |
|||||||||
In general and administration |
40 |
49 |
75 |
Name |
Number of Ordinary
Shares Beneficially
Owned |
Percentage of Ordinary
Shares
Beneficially Owned |
||||||
Wasatch Advisors Inc.
(1) |
2,651,946 |
9.28 |
% | |||||
Migdal Insurance & Financial Holdings Ltd.
(2) |
1,939,093 |
6.78 |
% | |||||
Harel Insurance Investments & Financial Services Ltd.
(3) |
1,890,099 |
6.61 |
% | |||||
Menora Mivtachim Holdings Ltd.
(4) |
1,730,937 |
6.06 |
% | |||||
FMR LLC (5)
|
1,514,015 |
5.30 |
% |
(1) |
The information is based upon Amendment
no. 2 Schedule 13G filed with the SEC by Wasatch Advisors Inc. on February 10, 2022 regarding holdings as of December 31, 2021.
|
(2) |
The information is based upon Schedule 13G filed with the
SEC by Migdal Insurance & Financial Holdings Ltd. on February 2, 2022 regarding
holdings as of December 31, 2021. |
(3) |
The information is based upon Amendment no. 8 to Schedule
13G filed with the SEC by Harel Insurance
Investments & Financial Services Ltd. on January 31, 2022 regarding
holdings as of December 31, 2021. |
(4) |
The information is based upon Amendment no. 4 to Schedule
13G 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 10, 2022 regarding
holdings as of December 31, 2021. |
(5) |
The information is based upon Schedule 13G filed with the
SEC by FMR LLC, its subsidiaries and Abigail P. Johnson on February 10, 2022 regarding
holdings as of December 31, 2021. |
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 the 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. |
• |
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. |
2020 |
2021 |
|||||||
Audit Fees |
586,000 |
570,000 |
||||||
Tax Fees |
89,000 |
64,000 |
||||||
Other Fees |
125,000 |
314,000 |
||||||
Total |
800,000 |
948,000 |
|
Page
|
F-3 - F-5
|
|
F-6
|
|
F-7
|
|
F-8
|
|
F-9
|
|
F-10
|
|
F-11 - F-35
|
|
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 $78.7 million as of December 31, 2021. 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.
|
/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 1
|
2 0 2 0
|
|||||||
ASSETS
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
|
|
||||||
Short-term interest-bearing bank deposits
|
|
|
||||||
Marketable securities (Note 3)
|
|
|
||||||
Trade accounts receivable, net of allowance of $
|
|
|
||||||
Inventories (Note 4)
|
|
|
||||||
Other current assets (Note 5)
|
|
|
||||||
Total current assets
|
|
|
||||||
Non-current assets
|
||||||||
Marketable securities (Note 3)
|
|
|
||||||
Interest-bearing bank deposits
|
|
|
||||||
Restricted interest-bearing bank deposits
|
|
|
||||||
Deferred tax assets (Note 14)
|
|
|
||||||
Severance pay funds (Note 9)
|
|
|
||||||
Operating lease right-of-use assets (Note 11)
|
|
|
||||||
Property and equipment, net (Note 6)
|
|
|
||||||
Intangible assets, net (Note 7)
|
|
|
||||||
Goodwill
|
|
|
||||||
Other long-term assets
|
|
|
||||||
Total non-current assets
|
|
|
||||||
TOTAL ASSETS
|
|
|
||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Current liabilities
|
||||||||
Convertible senior notes, net (Note 10)
|
|
|
||||||
Trade accounts payable
|
|
|
||||||
Deferred revenues
|
|
|
||||||
Operating lease current liabilities (Note 11)
|
|
|
||||||
Other current liabilities (Note 8)
|
|
|
||||||
Total current liabilities
|
|
|
||||||
Non-Current liabilities
|
||||||||
Convertible senior notes, net (Note 10)
|
|
|
||||||
Accrued severance pay (Note 9)
|
|
|
||||||
Operating lease long-term liabilities (Note 11)
|
|
|
||||||
Other long-term liabilities
|
|
|
||||||
Total non-current liabilities
|
|
|
||||||
Commitments and contingencies (Note 12)
|
||||||||
TOTAL LIABILITIES
|
|
|
||||||
SHAREHOLDERS’ EQUITY (Note 13)
|
||||||||
Ordinary shares (Note 1):
December 31, 2021, no par value - Authorized
December 31, 2020, NIS
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Accumulated other comprehensive income (loss)
|
(
|
)
|
|
|||||
Retained earnings
|
|
|
||||||
Total shareholders’ equity
|
|
|
||||||
Total liabilities and shareholders’ equity
|
|
|
Year ended December 31,
|
||||||||||||
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
||||||||||
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
|
|
|
|
|||||||||
Amortization of intangible assets (Note 7)
|
|
|
|
|||||||||
Total operating expenses
|
|
|
|
|||||||||
Operating income
|
|
|
|
|||||||||
Financial income (expense), net (Note 17)
|
(
|
)
|
|
|
||||||||
Income before taxes on income
|
|
|
|
|||||||||
Income tax expenses
|
|
|
|
|||||||||
Net income
|
|
|
|
|||||||||
Earnings per share:
|
||||||||||||
Basic
|
|
|
|
|||||||||
Diluted
|
|
|
|
|||||||||
Shares used in calculation of earnings per share:
|
||||||||||||
Basic
|
|
|
|
|||||||||
Diluted
|
|
|
|
Year ended December 31,
|
||||||||||||
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
||||||||||
Net income
|
|
|
|
|||||||||
Other comprehensive income, net of tax:
|
||||||||||||
Available-for-sale investments (Note 3):
|
||||||||||||
Unrealized gain (loss) on available-for-sale marketable securities, net
|
(
|
)
|
|
|
||||||||
Cash flow hedges (Note 16):
|
||||||||||||
Unrealized gain from cash flow hedges
|
|
|
|
|||||||||
Less: reclassification adjustment for net loss included in net income
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Other comprehensive income (loss)
|
(
|
)
|
|
|
||||||||
Total comprehensive income
|
|
|
|
|
|
Ordinary Shares
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated Other
Comprehensive Income (Loss)
|
|
|
Retained
Earnings
|
|
|
Total Shareholders'
Equity
|
|
|||||||||
|
|
Number
|
|
|
Amount
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2019
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(
|
)
|
|
$
|
|
|
|
$
|
|
|
Issuance of shares upon exercise of options
|
|
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Issuance of shares upon vesting of RSU
|
|
|
|
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Share based compensation
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share repurchase at cost
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
(
|
)
|
Other comprehensive income
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 income (loss)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
(
|
)
|
|
|
|
|
|
|
(
|
)
|
Net income
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|||||||||
|
|
2 0 2 1
|
|
|
2 0 2 0
|
|
|
2 0 1 9
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|||
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of property 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in short-term and long-term interest-bearing bank deposits
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
(
|
)
|
Investment in marketable securities
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
Proceed from maturities of marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property 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
|
|
|
|
|||||||||
Purchases of treasury shares
|
|
|
|
|
|
|
(
|
)
|
|
|
(
|
)
|
Proceeds from exercise of options
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
|
|
|
|
|
|
|
|
(
|
)
|
Effect of exchange rate fluctuations on cash and cash equivalents
|
|
|
|
|
||||||||
Increase (decrease) in cash and cash equivalents
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - beginning of year
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - 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
|
C. |
Financial Statements in U.S. Dollars
|
D. |
Cash and Cash Equivalents
|
E. |
Short Term Bank Deposit
|
F. |
Marketable Securities
|
G. |
Trade Accounts Receivables
|
H. |
Business Combination
|
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 and Equipment
Property 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
|
Weighted Average Useful Life (Years)
|
|
Technology (*)
|
|
Customer relationships
|
|
IPR&D (*)
|
|
L. |
Impairment of Long-Lived Assets
|
M. |
Accrued Warranty Costs
|
N. |
Derivative Financial Instruments
|
O. |
Leases
|
P. |
Convertible Senior Notes
|
See note 2X regarding the adoption of a new accounting pronouncement as of January 1, 2022.
Q. |
Revenue Recognition
|
R. |
Research and Development
|
S. |
Income Taxes
|
T. |
Share-Based Compensation
|
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
|||
Risk-free interest rate
|
|
|
|
||
Expected term of options
|
|
|
|
||
Expected volatility
|
|
|
|
||
Expected dividend yield
|
|
|
|
U. |
Earnings per Share
|
V. |
Concentrations of Credit Risk
|
W. |
Fair Value Measurements
|
X. |
New Accounting Pronouncements
|
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, 2021, were $
The Company had no proceeds from sales of available-for sale, marketable securities during the year ended December 31, 2021, therefore no realized gains or losses from the sale of available for sale marketable securities were recognized.
NOTE 4 - INVENTORIES
A. |
Composition:
|
As of December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
Raw materials
|
|
|
||||||
Service inventory
|
|
|
||||||
Work in process
|
|
|
||||||
Finished goods
|
|
|
||||||
|
|
B. |
In the years ended December 31, 2021, 2020 and 2019, the Company wrote down inventories in a total amount of $
|
NOTE 5 - OTHER CURRENT ASSETS
As of December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
Governmental institutions
|
|
|
||||||
Prepaid expenses
|
|
|
||||||
Other
|
|
|
||||||
|
|
NOTE 6 - PROPERTY AND EQUIPMENT, NET
As of December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
Cost:
|
||||||||
Electronic equipment
|
|
|
||||||
Office furniture and equipment
|
|
|
||||||
Leasehold improvements
|
|
|
||||||
|
|
|||||||
Accumulated depreciation:
|
||||||||
Electronic equipment
|
|
|
||||||
Office furniture and equipment
|
|
|
||||||
Leasehold improvements
|
|
|
||||||
|
|
|||||||
Net book value
|
|
|
Depreciation expenses amounted to $
As of December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
Original amount:
|
||||||||
Technology
|
|
|
||||||
Customer relationships
|
|
|
||||||
|
|
|||||||
Accumulated amortization:
|
||||||||
Technology
|
|
|
||||||
Customer relationships
|
|
|
||||||
|
|
|||||||
Net book value
|
|
|
|
Year ended December 31,
|
|||||||||||
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
||||||||||
Technology
|
|
|
|
|||||||||
Customer relationships
|
|
|
|
|||||||||
|
|
|
NOVA LTD.
Annual amortization expenses are expected as follows:
Year ending December 31,
|
||||
2022
|
|
|||
2023
|
|
|||
2024
|
|
|||
|
As of December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
Accrued salaries and fringe benefits
|
|
|
||||||
Accrued warranty costs (See B below)
|
|
|
||||||
Governmental institutions
|
|
|
||||||
Other
|
|
|
||||||
|
|
As of December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
Other current liabilities
|
|
|
||||||
Other long-term liability
|
|
|
||||||
|
|
As of December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
Balance as of beginning of year
|
|
|
||||||
Services provided under warranty
|
(
|
)
|
(
|
)
|
||||
Changes in provision
|
|
|
||||||
Balance as of end of year
|
|
|
NOVA LTD.
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.
|
NOVA LTD.
As of December 31,
|
||||||||
Liability component:
|
2 0 2 1
|
2 0 2 0
|
||||||
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 1
|
2 0 2 0
|
|||||||
Amortization of debt discount
|
|
|
||||||
Amortization of debt issuance costs
|
|
|
||||||
Total financial expense recognized
|
|
|
NOVA LTD.
Year
|
||||
2022
|
|
|||
2023
|
|
|||
2024
|
|
|||
2025
|
|
|||
2026
|
|
|||
2027 and thereafter
|
|
|||
Total lease payments
|
|
|||
Less imputed interest
|
(
|
)
|
||
Total
|
|
Operating cash flows for operating leases amounted to $
A. |
Rights of Shares: |
B. |
Share Repurchase: |
C. |
Equity Based Incentive Plans: |
Year ended December 31,
|
||||||||||||
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
||||||||||
Cost of Revenues:
|
||||||||||||
Product
|
|
|
|
|||||||||
Service
|
|
|
|
|||||||||
Research and Development
|
|
|
|
|||||||||
Sales and Marketing
|
|
|
|
|||||||||
General and Administrative
|
|
|
|
|||||||||
Total
|
|
|
|
Shares Options
Summary of the status of the Company’s share option plans as of December 31, 2021, as well as changes during the year then ended, is presented below:
2021
|
||||||||
Share
Options
|
Weighted Average
Exercise Price
|
|||||||
Outstanding - beginning of year
|
|
|
||||||
Granted
|
|
|
||||||
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.
NOVA LTD.
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)
|
|||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
2021
|
||||||||
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 2021, 2020 and 2019 was $
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.
NOVA LTD.
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.
NOVA LTD.
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
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 - 30
NOVA LTD.
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. Significant components of the deferred tax assets are as follows:
As of December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
Deferred tax assets:
|
||||||||
Net operating loss carryforwards
|
|
|
||||||
Tax credits carryforward
|
|
|
||||||
Reserve and allowances
|
|
|
||||||
Operating lease liabilities, net
|
|
|
||||||
Deferred tax assets before valuation allowance
|
|
|
||||||
Valuation Allowance
|
(
|
)
|
(
|
)
|
||||
Deferred tax assets after valuation allowance
|
|
|
||||||
Deferred tax liabilities:
|
||||||||
Convertible senior notes
|
(
|
)
|
(
|
)
|
||||
Intangible assets
|
(
|
)
|
(
|
)
|
||||
Reserve and allowances
|
(
|
)
|
|
|||||
Deferred tax liabilities
|
(
|
)
|
(
|
)
|
||||
Deferred tax assets
|
|
|
Long-term deferred tax assets:
Year ended December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
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.
F - 31
NOVA LTD.
F. |
Income before taxes on income included in the consolidated statements of operations:
|
|
Year ended December 31,
|
|||||||||||
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
||||||||||
Domestic
|
|
|
|
|||||||||
Foreign (mainly US)
|
|
|
|
|||||||||
|
|
|
G. |
Income tax expenses (tax benefits) included in the consolidated statements of operations:
|
|
Year ended December 31,
|
|||||||||||
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
||||||||||
Domestic
|
|
|
|
|||||||||
Foreign (mainly US)
|
|
|
(
|
)
|
||||||||
|
|
|
||||||||||
Current
|
|
|
|
|||||||||
Deferred
|
(
|
)
|
(
|
)
|
|
|||||||
|
|
|
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 1
|
2 0 2 0
|
2 0 1 9
|
||||||||||
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
|
|
|
|
F - 32
NOVA LTD.
I. |
Effective Tax Rates:
|
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.
The Company’s effective tax rates differ from the statutory rates applicable to the Company for tax year 2020, primarily due to tax credits and foreign derived 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.
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 1
|
2 0 2 0
|
|||||||
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*
|
|
|
F - 33
NOVA LTD.
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
A. |
Sales by Geographic Area (as Percentage of Total Sales):
|
Year ended December 31,
|
||||||||||||
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
||||||||||
%
|
%
|
%
|
||||||||||
Taiwan, R.O.C.
|
|
|
|
|||||||||
USA
|
|
|
|
|||||||||
China
|
|
|
|
|||||||||
Korea
|
|
|
|
|||||||||
Other
|
|
|
|
|||||||||
Total
|
|
|
|
B. |
Sales by Major Customers (as Percentage of Total Sales): |
Year ended December 31,
|
||||||||||||
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
||||||||||
%
|
%
|
%
|
||||||||||
Customer A
|
|
|
|
|||||||||
Customer B
|
|
|
|
|||||||||
Customer C
|
|
|
|
C. |
Long-lived assets by geographic location:
|
As of December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
%
|
%
|
|||||||
Israel
|
|
|
||||||
US
|
|
|
||||||
Other
|
|
|
||||||
Total long-lived assets (*)
|
|
|
NOVA LTD.
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 1
|
2 0 2 0
|
2 0 2 1
|
2 0 2 0
|
|||||||||||||
Derivatives designated as hedging instruments in cash flow hedge
|
|
|
|
|
Year ended December 31,
|
||||||||||||
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
||||||||||
Loss (gain) on derivative instruments
|
$
|
|
$
|
|
$
|
|
Year ended December 31,
|
||||||||||||
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
||||||||||
Interest income
|
|
|
|
|||||||||
Financial expense related to the Convertible Senior Notes (Note 10)
|
(
|
)
|
(
|
)
|
|
|||||||
Exchange rate loss, net
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Bank charges
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Total
|
(
|
)
|
|
|
F - 35
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 |