[PPT] - Investors Presentation Cautionary Statement Regarding Forward PowerPoint Presentation

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Investors Presentation

March 2019

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Forward Looking Statements

Cautionary Statement Regarding

his presentation includes statements that constitute forward-looking statements within the meaning of safe harbor provisions of the Private Securities Litigation Reform Act of 1995 relating to future events or our future performance, such as statements regarding, but are not limited to, anticipated growth opportunities and projections about our business and its future revenues, expenses and profitability. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied in those forward- looking statements. You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are in some cases beyond

ur

control. Factors that may affect

ur

results, performance, circumstances or achievements include, but are not limited to the following: our dependency on three product lines; our dependency on a small number of large customers and small number of suppliers; the highly cyclical and competitive nature of the markets we target and we operate in;

ur inability to reduce spending during a slowdown in the semiconductor

industry; our ability to respond effectively on a timely basis to rapid technological changes;; our dependency on PEMs; risks related to exclusivity

bligations and non-limited liability that may be included in our commercial

agreements and arrangements; our ability to retain our competitive position despite the ongoing consolidation in our industry; risks related to our dependence on our manufacturing facilities; risks related to changes in our

rder backlog; risks related to efforts to complete and integrate current and/or

future acquisitions; risks related to the worldwide financial instabilities; risks related to

ur

intellectual property; new product

fferings

from

ur

competitors; unanticipated manufacturing or supply problems; risks related to government programs we participate in; risks related to taxation; changes in customer demand for our products; risks related to currency fluctuations; risks related to technology security threats and changes in privacy laws; risks related to acquisitions we may pursue and risks related to our operations in

Israel. We cannot guarantee future results, levels of activity, performance or
achievements. The matters discussed in this presentation also involve risks

and uncertainties summarized under the heading “Risk Factors” in Nova’s most recent Annual Report on Form 20-F for the year ended December 31, 2018 filed with the Securities and Exchange Commission on February 28,

2019. These factors are updated from time to time through the filing of

reports and registration statements with the Securities and Exchange

Commission. Any forward-looking statements contained in this presentation

are made as of the presentation date and Nova Measuring Instruments Ltd. is under no obligation to revise or update these forward-looking statements. This following presentation includes financial measures that are not calculated in accordance with generally accepted accounting principles (GAAP). The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Nova's earning release, including a presentation of the most directly comparable financial measures calculated and presented in accordance with GAAP and a reconciliation of each GAAP to non-GAAP financial measure discussed in the presentation is available at the Investors section of the company’s website. Certain of the information contained herein concerning economic trends and performance is based upon or derived from information provided by third party consultants and other industry sources. We have not independently verified and cannot assure the accuracy of any data obtained by or from these sources.

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KEY

Facts

Leading Metrology Innovator for Advanced Process Insight

DUAL-LISTED EMPLOYEES GLOBAL PRESENCE TECHNOLOGIES METROLOGY R&D SITES PROFITABLE GROWTH NASDAQ / TASE 650 World wide offices Optical & X-Ray Dimensions & Materials USA & Israel Revenue Growth 5Y CAGR – 18% Operating Income Growth 5Y CAGR – 37% Cash Reserves ~$180M

Non-GAAP Financials

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Success Tied to

Customers’ partnership Diversified Portfolio Disruptive technologies Solid financial model X-ray & Optical Dimensions & Materials Coupling SW & HW Emerging Metrology needs Operational efficiency Growth by investment Development to Manufacturing Joint development programs

Revenue Operating expenses Operating income

$112 $149 $251 2013 2015 2018 $45 $59 $79 2013 2015 2018 $14 $22 $68 2013 2015 2018 In Million $ In Million $ In Million $

Non-GAAP Financials

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SLIDE 5 Q1 $63 Q2 $62 Q3 $64 Q4 $60

$121 $149 $164 $222 $248

2014 2015 2016 2017 2018

Record High

18% CAGR 5 Years

2018 Highlights

Revenue Growth +13% YoY Elevated R&D Investment Operating Margin - 27% Revenue Contribution:

Segments Territories

In Million $

Non-GAAP Financials

50%

Memory

Healthy Mix

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Innovative

Optical / X-Ray Semiconductor Segments Dimensions / Materials Parameters

10um Pad 5nm Pitch 0.5Å Precision 300mm Wafer

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Unique Complementary

Software

Physical & Mathematical Models Fleet Management Hybrid Ecosystem

Dimensional

Integrated & Standalone Optical CD Film Thickness

Materials

Standalone Materials Metrology

Services

Install Base Features and Upgrades 7

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Interlacing HW & SW solutions

CMP Deposition ETCH Lithography FLEET MANAGEMENT

Hybrid Metrology Physical Models

NOVA MARS

Complementary Models

NOVA Fit

Inline Monitor Train & Retrain Open Eco System

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Digital

Semi Market Wafer Capacity

2000 2010 2020 2025

Internet Mobile Internet Connected World Data Economy

Connectivity Mobility Productivity Veracity

2017

60B GB 40% Human 9

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Multi Catalysts for Semiconductors Demand

Smart Cities

25%

CAGR Smart Sensors

30%

CAGR AI

50%

CAGR Cryptonomy

30%

CAGR Smart Industry

1 PB

Per day Autonomous Vehicle

4 TB

Per Car Per Day AR / VR

70%

CAGR

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GROWING Demand for Data Management & Computing Power

Data Management Network Infrastructure Beyond Capacity Connected Sensors

Semi Growth

Smart Sensors Smart Industry Smart City Automotive AI AR / VR 5G Cloud Cryptonomy Smartphones Wearables Robots

Continuous demand for improvement

Performance Density Scaling Cost

Mobile Devices 11

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Requirement Variety

Density Scaling storage (capacity) Energy efficiency Access speed Powerful processing (speed)

10,000 100 1 0,01 0,0001 1,000 100 1 0,01 0,000 0,0001 0,01 1 100 10,000 POWER (Watt) DATA STORAGE (Gigabyte) DATA RATE (Giga operations/sec)

HIGH PREFORMANCE MOBILITY IoT SENSORS

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Growth Beyond Demand

Metrology Intensity Complexity

Planar FinFet Nano-Wires Planar NAND VNAND Gen-1 VNAND Gen-x DRAM Gen-1 DRAM Gen-X DRAM Gen-Y

METROLOGY INTENSITY

Scaled Devices 3D Profiles Multiple Parameters Thinner Films

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Composition Stress Strain Doping Chemical State

Unique Differentiation Parameters Variety Expanded TAM Reduce Leakage & Increase performance

Beyond Architectural Changes

48 Elements 26 Elements 13 Elements

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Enabled by Materials

CHALLENGES TECHNOLOGY

Future NVM

MRAM Xpoint RRAM FeRAM

Floating Gate

BEYOND TRADITIONAL DIMENSIONAL SCALING

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Endurance High Program V MLC Cross talk Charge stability TLC Charge density Bit density TLC Bit Density TLC Bit Density Channel resistance QLC

Planar Floating Gate NAND High K Blocking Oxide Doped Floating Gate Tunnel oxides Charge Trap layers ALD gate Staircase etch Tunnel Oxides Charge Trap Layers ALD gate Carbon Hard Masks Tunnel Oxides Charge Trap Layers ALD gate Barrier metal Next-gen hard mask

METROLOGY Needs

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Low Voltages Fast clock cycles Multiple Low VT Off state leakage Low drive current Electro migration fails Low VT Stability Short channel fails Off state leakage Drive Current SD resistance

Poly SiON Gate Stack Strained Silicon High K Metal Gate Strained Silicon B doping Cobalt EM capping FinFets Replacement HKMG Annealed HK Gate dopants Cobalt Contacts Advanced ALD

Future Designs

Gate All Around 3D Transistors CFETS

Enabled by Materials

Metrology Needs CHALLENGES TECHNOLOGY

BEYOND TRADITIONAL DIMENSIONAL SCALING

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From Nova200 to

300

Reaching revenues

f $300M organically

Share Gains TAM Expansion Disruptive Innovation M&A

Dimensional Metrology Services M&A Materials Metrology $300M $200M $100M

Inorganic Process Control > $50M Organic

$300M

2012 2017 Target

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Customers Segments Mix Nodes Technology Geography Increasing Market Share while Expanding TAM

Diversification

Why do we CONTINUE GROWING?

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Diversification -

Product Revenues Customer Mix

Target Model

5 Large Customers Additional Memory Customers IDM Penetration

TSMC 40% GLOBAL FOUNDRIES 25% Other 35%

2014

Foundry Exposure 2 major customers

TSMC 15% SAMSUNG 15% HYNIX 20% HUALI 10% Other 30% Micron 10%

2018

Memory Growth 5 major customers 19

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Diversification -

2014 2018

Segment Mix

Memory versus foundry / Logic

Target Model

Segments Balance Memory Growth Foundry leadership

Non-GAAP Financials

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Diversification -

Target Model

Balanced Territory 3 Large Territories

Regional Mix

Taiwan 45% USA 25% Korea 10% Other 20%

2014

Taiwan Exposure

Korea 35% Taiwan 20% China 30% Other 15%

2018

Diversified Territory Mix 21

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Diversification -

18% 28% 27%

2016 2017 2018

$34 $38 $44

2016 2017 2018

R&D Investment

(in Million $)

Operating Margin

From single tool to Fleet approach - infrastructure Invest in Sustaining and Disruptive innovation Compete with unique Coupled HW & SW solutions lead the Emerging Metrology markets

X-RAY OPTICAL CONVOLUTION ADVANCED SW CAPABILITIES LAB TO FAB TECHNOLOGIES MTROLOGY ECOSYSTEM MATERIALS ENGINEERING 22

Non-GAAP Financials

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Advanced Nodes - 56%

Nova Performance by Tech-Node

$M 2014 2018

MIX nodes Trailing & Advanced

Diversification –

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Share in Growing Markets

Unique Value

Displacing Other Technologies Emerging Applications Disruptive Innovation

Addressable Market

(In Million $)

Market Share

Expanding TAM Gaining Market Share

$1,200

2014 2017 $300M model

25%

2014 2017 $300M model

>

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2014 2016 2018

Revenue ($M) Operating Profit ($M) Earnings Per Share ($)

2014 2016 2018 2014 2016 2018 25

Non-GAAP Financials

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5 Years CAGR (2013-2018)

Non-GAAP Financials

5 Years Growth

Achieved 3X CAGR

ver Process Control

Grew operating income at 2X Revenue CAGR Generated ~$150M in Free Cash Flow Process Control Nova Revenue Nova Op Inc

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& Operating Margins

2014 2018

Gross Margin (%) Operating Margin(%) Nova 300 Model Nova300 Model

2014 2018 27

Non-GAAP Financials

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Solid Track Record

Revenue Growth $M

Revenue Doubled

Every 5 Years

Expanded technology base driving TAM increase Diversified revenue stream driving wider market exposure Solid operational model to support investment $20 $58 $96 $222

2002 2007 2012 2017

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