Nova Ltd. — Interim / Quarterly Report 2008

Aug 5, 2008

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Company Contact:

Dror David, Chief Financial Officer Nova Measuring Instruments Ltd. Tel: 972-8-938-7505 E-mail: info@nova.co.il http://www.nova.co.il

Investor relations Contacts:

Ehud Helft / Kenny Green GK Investor Relations Tel: +1-646-201-9246 E-mail: info@gkir.com

Company Press Release

NOVA ANNOUNCES 2008 SECOND QUARTER RESULTS

Rehovot, Israel - August 5, 2008 - Nova Measuring Instruments Ltd. (Nasdaq: NVMI) , provider of leading edge stand alone metrology and the market leader of integrated metrology solutions to the semiconductor process control market, today reported its 2008 second quarter financial results.

Highlights for the Second Quarter of 2008

• Total revenues of $11.1 million

• Gross margin of 39%; Improvement in services gross margins

• Non-GAAP net loss of $0.5 million, or $0.02 per share; GAAP net loss of $1.3 million, or $0.07 per share (including $0.6 million final non-cash impairment charge related to Hypernex acquisition)

• Final acceptance of Stand Alone Optical CD systems at two different Fabs in the Asia Pacific region

• Placement of additional two Stand Alone Optical CD evaluation systems in the Asia Pacific and Japan regions

2008 Second Quarter Results

Total revenues for the second quarter of 2008 were $11.1 million, a decrease of 25% relative to the second quarter of 2007, and a decrease of 13% relative to the first quarter of 2008.

Gross margin for the second quarter of 2008 was 39%, compared with 46% in the second quarter of 2007, and compared with 40% in the first quarter of 2008. Gross margins declined mainly as a result of the lower product revenues.

Operating expenses in the second quarter of 2008 were $5.7 million, compared with $5.9 million in the second quarter of 2007, and $5.3 million in the first quarter of 2008. Operating expenses for the

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second quarter of 2008 included $0.6 million final non-cash impairment charge related to its Hypernex acquisition.

On a GAAP basis, the company reported $1.3 million net loss in the second quarter of 2008, or $0.07 per share. This compares to a net income of $1.1 million, or $0.05 per diluted share, for the second quarter of 2007, and breakeven results for the first quarter of 2008.

On a non-GAAP basis, which excludes stock-based compensation, amortization of intangibles and impairment charges, the company reported net loss of $0.5 million, or $0.02 per share, for the second quarter of 2008. This compares with a non-GAAP net income of $1.4 million, or $0.07 per diluted share, in the second quarter of 2007, and a non-GAAP net income of $0.2 million, or $0.01 per diluted share, in the first quarter of 2008.

The company generated $1.6 million in positive cash flow from operating activities during the second quarter of 2008, and total cash reserves at the end of the second quarter of 2008 increased to $21.5 million.

Management Comments

“In view of the downturn being experienced by our industry, our on going cost control measures continued to prove their effectiveness in the current quarter”, said Gabi Seligsohn, President and CEO of Nova. “We are continuing to make progress with our penetration of the Stand Alone Optical CD market. During the quarter we concluded successful stand alone evaluations at two different Fabs, and we are now beginning to recognize revenues from the sales of these systems. In parallel to this success, proving the strong capabilities and the growing interest for our stand alone metrology products, we placed new evaluation systems at two additional customer sites.”

“Although the current weak market conditions appear likely to persist until the end of the year, we are taking advantage and enhancing our market position by developing new applications and penetrating new customers. We believe that our strong execution and tight cost controls, combined with our solid progress in the Stand Alone Optical CD area, will help us to outperform the industry, and emerge from the downturn a stronger Company, with improved revenue mix and customer presence, and a broader suite of products and applications.”

The Company will host a conference call today, August 5, 2008, at 11:00am ET. To participate, please dial in the US: 1-866-345-5855; or internationally: +972 3 918 0610. A recording of the call will be available on Nova’s website, within 24 hours following the end of the call.

In addition, the conference call will also be webcast live from a link on Nova’s website at www.nova.co.il.

This press release provides financial measures that exclude non-cash charges for inventory writeoff, stock-based compensation and impairment charges and are therefore not calculated in accordance with generally accepted accounting principles (GAAP). Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding Nova's performance because they reflect our operational results and enhances management's and investors'

ability to evaluate Nova's performance before charges considered by management to be outside Nova's ongoing operating results.

The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Management believes that it is in the best interest of its investors to provide financial information that will facilitate comparison of both historical and future results and allows greater transparency to supplemental information used by management in its financial and operational decision making. A reconciliation of each GAAP to non-GAAP financial measure discussed in this press release is contained in the accompanying financial tables.

About Nova

Nova Measuring Instruments Ltd. develops, produces and markets advanced integrated and stand alone metrology solutions for the semiconductor manufacturing industry. Nova is traded on the NASDAQ & TASE under the symbol NVMI. The Company's website is www.nova.co.il.

This press release contains forward-looking statements within the meaning of safe harbor provisions of the Private Securities Litigation Reform Act of 1995 relating to future events or our future performance, such as statements regarding trends, demand for our products, expected deliveries, transaction, expected revenues, operating results, earnings 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. These risks and other factors include but are not limited to: our dependency on a single integrated process control product line; the highly cyclical nature of the markets we target; our inability to reduce spending during a slowdown in the semiconductor industry; our ability to respond effectively on a timely basis to rapid technological changes; risks associated with our dependence on a single manufacturing facility; our ability to expand our manufacturing capacity or marketing efforts to support our future growth; our dependency on a small number of large customers and small number of suppliers; risks related to our intellectual property; changes in customer demands for our products; new product offerings from our competitors; changes in or an inability to execute our business strategy; unanticipated manufacturing or supply problems; changes in tax requirements; changes in customer demand for our products; risks related to currency fluctuations and risks related to our operations in Israel. We cannot guarantee future results, levels of activity, performance or achievements. The matters discussed in this press release also involve risks and uncertainties summarized under the heading ``Risk Factors’’ in Nova’s Annual Report on Form 20-F for the year ended December 31, 2007 filed with the Securities and Exchange Commission on March 28, 2008, as amended. These factors are updated from time to time through the filing of reports and registration statements with the Securities and Exchange Commission. Nova Measuring Instruments Ltd. does not assume any obligation to update the forward-looking information contained in this press release.

(Tables to Follow)

NOVA MEASURING INSTRUMENTS LTD. CONSOLIDATED BALANCE SHEET

(U.S. dollars in thousands)

CURRENT ASSETSCash and cash equivalentsShort-term interest bearing bank depositsHeld to maturity securitiesTrade accounts receivableInventoriesOther current assetsLONG-TERM ASSETSLong-term interest-bearing bank depositsLong-term investmentsHeld to maturity securitiesOther Long-term assetsSeverance pay fundsFIXED ASSETS, NETTotal assetsCURRENT LIABILITIESTrade accounts payableDeferred incomeOther current liabilitiesLONG-TERM LIABILITIESLiability for employee severance payDeferred incomeOther long-term liabilitySHAREHOLDERS' EQUITYTotal liabilities and shareholders' equity	CURRENT ASSETSCash and cash equivalentsShort-term interest bearing bank depositsHeld to maturity securitiesTrade accounts receivableInventoriesOther current assetsLONG-TERM ASSETSLong-term interest-bearing bank depositsLong-term investmentsHeld to maturity securitiesOther Long-term assetsSeverance pay fundsFIXED ASSETS, NETTotal assetsCURRENT LIABILITIESTrade accounts payableDeferred incomeOther current liabilitiesLONG-TERM LIABILITIESLiability for employee severance payDeferred incomeOther long-term liabilitySHAREHOLDERS' EQUITYTotal liabilities and shareholders' equity				As ofJune 30,	As ofDecember 31	As ofDecember 31	As ofDecember 31
								,
					2008		2007
					13,744725,8445,0409,4731,905		15,2,9,8,1,
								324--251146524703948245562489169488953484385829610288
					36,078		36,
					6111,240-1692,719		2,1,1,2,
					4,739		7,
					3,091		3,
					43,908		48,
					4,4101,9086,28912,6073,8361,042564,93426,36743,908		7,41,47,3
							16,
							3,9
								610151
								513
							4,
							27,
								584385
							48,

NOVA MEASURING INSTRUMENTS LTD. QUARTERLY CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands, except per share data)

REVENUESProduct salesServicesCOST OF REVENUESProduct salesServicesGROSS PROFITOPERATING EXPENSESResearch & Development expenses, netSales & Marketing expensesGeneral & Administration expensesImpairment loss on equipment related toHypernex assets and liabilities acquisitionOPERATING INCOME (LOSS)INTEREST INCOME, NETNET INCOME (LOSS) FOR THEPERIODNet income (loss) per share:BasicDilutedShares used for calculation of net income (loss)per share:BasicDiluted	Q2-20087,4963,59411,0903,5243,2506,7744,3162,1772,0427976335,649(1,333)66(1,267)(0.07)19,378	Q1-20089,6143,19712,8114,4883,1577,6455,1661,9052,440904-5,249(83)124410.000.0019,33819,541	Q2-200712,1282,68214,8105,5222,5478,0696,7412,2032,5281,159-5,8908512201,0710.060.0518,90419,652

NOVA MEASURING INSTRUMENTS LTD. YEAR TO DATE CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands, except per share data)

REVENUESProduct salesServicesCOST OF REVENUESProduct salesServicesGROSS PROFITOPERATING EXPENSESResearch & Development expenses, netSales & Marketing expensesGeneral & Administration expensesImpairment loss on equipment related to Hypernex assetsand liabilities acquisitionOPERATING INCOME (LOSS)INTEREST INCOME, NETNET INCOME (LOSS) FOR THE PERIODNet income (loss) per share:BasicDilutedShares used for calculation of net income (loss) per share:BasicDiluted	Six-months endedJune 30, 2008June 30, 200717,11022,5716,7915,60623,90128,1778,01210,3906,4075,21314,41915,6039,48212,5744,0824,5364,4824,7261,7013,271633-10,89812,533(1,416)41190389(1,226)430(0.06)0.020.0219,35618,07218,784	Six-months endedJune 30, 2008June 30, 200717,11022,5716,7915,60623,90128,1778,01210,3906,4075,21314,41915,6039,48212,5744,0824,5364,4824,7261,7013,271633-10,89812,533(1,416)41190389(1,226)430(0.06)0.020.0219,35618,07218,784	Six-months endedJune 30, 2008June 30, 200717,11022,5716,7915,60623,90128,1778,01210,3906,4075,21314,41915,6039,48212,5744,0824,5364,4824,7261,7013,271633-10,89812,533(1,416)41190389(1,226)430(0.06)0.020.0219,35618,07218,784
			22,5715,60628,17710,3905,21315,60312,5744,5364,7263,271-12,533413894300.020.0218,07218,784

NOVA MEASURING INSTRUMENTS LTD. QUARTERLY CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

CASH FLOW – OPERATING ACTIVITIESNet income (loss) for the periodAdjustments to reconcile net loss to net cashused in operating activities:Depreciation and amortizationAmortization of deferred stock-basedcompensationIncrease in liability for employee terminationbenefits, netImpairment loss on equipmentNet recognized losses (gains) on investmentsDecrease in trade accounts receivablesDecrease (increase) in inventoriesDecrease (increase) in other current and long termassetsDecrease in trade accounts payables and otherlong term liabilitiesDecrease in current liabilitiesIncrease (decrease) in short and long termdeferred incomeNet cash from (used in) operating activitiesCASH FLOW – INVESTMENT ACTIVITIESDecrease (increase) in short-term interest-bearingbank depositsIncrease in short-term investmentsProceeds from held to maturity securitiesProceeds from long-term depositsInvestment in held to maturity securitiesAdditions to fixed assetsNet cash from (used in) investment activitiesCASH FLOW – FINANCING ACTIVITIESShares issued under employee share-based plansNet cash from financing activitiesIncrease (decrease) in cash and cash equivalentsCash and cash equivalents – beginning of periodCash and cash equivalents – end of period	June 30,2008(1,267)3151556863323,331228758(2,415)(974)7221,557(72)--11,068696(9,654)(183)1,855----3,41210,33213,744	Three months endedMarch 31,2008 4136516459--12775(1,360)(865)(652)(225)(169)(1,854)----2,205938(5,736)(557)(3,150)1212(4,992)15,32410,332	Three months endedMarch 31,2008 4136516459--12775(1,360)(865)(652)(225)(169)(1,854)----2,205938(5,736)(557)(3,150)1212(4,992)15,32410,332	June 30,20071,07145525967--(57)67(239)(181)(1,158)(4,815)3,404(1,127)66(2,177)1,574498(485)(149)(673)397397(1,403)7,6576,254

NOVA MEASURING INSTRUMENTS LTD. YEAR TO DATE CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

CASH FLOW – OPERATING ACTIVITIESNet income (loss) for the periodAdjustments to reconcile net loss to net cashused in operating activities:Depreciation and amortizationAmortization of deferred stock-based compensationIncrease in liability for employee termination benefits, netImpairment loss on equipmentNet recognized losses (gains) on investmentsDecrease in trade accounts receivablesIncrease in inventoriesDecrease (increase) in other current and long term assetsDecrease in trade accounts payables and other long termliabilitiesDecrease in current liabilitiesIncrease in short and long term deferred incomeNet cash used in operating activitiesCASH FLOW – INVESTMENT ACTIVITIESDecrease (increase) in short-term interest-bearing bank depositsIncrease in short-term investmentsProceeds from held to maturity securitiesProceeds from long-term depositsInvestment in held to maturity securitiesAdditions to fixed assetsNet cash used in investment activitiesCASH FLOW – FINANCING ACTIVITIESShares issued in private placementShares issued under employee share-based plansNet cash from financing activitiesIncrease (decrease) in cash and cash equivalentsCash and cash equivalents – beginning of periodCash and cash equivalents – end of period	Six months endedJune 30, 2008June 30, 2007(1,226)43068289231952312771633--13(116)4,1061,523(1,131)(798)(107)71(3,067)(1,330)(1,199)(4,749)5533,321(297)(162)(72)349--(4,777)13,2732,4251,6341,005(15,390)(1,981)(739)(250)(1,295)(3,229)--4,98212487125,469(1,580)2,07815,3244,17613,7446,254	Six months endedJune 30, 2008June 30, 2007(1,226)43068289231952312771633--13(116)4,1061,523(1,131)(798)(107)71(3,067)(1,330)(1,199)(4,749)5533,321(297)(162)(72)349--(4,777)13,2732,4251,6341,005(15,390)(1,981)(739)(250)(1,295)(3,229)--4,98212487125,469(1,580)2,07815,3244,17613,7446,254	Six months endedJune 30, 2008June 30, 2007(1,226)43068289231952312771633--13(116)4,1061,523(1,131)(798)(107)71(3,067)(1,330)(1,199)(4,749)5533,321(297)(162)(72)349--(4,777)13,2732,4251,6341,005(15,390)(1,981)(739)(250)(1,295)(3,229)--4,98212487125,469(1,580)2,07815,3244,17613,7446,254
			43089252371--(116)1,523(798)71(1,330)(4,749)3,321(162)349(4,777)2,4251,005(1,981)(250)(3,229)4,9824875,4692,0784,1766,254

NOVA MEASURING INSTRUMENTS LTD. DISCLOSURE OF NON-GAAP NET INCOME (LOSS)

(U.S. dollars in thousands, except per share data)

June 30,2008GAAP Net income (loss) for the quarter(1,267)Non-GAAP Adjustments:Stock based compensation expenses155Amortization of intangible assets--Impairment loss on equipment related toHypernex assets and liabilities acquisition633Non-GAAP Net income (loss) for the quarter(479)Non-GAAP net income (loss) per share:Basic(0.02)DilutedShares used for calculation of non-GAAP netincome (loss) per share:Basic19,378DilutedGAAP Net income (loss) for the quarterNon-GAAP Adjustments:Stock based compensation expensesAmortization of intangible assetsImpairment loss on equipment related toHypernex assets and liabilities acquisitionNon-GAAP Net income (loss) for the quarterNon-GAAP net income (loss) per share:BasicDilutedShares used for calculation of non-GAAP netincome (loss) per share:BasicDiluted	Three months endedMarch 31,2008June 30,2007411,071164259--109----2051,4390.010.080.010.0719,33818,90419,54119,652Six months endedJune 30,2008June 30,2007(1,226)430319523--216633--(274)1,169(0.01)0.060.0619,35618,07218,784	June 30,
		20071,071259109--1,439