ONTO - Earnings call transcript Q3 2019

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Operator

Good day and welcome to Onto Innovation Third Quarter Earnings Release. Today's conference is being recorded.

At this time, I would like to turn the call over to your Mr. Michael Sheaffer. Please go ahead, sir.

Michael Sheaffer

received company's of a website the is not refer release, copy have release the to at posted. you a the copy please of If ontoinnovation.com where

Officer today Chief the Officer of Roth. the call Plisinski; Steve Financial the Innovation, on Innovation, Michael us Chief Joining Executive of Onto Onto and is

plans, Any expected I comments forward-looking are that not consists facts, particularly the As remind of today is case, always and the matters you the objectives, company's of future regarding to performance need Safe forecast Harbor regulations. statements historical of judgment being best information meaning or summits the Reform available Act the company's are Litigation within whether at Private this of made implied, as currently the Security based time. on XXXX, such and expressed

range be guarantees these cautions assumptions believes results cause recognized of company to a subject be must can materially. wide reasonable, company no it the of Thus, the to that statements that are actual statements vary range are to that these well Within update results that the disclaims however, uncertainties a the XX-K, Nanometrics Rudolph not are and Form may and company's statements do filings latest of described as impact Rudolph's Technologies factors any performance. other the SEC obligation in periodic does for rules. future expressively to so. forward-looking as that Risk

today's A in our reconciliation found between will discussion non-GAAP non-GAAP release. be specified. can results unless financial be otherwise detailed Today's financial GAAP of presented on basis a results and earnings

to Plisinski. And will now Mike, please call I go ahead. the Mike turn over

Michael Plisinski

you today. introduce everyone. our to of Innovation good Onto to afternoon, And all Mike. It's you, Thank pleasure

unlock outstanding markets. of resulted a efficiencies, additional entire new by and the serve strengthening, for value Before That this congratulate broader teamwork we creation opportunities smooth Onto and explore I teamwork begin, technologies for the to across to launch identify the in collectively want our exciting as is operational leveraging company. potential successful complimentary Innovation ultimately which I team

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Now commentary, third second from turning Rudolph Nanometrics make in to quarter July. it to to progression we will cover the quarter perspectives our separately our releases results order in the the earnings individual easier in bridge and from

to a earnings guidance in company and quiet time, conduct period, was reminder, a As we're able provide third at the to calls that neither quarter. for forward-looking

of for quarter the from an statements Following quarter. financial fourth closing with we provide company, the Onto how impacts financial Innovation guidance the for October along each summarized will in explanation fourth results the

the and results the So for let's begin third quarter. with Nanometrics

adding second our as a revenues primarily of quarter revenue channel quarter. high from platform and was the their foundry result, up X% increased nanometers advanced XX in logic prior Atlas with below. in for nodes provide from other the at NAND's Spending growth systems ratio customers our third orders product revenues customers to to optical precise as by holes. and such control quarter over driven of dimensions XX outlined critical as logic earnings XX% capacity were from metrology by aspect and repeat Atlas customers release, product and grew adding more well As foundry million. the grew This devices

strengthen our flat wafer weaker systems support offsetting an a for in Also with across evaluation leading DRAM and requirements memory off tool demanding after Overall the CMP wafer process for by the EUV to control. metrology XD-NAND third integrated wait the NAND memory This for their the selected customer environment. applications. was was quarter-over-quarter extensive was IMPULSE by of quarter,

production begin later to in orders XXXX. expect We

Overall which industry revenue decline XXXX, other memory overall foundry/logic with and WFE. the in XXX% industry, declined revenues outperforming for the while of consistent months XX%, Memory is nine has year-over-year our first device have overall increased the

I'll Steve highlights. now ask financial CFO the to Innovation cover Roth, Onto

Steve Roth

Mike. Thanks,

prepared my let company merged financial I company you the will forward. has how as remarks, historically remind basis will will know begin accounted here result financial on usual to each a new be the I everyone non-GAAP non-GAAP Before will remarks, provided be going want presented and present items. information my I Later discussed our in as for

So, let's begin.

DRAM the By from the resulting million, sales the quarter. revenues of XX% increase mentioned, NAND and were X% Nanometrics' was of quarter. Product XX% decrease segment Mike second an XXXX. XX.X the were revenues comprise XX As flat lower memory with revenues were the XX% third revenues service product which being XX.X an prior million, than a second end-market, And from in and were from of for quarter prior XX% the million, XX% business sales quarter. increase quarter X% the of third essentially quarter

total XX% second addition, contribute In revenue and other devices to the increased to quarter-over-quarter quarter. foundry/logic XX% of in compared

greater customers and or Toshiba five They Hynix, in TSMC. SK representing Intel, XX% were quarter, Samsung, had sales. the Nanometrics third

flat quarter increased contracts that gross was previous lower XXX and by quarter. quarter basis second from Over was offset mainly with lower margin Third points in was to the the increase Product service XX.X%. margins due the margins, service was XX.X% quarter. to

quarter And or $X.XX by R&D sales million per was were XXXX the marketing. in similar XX.X quarter compared with to in third expenses million offset share, increases $X.XX or Operating decreases and the prior X.X second the per and X.X quarter. million for flat with share slight income

The and merger sheet, decreased to primarily investments expenses. cash used balance by Naturally, cash decreases pay driven related XXX.X million. the for to was

Year-to-date global million. infrastructure, previously expenditures technology capital expenditures space. manufacturing the the office and completed most and of information upgrades announced Those were X.X to

I'd to turn over Now, Mike? like the call back to Mike.

Michael Plisinski

you, Thank Steve.

to of at business, revenue quarter. Now historical a turning second representing our million, root came X.X% over XX.X the increase in

strong business over sales grew second driven Our XX% NovusEdge macro of quarter, inspection partially systems. by the

NovusEdge As are applications. targeted leading being silicon by meet control for for manufacturers requirements EUV to adopted wafers a wafer process the evolving reminder, systems

segments five or memory manufacturer additional in packaging stack of power use GX top of that users including an a and Dragonfly gain will for addition, product. their In to continues speed losses through memory gain to the TSVS chips. via reduce type traction between stack package silicon This number XD DRAM advanced

demand measurements the to has with been for pillar XD of the advanced high growing addition and inspection, fidelity and copper memory adoption bumps and devices. micro XD In logic

over the adoption result, of metrology our years, a XD a our three with through CAGR sensors the of over XXXX. increased last As including current forecast XX%

have additional customer from XD XD applications in orders expect orders and We to both XXXX. and this memory taken support

spending second of additional the NAND's added in third said panel We edge JetStep lithography quarter third the XX% in Despite we quarter, for mass control business from decrease volume, our CapEx for was tool the manufacturers improved memory to the declining two in hard metrology again from customers. approximately qualified primarily our clear. due sixth Our down medical the customer quarter.

This of and used next of a X.X-D multi-dye a application. tool for Novel process be development technology generation packaging

by ramp growing for the previously, though expected, production from opportunities well impacted dispute demand number stated of was larger between we we've As the packages than heterogeneous by of number lines United served see continue and This in growing been pilot positive to has slower by the prolonged panel a lithography investments development China format, in as R&D the customers. States. a offset trade

it will Roth to briefly Steve back now cover turn financial highlights. the I to

Steve Roth

Mike. Thanks,

Here third details Technologies. are behind the results quarter of Rudolph the

million also Increases As metrology by slightly from million, and second XX the software. lower inspection lithography revenue our XXXX and businesses X up Mike mentioned, third in partially were quarter XX.X was in quarter.

gross margin margin, the the in XX% quarter. the from second decreased to Moving in XX% our gross quarter

quarter, to and lithography quarter. pressure with adjusted coupled of previous the Software in represented that margins X% the in to in total lower sales XX% metrology sales combined system the compared and

the related expenses, Rudolph's merger exclude details operating continue we of a non-GAAP at expenses, the control maintain Looking basis which over tight are to on spending. our

by down Slight costs Third second quarter million, expenses in R&D were XX.X increases the SG&A. project minor in slightly operating from were offset decreases XX million in quarter.

tax rate higher Net income increase X quarter. primarily to million the driven $X.XX was in and year. the second foreign $X.XX in for X.X gains per or share The was share by million revised the or lower compared slightly exchange per income third net for quarter

XXX quarter was cash million the to XX.X million. turning marketable and securities sheet, for increased to in Now quarter the free our and the balance cash million flow XX.X

While slightly to and due cash we the XX.X expect of expenses merger in cash generator, be be the the new a majority quarter. to significant XXX negative the receivable company fourth to the our quarter million. of will flow flow to payment Cash free increased inventory million declined

the for up on comments wraps my quarter. third That Rudolph

as back some I changes before to over we as couple minutes will forward discuss be I of that take the move would making a now call to financial turn So Mike, Innovation. important like to we Onto

for and Rudolph the a merger agreement, the Nanometrics legal discussed, in is equals. have we Nanometrics acquire merger As the of And of the is transaction. combination

a financial acquire. However, used entity that from be financial And the means historical to the from Rudolph’s accounting perspective, is basis. comparative surviving a will accounting Rudolph be results

as in areas. financial presentation We our basis the also of different conform need two to companies certain

of are such, be will As implementing. we here changes couple a

Rudolph as moved cost have will sold. of it the in We formats gross previous above reporting margin expenses goods included the record aligned be line. to in Certain relates highlights costs our operating

will will X% the of costs historical of the if the result two The might operating the to be to just some expect you net in were gross together. add results margin margin these on approximately compared moved a you by what companies the changes line And Nanometrics overall decrease gross basis, of expenses. combined that

adjust quarters In addition, we stock Nanometrics' to unchanged. result our million The historical income, will moving the remove decrease to new to in with X GAAP expense results impact approximately Rudolph's annually format. of changes X of non-GAAP will forward. in company compared will million in be the remain no consistent presentation non-GAAP results. compensation longer income to operating a affect course will These operating

the Since the but of effect the of important a fourth operations, timing Rudolph's guidance. quarter relates results be October the million million during will on QX the our QX financial guidance results in merger the and will This Nanometrics year. of from factor only quarter XX of the and of date Another full close the in XX, activity to XX the not closing on operating couple approximately expenses minutes. a the merger closed of revenue the Mike end comprised of quarter in that of included provide to in

total be shares. In the to to shares shares will share the outstanding approximately the weighted the fourth average addition, post-merger, of prior shares The the quarter the million XX approximately calculation million us Nanometrics' exclusion be per shares earnings in quarter XX.X while will fourth closing. of

over Mike Mike? that, call With back quarter. on turn for to I'll comments the the next

Michael Plisinski

Steve. again, you Thank

XX%. may the Steve which seen to our approximately declined This Showing year-over-year October XX midpoint, quarter minus release, relative XXXX At for the XXX million from excludes have ago. As range fourth earnings Onto WFE. revenue Innovation you in the already moment combined in pro revenue in plus forecasted Onto we Nanometrics, performance from solid revenue for or of million forma Innovation is expect the discussed a X%.

provided improving further but were prolonged by environment higher, opportunities then, worsened our trade quarter last previously calls, the were since spending impacted than outlook negatively mentioned, as the on with earnings China. first respective we forward-looking expected. as And When expectations dispute rather our memory lithography

XX% margin between gross in In X% by the XX%, impacted product and revenue Steve expect we mix. change this range, discussed to fall

of to fourth Operating to income and in $X.XX. expenses quarter range expenses. million range per which pre-merger million, revenues million Those share produce would be projected expected $X.XX to XX in net then XX of the the in are XX non-GAAP expenses approximately diluted excludes

Similar to see in our investments, fourth particularly benefiting gross has margins provides. in our and unlocking we the the advanced foundry/logic ability what from We're customers, model our betting, driven this increasing by the quarter to by on move operating ways. peers confident combination we at reported spending into synergies as are from the nodes. been are focused We and two this

of Atlas from used first The metrology tool critical III+ dimension advanced is the for growing our measurements. optical adoption

advanced the of The silicon. this second solutions benefiting is process suppliers way we supplying control upstream are to leading

multiple wafers and by provides top product the Onto combination has control manufacturers, fact, lines FTIR wafer Metrology substrate In for silicon the comprehensive advanced process QS monitoring process System EUV a System of targeting Fe processes. two Inspection more the composition Innovation and for This qualified NovaSeq most nodes. suite Series

major announcement technology only in backlog for of interesting underscored process will of we are cooperate, which by around XG from underscores the of power, several look the content acceleration sub-XX-nanometer this in highlighting speed smartphones, EUV and also we solutions to statements not than and an ability the this we will for in XXXX. the have smartphones, in quarter, we for handhelds important the strong up the the leading-edge TSMC, "Since recent which development. The ahead XG technology". to This leads but to of deployment year. higher contributing functionality XG network substantially Meanwhile, increasing note of adoption to growth additional XG is demand our efficiency, be of in optimism to smartphones and XG as world, CapEx our XG speed the NXX ASML for growing that seeing expect year, require technology. demand recent the the from an stepper increase middle critically introduction It's silicon of have smartphones NX TSMC's fourth worldwide been is markets to the This

antenna packaging illustrating Cisco see in in The billion it for package to bit and for continuing carbide-based X.X-D by years, packaging Heterogeneous we continued of full demand Intel’s OS to email XXXX. Likewise, and competitive IDM a with $X will seek Tier to to advanced activities revenue the devices. info technologies, info customers this the number logic, form packages, also designs transformation to differentiation packaging in power they and Foundry Novel increasing and and into driving XG X new of take of as technologies silicon but accelerate, projected requirements gross new is advanced development TSMC development, add through XXXX, packaging addition

In logic for another quarter, the the this fourth increase for XG to digit support growing inspection compared quarter reflects We double of which of XXXX. offsetting increase the events for more revenue expect low and control of growth midpoint single-digit on demand precise enabled these a growing on XX% memory our we investments, in see pro the forma in DRAM and the at process a fourth packaging continued spending We optimism in increase decline in would represent the believe solutions. basis. the foundry, guidance quarter, in fourth devices and resulting decline

DRAM growth in year. next also weakness year XXXX we has in as exacerbated our optimism XXXX, our contribute second to the look impacted a potential DRAM rebound in While the this in expected of would to ahead half

value this are innovations advanced wafer to summary, logic customers and world. devices, new products of technology innovative to Innovation manufacturing, or in opportunities together that and We memory, our across all In changing well chain chain pride semiconductor factors. edge the this release Onto spanning across high leading smaller the come and has form value specialty take recognizing performance as which our as enables helping packaging

us a to excited Onto the I our to to and to the am team. challenges ultimately the made up an that Innovation and our of This individuals opportunities of customers, conclude amazing of I want collection by team part new ahead eager maximize of how shareholders, are team. talented conveying passionate and of solve Onto Innovation our benefit be is

with line that, your will questions. Aaron? we the And for open

Operator

Bolton Thank with And go [Operator Instructions] to you, we’ll Quinn sir. first Needham.

Quinn Bolton

the the have third revenue on the some on Rudolph a and about looked wanted on start results Nanometrics congratulations to of if the would and I I’ve basis nice treatments. you accounting I job at guess, in for quarter, million. standalone with the Hey combination far. guys, $XXX so combined

XX guidance your from hit fourth quarter, plus gets inclusively $XXX the Your million. for XXX NANO midpoint

decline are So, will forma by driven recognized to the that or to transaction? sort be quarter accounting on quarter purchase pro treatment be that there down. of DRAM some that sort of full not are a all the result a Is of revenues able of revenues as full comparison in

Steve Roth

is Quinn, Roth. Hi, Steve this

into numbers. is so deferred So, the purchase yeah, revenue factored in that lost factored revenue, some into accounting, number $XX is that the revenue of million is last

So, pro $XXX million to comparison is accurate your of million the $XXX math. forma

Quinn Bolton

looking the million And combination in their result not been a Understood. to the historical comp includes $XX about stock-based Nanometrics okay. running forward. non-GAAP up backing any included there were had Okay, compensation stock-based compensation company in they then September the into stock-based Nanometrics, of the that OpEx? just $X since quarter that level of Has be results, will the going some of as million about the change

Steve Roth

I and Obviously, hit and that might would integrations, there’s corporate you on, no as change the – number Nanometric work the there’ll we side. on a normally expense impact on be quarterly merger mean, imagine kind the the level. level the on that the of especially because synergies that No, compensation through stock-based overhead can of higher basis hit as some things

and will but So materialize unchanged. those been guidance yeah, basically the going so compensation change as remains number to start their do stock-based basis of Nanometrics be those which giving forward, will more they’ve

Quinn Bolton

number us yeah the for fourth Okay, package a can you service give quarter? and comp

Steve Roth

– that between and basis that six seven, the side ours us. annual would actually, for and So, is then compete our for

I the is it front outside that the was don’t already have $X.X we don’t of number in – of out it We have me. in our historical that okay, about just get the in you results. because break It’s to For out, it’s the numbers. route – right what million was And Quinn, really

Quinn Bolton

Okay. I’ll jump Thank back you. queue. in the

Operator

with Diffely Tom D.A. We’re Instructions] next Davidson. to [Operator going

Thomas Diffely

good Yes, afternoon.

Nanometrics Another lines of question the along level. business the

quarters level business it’s and right below grow XX% or after would that went not a was couple now obviously you thought ago, a before that’s XX%, quiet to So, half-over-half, that. the

just today is, to foundry which quite I difference between is So, portion, was in we or a ramp what the side has bit then truly be well? just back wanted as the logic clarify the to DRAM the kind heard of supposed

Michael Plisinski

decline we the from the has logic – to when XXX and there it’s something up the side DRAM at in we the side again be No, up significantly those numbers Tom. and something the where in not expectations truly and foundry guidance the it’s down DRAM. other look percent, Hi, trailing months, but on enough provided QX, XXX percent, expect quite continuing it to nine offset when come were were

Thomas Diffely

Okay. those X Nanometer, those outs? XX, X the And multi-quarter build are and lines, Nanometer are

Michael Plisinski

yeah, Yes, ramping we QX, ramping and of QX, we saw but a numbers these from some see XXXX. continued QX, lot we are continuing into in for don’t in have

Thomas Diffely

Okay. quarter the the then portion those And Steve, pre-close, expenses fourth NANO numbers? the the excluded also on first are are the from from year model, in

Steve Roth

that so remarks. talked million about was Yeah, $XX the that in prepared we

OpEx and expenses, October of that So, in Mike million expenses, $XX that number. the there’s the not on guidance call gave OpEx

Thomas Diffely

then, Okay. what’s that there than that? because And like more side bit. was just services NANO it the – with the sound going of to Is acquisition or was the business down on on a

Michael Plisinski

think little – and surge came was mix down quarter upgrades. it had third upgrades hardware in the a bit I that in quarter, upgrades big this primarily the and quarter. related software third a to in in fewer They and of

Sorry.

Thomas Diffely

view more in Okay. don’t on on you Maybe work these it’s that these at – point And they talked together, to between or little products complimentary of that your that conference the companies. product complementary point color a overlap? some then, lines you two fact comments just are about Mike, from

Michael Plisinski

exploring We’re that.

the line. same So, certainly of in the they’re parts

Can opportunities data customers provide technologies, looking way the some it’s technology of could more the ramp they’re of potential and wrap yields So, provide to now this about in manufacturers, Atlas additional to are and we’re two products parts up from and further time these these to to the lines provide we and in of streams parts our the the from on discussions around data we’re does for there just and challenges, same, be open customers? for critical insight way in insight the same at Metafore’s line those software solutions same what additional the streams equipment and to mean? and control starting improve

Thomas Diffely

early to then on should when that nice Okay. has finally, NANO Good. you say side, memory And look that the exposure specially starting are that see some NAND you the DRAM center hope the at signs from the on weak? little still of heard pretty though NAND like others? of the the side, of market we potential few recovery even side A is bit

Michael Plisinski

we think strong did quarter, support So number to process we pretty saw, equipment. growth see largely third NAND and installations in it’s I of a that of timing, a was the in matter

need to first you obviously, systems the in qualify and process metrology up the So, place ramp equipment.

the where in but DRAM that more some is – this we to down. and continued see investment also we have the of So, team, we from growing is saw do down XXXX, into insight talking NAND quarter NAND for

Thomas Diffely

today. Okay. Alright. for thanks Well, time your

Michael Plisinski

Yeah. Thanks, Tom.

Operator

will next We to go Stifel. Patrick with Ho

Patrick Ho

a forward come already now going you you about, much of you’re we number both in crunching can to given this several companies. very early in of the the that projects and to do company, past of Steve, And you’ve help the say both some basis? lot do congratulations, the those a Nanometrics with – – to may combination aged the might thank how question some you’re lot bit it’s advanced and you together you in that front-end one suppliers, potential well unfair you packaging. memory Mike, changes customers your manufacturing complimentary I’m and a you deal of this Have you’ve be some a customers next Thank And ask sure that larger and address and years two the still any these of us This generation offers your and of these But the all given memory forward. with getting seeing on as over as little going clarification. to and put few weeks. had of closed to hey, solutions you for team a where

Michael Plisinski

Patrick. question, great a That’s

or customers, is we thing. insight haven’t are only product kind weeks questions than that and since less roadmaps and to from we even no, it’s had been answer but So, sharing that two allowed start direct technology short the of

to expect didn’t we’ve pleasantly was to understand That each had, to and of been out problems So, surprised systems help solving team think with be solution. combination customers we’ve lines. it’s premature accelerate said, in customers the initial I capabilities along find various thinking we think the I those discussions are may that that for

So, we’re software encouraged early the including already, but what can the we’re these exploratory still systems. that in we’re phase, on by tying and have impact different from seeing metrology data streams together

We’re the going from where detailed that’s customers, with discussions show on customers, month, that. road in extensive a be we’ll next I around expect we’ll all pretty have and executives our some leading top exactly more meeting where of customers,

Patrick Ho

Great. we at particularly going how again, helpful. companies. as OpEx of in look That’s And two basis, should follow-up on a it’s my really in question consolidation in early forward of maybe terms R&D the the

look Maybe speak. probably as how qualitative we do a go a that are we or basis of projects maybe R&D, of picture evaluated XXXX? we into Given being Steve, at kind big as lot on

Steve Roth

the obviously, So, that right. programs OpEx. integration our from R&D we’ve perspective. robust R&D, started and mean, We had pretty you’re the I process just

of a I mean, integration our we’ve of synergies number as planning. So, identified part

as said, change I overlap we’re that out looking taking somewhat at the but the historic will synergy forward out we number, but bat start numbers clearly companies two from we’ll for that see going significant come products synergies we’ll synergies have then overall, as area. would to don’t are Mike any rate with and you of wouldn’t QX, see run off there, be but platforms both I guidance things Mike gave and the that’s big that going think more any probably that obviously and you work companies. plan, of that the you in in synergies. base any like I the off change in Clearly, the probably give lay you if guidance right expect for there’s

Michael Plisinski

in and Patrick be calls. clarity April to that to I will provide would expect able January more the that

Patrick Ho

a Thanks guys. Great. lot,

Operator

[Operator our from Instructions] take B. Craig Ellis We next FBR. Riley with question

Craig Ellis

that ask Patrick’s in thanks question make of at question. terms to provide. Yeah, a just the for looking taking I’m I’ll sure to you can things correctly, follow-up information

when synergies that COGS the $XX and any that of provide you in was how would rough can much be target you pure on previously and cost timing color that OpEx just realized. think terms versus Guys, I anything of is million. where, get can on in where

Michael Plisinski

say like I Craig, XX% would the million, something COGS $XX it of line OpEx. in probably the that Yeah, was in XX% and

Steve Roth

I mean, rough it’s a basis. on

that’s could expect the of to the $XX how line kind come So, out OpEx seeing of you million. of start

Michael Plisinski

I mean for were we to that’s priority will targets into was rather achieve I later. able put that’s in something referring we’re look timing guidance a synergies those just to that. and is I than starting say, timing. the to dig would a Patrick do to say some little about in January at to Yeah. plans synergy the and going of now to those and plans. there exactly provide more what and be together I May, on the calls And to will what April sooner and bring May adjust earnings

Craig Ellis

your a then And you NAND, XQ? expect how think or don’t some insights third the given it the helpful the on and and helpful. do DRAM, fourth inspection expectation of get NAND on to on quarter to quarter down clarification caught advanced just That’s is and sequentially, commentary, I Okay. I play anything Mike, that��s the strong on packaging that business

Michael Plisinski

third set had NAND to NAND we strong And orders a in again, and NAND. we the continue. both don’t and down expect pretty quarter that DRAM quarter are of for down also fourth so, is

logic almost So, XX% that’s between strong down the in the orders fourth foundry from quarter, that but up two. very is offsetting

Craig Ellis

sense just that, the your the out first momentum the of can on What’s field. quarter And from this You of would launch long in that the further logic any how would next in strength color are part what your into visibility beyond teams have seeing extend this? for year For last? helpful? boundary business be

Michael Plisinski

quarter. Yeah, – probably significant early question to will The what of as really the most looking expansions recover see what memory business say, a in we’d DRAM numbers. in little some what the And first we’re but – see probably continuing continue growth these from of it’s well? will that’s some will to to is, be start the we into forward

Craig Ellis

Okay. my be Mike. then, question And last going question you, is level a to for high

the lot combined with that little look the specifics done you and has growth opportunities the as you question to obviously, the things just unleashes wondering I’m see do and the So of things this company, next a calendar market? bit is companies congratulations are to bringing that exists as investors a The if and you year. job the together getting us new can on about excited on and getting in the reflect the milestones really Thank significant should call innovation you. for that of look tries for that XXXX portfolios, started. the to some on realize at as about that What you’re company

Michael Plisinski

Thanks, on devices years also of driving number support is smartphones think and XG Craig. the and the in of growing potential penetrating – NAND that all growth the drive we’ve for XG bringing, now. growing most been will the that Well, several logic starts so working some the pull Sure. smartphones, in advanced over specialty I that create about excited both the inflection we’re as to and

of inflection were areas So, we’re for of Innovation means a what that excited about pretty it place. number Onto

areas. milestone look continued you’d wise, obviously, growth in for So, those

but think multiple as wafer control forward. that’s Innovation driver, EUV like significant have advanced milestone products forecasted. from for and And we manufacturing, growth we excited then, is yet, see, driver sooner we moving Onto looks is synergies a that about the a for hit big our start And significant on growth for perspective, supporting do laid rather the that will this these process deliver position haven’t a see been wafers out wafer it the sort us that with to to and I to you also to we of than We’re now want later. and again, financial

Craig Ellis

Good guys. Thanks, luck.

Michael Plisinski

right. All

Operator

Securities. with go to Dooley We next David Steelhead

David Dooley

my taking Thanks question. for

Just of a couple clarifications.

Could packaging. was out down about guidance elaborate about something a talk just fleshed I think just is But guess? as revenue is people I sequentially you basis. mentioned on are you why you there exactly sequentially? combined your memory advanced DRAM, also Could down

David Dooley

my taking for question. Thanks

couple of clarifications. Just a

a is your memory think you talk sequentially DRAM, why packaging. about I also But guidance about mentioned people revenue down basis. was just guess? elaborate there just sequentially? something out combined Could fleshed as is down Could exactly I you are advanced you on

Michael Plisinski

Okay.

memory. it’s So primarily

So, on primarily the the DRAM was Atlas that’s tied some And down. growth Obviously, is that’s to drove down side. been MetaPULSE, meaningful then which potential, it’s on the offset pretty foundry heavily logic also memory. by which

talking about down XX $X And quarter-over-quarter. I in something that’s that think, really million, prepared the said I being we’re percent the $X million remarks.

as far I were believe going to that’s As packaging, we implying advanced grow. actually,

or XX% in a growth QX so quarter after expect We QX. the third from to

into fourth expect our double moving quarter. a in still inspection business digit the We growth

David Dooley

– referenced shipments I with business. on could you the talk bit – guess that about And a elaborate going lithography that or you was little couple just going a to happen what on of more are elaborate what there?

Michael Plisinski

not to several close expecting reasons to number so three did accounts had the dispute. to of of we happen at that a Yeah, for least variety related trade we’re China, in which a

was side. So, one that negative

shift tool the no quarter. in the The panel third other is, we

like the we push that panel tool was another also take XXXX. did looks expected to that customer out happen a So, into similar positive, is not and that a

lithography overall, remain of for and pretty situation, the most that delays to generation it by related outs packaging strong encouraged or the research our in positioned is position advanced of is So, remains next there. the push China the packages and research we but

David Dooley

Okay. A clarification question.

company the QX for guidance the just You you margin missed gave I is? for gross what repeat Could margin and that. QX gross buying

Michael Plisinski

It XX% to Sure. was XX%.

Steve Roth

that it be. together, companies you might by change based would the presentations what we’re two about that think And impacted the X%, whereas got when confirming by versus Right.

David Dooley

but the like lot Okay. cost and around side comp on doesn’t cost of of gross no and change that expenses between number That comp margins, just right? stock operating shifted retail a have just because XXX,XXX, the you goods XXX,XXX didn’t there’s sold the in – stock or

Steve Roth

correct. Yeah,

David Dooley

All right.

for Thanks that Thanks. Okay. clarification.

will you Will amongst a as you the numbers on to a couple be breakout inspection, lithography breakouts a as be forward. how the presenting Now, revenue of are things Or providing quarterly metrology basis revenue? and software? of us far going

Michael Plisinski

Jan out the in we’ll on the that you having and have call. February is. next January, now, discussions for We’re call – that January earnings whenever laid and

David Dooley

merger cash M&A you Okay. without would and what you or cash cash Could negative expenses. be? me mentioned just the flow operations the much articulate those expenses final question is, quarter driven And in for then be flow, those by might how fourth are with flow from

Steve Roth

that Yeah, see per But put so on $XX share I in the million you will in if million total, you there. million in not it’s perspective XX – so you’re all think so, the guidance the about to talking press the you’re quarter. impact talking but $XX can the $XX million, you about $XX is we get – release, or over cash

flow yeah, in $XX the quarter So in impact numbers. cash those on so million probably about

David Dooley

flow flow will be give we negative, And the you what event? from you back be just operations could one-time cash might can Okay. bet without an number, basically cash exact a so said then, into

Steve Roth

think would I end the basis. the hold we’re I think there, No, from a cash we combined, in and… flow just guess – would on of at think combined have we we second. – going that we that’s couple quarter so what XX a million a I without be positive;

Michael Plisinski

guys… that to you – get will Yeah,

Steve Roth

cash $XX It’s see to cash of the without got door what on pro would out million, the be the and forma I that. obviously

David Dooley

providing basis? be Would on forma you numbers historical a pro

Steve Roth

won’t accounting add two allow honest. to the more documents – little be change the obviously can’t together. I going companies but there’ll obviously in – able we but put you a be won’t differences That’s the we that is – per historical but us with to going do se, the numbers be we’ll difficult, him mean, to because purchase the be account forward, can basis, Yeah, from

comparatives.

David Dooley

you. Thank Okay.

Michael Plisinski

David. Thanks,

Operator

We’ll with follow-up take from Bolton a Needham. Quinn

Quinn Bolton

the gross Steve, XXX hit Hi, points. by basis the margin, about on understand reclassification

model about As XX at of to basis that by coming XX you XX the need due points inclusive changes, long-term we of that the we reclassification? to down margins to do those or With XX look to XX. XXX to gave to XX think with that

Steve Roth

the take points top XX, would off think I so XX Yeah, – it I probably I things I think to would take fine, basis would Quinn. XXX would but that the probably that,

Quinn Bolton

I seen sure part if win he and in business expected mentioned sometime business, great. And QX side wasn’t just a metrology said the business or on in you’d the the side, or think whether Okay, was the of you that that that that on then into current either we was strength, NAND integrated XXXX. to ship

Michael Plisinski

that That out will that been has be was to business pushed XXXX. –

Quinn Bolton

Thank you.

Michael Plisinski

welcome. You’re

Operator

additional remarks. call and Michael to for like our closing will I’d session. turn that back the any Sheaffer conclude to gentlemen, Q&A and Ladies

Michael Sheaffer

you, call to we’d the for Well thank and innovation. Thank for Aaron. onto everyone like your participating on today, in interest

forward and That are beginning the calls. it We up, for to concludes wrap Please today. this with excited look our clearly future about new remarks era company Aaron.

Operator

does conference. participation. you We conclude Ladies thank this and your gentlemen, today’s for

You may disconnect. now

Onto Innovation (ONTO) 10 Nov 192019 Q3 Earnings call transcript