ONTO - Earnings call transcript Q2 2021

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Operator

Please standby. Good day, everyone. And welcome to the Onto Innovation Second Quarter Earnings Release Conference. Today’s call is being recorded. At this time, I would like to turn the call over to Mike Sheaffer. ahead. go Please

Mike Sheaffer

and XXXX April, after everyone. Innovation Onto market Thank quarter good financial its second shortly results issued closed. you, afternoon, this the afternoon

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

Chief Officer. us Joining Plisinski, the Steven and today call Officer; on Roth, Michael are Executive Chief Financial

the matters facts, remind I of the consist regarding Any need especially regulations. historical not to performance, you future objectives, today always, products, are As Harbor that expected plans, forecasts company’s comments Safe and of Litigation judgment available best forward-looking statements within information or the whether currently meaning company’s of the at the this Reform Private These implied Securities and on time. Act. are based expressed estimates,

range to company wide that these is be of believes a the assumptions reasonable. Within

report must guarantees future be Innovation’s actual with cause XX-K can Innovation otherwise financial to SEC. the results Form company cautions statements obligations these any uncertainties Onto in impact not as unless specified. December statements so. that expressly will discussion to materially. the results does presented and are forward-looking that disclaims the update statements factors the of range Innovation’s Onto currently recognized Onto Thus, non-GAAP be of are described these a performance. no basis However, Risk quarterly financial subject other that do year well as that may our results a XXXX, Today’s for filings ended vary of to it on are

Plisinski. over release. I and go can between and results earnings found a Mike? turn to be in ahead reconciliation reminder, today’s now detailed Mike GAAP a the call As will non-GAAP

Michael Plisinski

and Across Innovation’s necessary unprecedented quarter value welcome logic from strong advanced Innovation’s the are markets more in Onto second to yields sophisticated rapidly the for for this versatile solutions. DRAM from Onto design contributing broadly nodes global wafers latest packaging is at to the fabrication and creating growth the where shrinks to X-nanometer afternoon. devices, to Good to silicon and evolving X-nanometer Innovation products inspection support And ramps are higher demand demand participating conference Mike. out communication wafer the down semiconductors. you, to semiconductor design to XG faster Thank accelerating and advanced packaging chain Onto call. the and

second well second As end stronger exceeding million, in of a continue revenue guidance we result, $XXX the year. the and reported we of the quarter, high of see our to record a half

largest advanced looking devices high So growing the highlights our packaging. the specialty devices let’s revenue with market from by and demand End quarter, propelled computer applications, begin work-from-home segment, at for performance and starting second support to increased the segment which by for first was this inspection increase quarter quarter technology, this the of year-over-year. than first quarter Leading more over second to and XX% over and demand in the XX% growth double XXXX. XX%

ahead Dragonfly our as sensitivity, sensors, new improved sophisticated released is continues integrated systems of the markets, opening speed and recently high GX Our markets and demanding expectations. where our position technology in packaging also such image most definition growth while Clearfind expanding

sensor image For to base received existing second the a from sensor image the of fourth support three example, ramp a while their installed customer in new their top doubled orders sensor quarter, we latest customer, technology.

high large and believe point particularly markets Another We for performance an this engines for compute heterogeneous the market packages. see industry, panel packaging. inflection segment we our served expanding represents level as important

be which next-generation technology deliver lithography wide enabler high-resolution Our for proving larger of field packaging for to key very a advanced packages. is newest a across tools imaging view,

orders half shipment for backlog of an We have have started first XXXX. shipping received our four and in additional

production million is shipments booked and schedule with XXXX close more several backlog lithography Our total a over we to fully and $XX tool now for expect XXXX.

and quarter. customers increased suppliers included the our to second working new needs are over demand in demand and XG film support metal to and additional to applications million XXXX. overlay the with This four capacity This systems, power both acquisition included $XX of determine We half projected new Revenue for power for closely also stronger we the RF inspection year. Inspectrology will metrology of for to addition of metrology. and customers, from expect strong our which our contribute our

primarily central second dimensions Turning Atlas required to our the metrology OCD advanced speeds where revenue manufacturing. record metrology we devices, demand quarterly of for number at platform. for set a growing and record logic leading expansions for volume our flagship critical sensitivity of edge provides nodes, was quarter, a in in the support This DRAM a greater for

We year, higher both for our second in an the and in OCD investments Atlas of number to DRAM, our expect to to the of yields. of continue and half increase on logic in support demand tools additional the advanced applications in support strengthen

Even growth by as XD we to such films and position markets as aspect metrology new demand for ratio our enabling market are future core our for expanding record high products support growth, have in levels NAND. planar overall

introduce We to as specialty in our are we seeing these revenue customers. suite also metrology markets synergies

For we of nice orders be wanted the orders projected for repeat customers half raising ship responsibilities to second the expect markets. to social from first Responsible an over from example, first and corporate new our into Business momentum highlight the planar device in Alliance. second in affiliate from ongoing finally, also the films the in to second film XXXX providing will system commitment six by becoming customer, These half, our and orders And of of XXXX. half member our our our growth I quarter, XX% latest specialty received we including

and of as Steve already quarter committed By provide suppliers example Business our before the forward. Responsible Roth, color will conduct in better who is to environmental important policies, another second members of serve highlights of our over more we actively step world. will but the social Alliance to successful industry I and how an on to cover our are quarter. the code create a turn some RBA, the now I Steve? climate third call RBA our joining will can fellow the responsible We membership the financial

Steven Roth

afternoon, everyone. will I what our Thanks, third details In with QX are for that Mike, and remarks results quarter. this on seeing my the afternoon, provide we for then some follow good guidance

revenue mentioned, up was million, our period last second over Mike quarter. and As XX% over up quarter XX% year $XXX.X the same last

of packaging other the quarter systems in specialty have Breaking We customers. to totaled the our portion a backlog During combined XX% the the government XXXX the and China. from $XX.X that the we in received market quarter. from at shipments were totaled systems the other the systems down customer which of from strengths $X.X had revenue from coming quarter, million the approval, U.S. The quarter, ship end we since in approval to million. sales to QX. Those certain market, in government order markets, second still device totaling $X by to XX% and the customers’ Due RF redeploy million to a those advanced about up market, the awaiting advanced plans approximately delay were of node their of orders and cancel shifted of over XXX% ramp and power and with represented original approximately a getting approval, down sales our downward, which first quarter. this customers’ we in agreed end

temporary see by both logic those pause we While growth customers. memory, in DRAM NAND, from and increases did a were offset

quarter the services slightly and and in revenue. increased XX% represented software of Finally,

gross to and performance, the increases its XX% Higher quarter to Our drive our quarter. costs the and supply fixed strong gross the quarter-over-quarter revenues cost margin compared mix helped first continued increasing in margin offset XX% covering in manufacturing product chain improvement.

quarter of quarter as Second far plans as expenses and in from the were operating had in well operating This the XXXX. QX true-up our unusual such increase million, -- we expenses as mainly an to was variable increase compensation exceed of catch-up to including $XX.X our $XX.X a due accruals, forecasted to targets, first now million shortfall.

employee XX% in higher increased up was in and operating first strong increase an our now quarter headcount expense we the the Even growth operating financial grants in future. annual margin model from compensation in the stock-based expenses, the increase addition, and XX%, in seeing to due support are in quarter. resulted to with to In

increased merger our margins confident the or fact, income of second margin and margins the improved million operating XX%. revenue calls quarter quarter which a XX% at and million income Net share completed and every quarter, In share. operating in reported Rudolph $X.XX to our the XX% $XX we our -- guidance. achieving we $XX.X model, of or $XXX of the high end million above of we gross XX% for operating since net Nanometrics, of feel in XXXX first $XX.X long-term to was level has $X.XX per full and per and of In

increase Accounts QX. were linearity a with $XXX the balance which to million million quarter ended revenues heavily of shipments, sheet, half from to quarter. $XXX receivable our $XX we quarter Moving back million, and to in increased the the due an of weighted cash the in up the position to the of

Our inventory the improved in quarter. turns

at increased ended However, overall slightly inventory $XXX million. and

Now to in $XXX to revenue diluted of per million per to we in earnings range turning guidance, this $XXX to and anticipated third $X.XX expect the is $X.XX share. quarter be revenue share million, be range between

and our expect gross XX%. margins be between to also XX% We

we place have strong will plans operating and active For Mike? Therefore, quarter going just plan the are third of quarterly for and be XXXX. $XX continue million true-up compensation we back range minimal million. the that, Mike have of the to operating expenses, in on to impact in discussed insight the should to call I we anticipate forward, the I in decline to seeing. expenses the but turn will our expenses growth into recruiting And QX operating $XX remainder with for additional

Michael Plisinski

strong efficiencies We strengthen of quarter and growth. further include with for strategic to all markets Steve. continuing the sustainable increase foundation which entered initiatives, you, operational across third Thank our our to momentum

out for remain second in set our expectations record the We in the than for growth XXXX, the second to stronger quarter, quarter with the so have visibility we continued the strong last quarter even backlog a half, fourth third. and results early with confident

on in mobile demand quarter, and several year. support their applications. from support We the increase quarter, additional current of and growth expansions the new logic in to of packaging sharper customers we in and RF the half to suppliers customers second the investments XG by significantly a our quarter continued spending in expect for third expanding Specifically, of in increase applications and in third strong infrastructure to increased see expect addition fourth in the the number transportation as logic

overall pick the from up fourth significantly the with to quarter We DRAM third to investments suppliers. support in quarter to expect spending in memory decline leading

With the our to impact minimize the each our growth supply increasing focus we chain year, of backlog the on partners supplier second customers. deliveries of team to their half from and is see supplier continued for our

total, existing served in mentioned but by go the we high revenue into markets, analysts. products earlier, these making As XXXX And in additional I not our films, April, $XXX ratio such are from image with over our progress for driven only the markets, open demand expanding plainer please packaging is In line new questions as growth creating markets covering panel by also million, aspect and the the for expand surge sensors, our metrology. and that, beyond. opportunities initiatives our for will ahead. we

Operator

Ho hear you, Stifel. Patrick Thank from [Operator will Instructions] And we of

Patrick Ho

in and Thank opportunities the much most of you the advanced seeing of picture first, at that AP of processes their little edge, lot those and agreements particularly maybe top you chip a stock highlight purchase I bit one, to nice a packaging I a congratulations guess, Can on from you are some you have together on past, leverage packaging. basis, quarter opportunities of there’s in a of talk think, of, kind are the you are it one a becoming? market, more fact a advanced growth your Difficulty] of the some in outlook. of they, talked how opportunities, and really of give about in leading because those two, in makers’ [Technical about volume some big very clearly come terms able Mike, the

Michael Plisinski

up understand gist little your a question. I but you Patrick, broke of I think bit, So, the

From packaging a the traction manufacturers, also IDMs we capacity. our The -- leading across the agreement, of CapEx and are more And you from IDMs, gaining dollars these volume demands top right. the a toward are capital from increasing technology different R&D where and purchase dollars expanding applications. packaging, metrology with perspective, certainly investing So -- are an AP variety advanced significantly are leading platforms. -- a

they we end, are opportunities organizations. on front are and the the volume, the On to the also end able the leverage similar seeing increased back service

overlap significantly support During and COVID, a lot uptime now our we and see with so benefit service have of we a of and service capability, and so cross-trained better can lot and coverage organization, that, that look negotiate of gives volume offer as a as Onto going the we sure purchase and into buying case. supplier customers some us agreements the to XXXX. that’s from benefit capabilities and Make they

Patrick Ho

helpful. And my Steve. for follow-up That’s Great. question as maybe

First recent person working your to with off, less to think will luck. Steve, going you want pleaser wish be been a announcement, the It’s of these you. again forward, I given years I you harass I one and best all

you again. thank So

Steven Roth

for words. Patrick. the Thanks, Thanks

Patrick Ho

varying the given constraints Going outlook, to going is the you well. supply right near-term and chain degrees. results The environment, industry now obviously very your to manage through entire

there different. in your also the supply and companies, full company different, are are each outlook, and understanding differently what supply components able from their chains you have equipment types but do been are very Given short to different results of equipment the is other

could of the to efforts on give if little bit color have you So situation? done what just you a mitigate

Steven Roth

I a them we doing They but a It’s for great the part. seeing of goes supply lot, delays, been job of and pulse chain a manage where have component keeping to question. been mean just able I the the have to through some we congratulations assembly think good are most our finger of, Yeah. a team. on

on to the just material I think we stuff are obviously side seeing logistics and us. getting

on mentioned in charges was offsetting cases, and our our little and in stuff we time been I on pressure get just cover some paying have time. transit that margin, make a we a that of but bit reduce really sure things little to So to expedited gross

seeing. that, doing are growth the have as books further stuff are obviously, we sure well looking a out that -- adequate the making and little sure as So we making on that for we

overall. been a we of So of not doing good managing have have fairly job good experiencing managing doing think not job we I are a I but it think it, that it, been we

Patrick Ho

again. Great. Thank you

Operator

Bolton & Needham of Quinn Company.

Quinn Bolton

the to Congratulations the on Hey up second into congrats sort wanted that up same and sounds best with start Steve, results, and guys, nice the wishes QX, will have I just I visibility the to again. say over half, of you. QX QX like you

the visibility As WFE, product perhaps into predict of keep I plus, will maybe outperform I up pace even you think mid-XX%s analysts XX% if level in sort your think based now. overall revenue WFE at am or that even look right and Onto you many wondering on at WFE XXXX?

Steven Roth

Yes.

that we the So, WFE. Quinn, be we believe outpacing will

are different advanced capital intensity for you Atlas on the our we If and the front. all see XX% stages early combine platforms of We we the are in given look the would some a with in new expanding expansions nodes Metrology combination at we And advanced applications, the look outperforming market fairly packaging at confident that then look of only WFE have gaining that at happening the the and indicate we in that kind number. that of traction. we guidance

Quinn Bolton

it It QX, wondering DRAM, looking driven through that’s QX? had on thoughts up QX, fourth the into memory quarter. in like Great. sounds going And NAND by more comments like outlook you am are question, sounds but you saw I as picking second any the if QX, the you

Michael Plisinski

For us, half. NAND the in we see the second softening

tell, So probably comes level. we stays the see that have into the that market strength then despite and all at what down is half equal a second can seen roughly that that from bit it’s the softening -- one reduced and going we we

Steven Roth

Quarter-over-quarter… Yeah.

Quinn Bolton

up one the quarter. last for again And Steve, for sorry, litho on the litho, Steve, you, nicely this backlog

carry Any pull like As XX% on at pretty to run probably, could XX% -- below getting ship million systems, that you to that, $XXX quarterly concerns close basis lower to guidance that to those you going carries high margins. the are it QX? be you know either gross then looks end a of level those systems start not I definitely that the if quarterly for rate, but to that QX

Steven Roth

Yeah.

systems just or a concerned. -- started I We for shipping that’s So good QX not I am new systems. question.

QX, they going pressure to could slot up, have being have anticipates tools the get are litho but to I to got see that get probably delay we mix recognized going when don’t could we if overall tools in rec tools rev anticipate shapes QX. a how So things were are all recognized on model those it. the some the some actually actually QX, we the margins lower margin. with have to built of The in recognized. into

that overall, quarter So margins. model one lower it than just impact. be normal might -- if might have be onto one include back quarter But, with litho up question the does the a they those

Quinn Bolton

very Got it. Thank much. you Great.

Operator

Ellis we next Securities. B. from will Riley And hear Craig of

Craig Ellis

$XXX on at wanted at my and the and release that with historic I taking incorrect. you guys point maybe in notes, million, your really that from question I a SAM congratulations question for what and my is scope expansion but press growing on. strong is Mike opportunity go scoped you in so -- the happening expansion that’s back notes think off opportunity that to was script, the start But Thanks to and I I have performance. SAM the what’s think were $XXX centers million, the

As months opportunity months you you to larger you were six and calendar do front seeing calendar actually are nine a ago? moving than XXXX, through what SAM approaching of expansion you in XXXX see

Michael Plisinski

We in see also is probably which sensor, level Yeah. a We but more in films. one CMOS the is We do shift the do. biggest panel little packaging, of on areas. the image the plainer bit

more We channels, positive. also have the starting products. how specialty just not sales the customers been where we broader there new to opportunity our channels, much a markets. opportunities very area we been leverage started the very was but and in traditional The receptive the as are device our broader there to another have to appreciate demand, that’s little didn’t in just So see markets,

Craig Ellis

And a I you. it. then, Got it. will Steve, follow-up Got do with

I there, the million, if close quarter’s margin like get to quite to a and I that margin very current $XXX something were bigger close but is the annualize gross but looks So to guidance, has it operating the target. target, revenue not gap close is

to if am are gap you operating be wondering where at the the XX.X%. just will can close So I levels some through walk margin now needed from we to of things that target

Steven Roth

Yeah.

the thing a variable remarks, as So the the up only prepared showing -- and… plans, the running are you that -- that’s in comp above little, well is plans comp XXX% Craig, I mentioned the my

Craig Ellis

it. Got

Steven Roth

at catch-up entry model there’s in XXX%, on the going of they a …. assumes quarter. lot so are the

Craig Ellis

Yeah.

Steven Roth

That’s say but I rate that’s throwing that to very that if model. off a close bit, you were why out little rate, you be would so am I as a back long-term confident to the actually run run

Craig Ellis

Great. keep group And I for last echoing the want then lastly I before will the the years. in over ask and join to help and you, there, just of I the the, Steve, it all question thanks

valuable target today’s not wish is tremendously which level, are XX.X%. your equal midpoint really You ingredients now and we from an just greatly that Is contribution us get we or with at and what levels? us look next take well. the the that the about and gross it target but are Onto, margin volume at broader the there milestone next up I XX.X% have that appreciate the been you looking to with as industry to that mix between But

Steven Roth

that obviously, of keeping litho standard too. into inspection, is just built mix the It’s metrology Yeah.

all see you keeping Mike a lot across to growth. just even really a growth where the segments, of talked it’s about somewhat the So that

you long-term keep leveraging of numbers up proportionally in the our that into You up, model. next level that you operating those start see

Craig Ellis

luck. good Thanks helpful. guys That’s and

Operator

hear Davidson. of we from D.A. Next Tom will Diffely

Tom Diffely

the and thanks question. Good afternoon Yes. for

go. am you First, very Steve, I see to sorry

chats. have and the been in have your constant this the XX You been I almost one business in years

Steven Roth

Yeah.

Tom Diffely

How over with last challenges resolved, you supply seen would the getting the few the So, of you, that? the view maybe Are or are better, at is look chain you starting supply do quarters, the you how issues? of it move getting things characterize they getting you when worse? have transition

Steven Roth

don’t -- kind I Yeah. right worse them I’d right now say of we now. are see getting

have I think of they level. a kind been on

ships the saw that. freight longer stuff a you of through in taking I think extended it was -- here, think of kind we especially shop, so saw first, side initially the over you of I saw container it where bring stuffing and get to we initially logistics lot

one where if trying stuff really think to you on they is where are to our assemblies Tier our that are a it, our component to evolved I seeing their even a causing like, to call obviously, on supplier maybe I people suppliers a from, side, are hear because lot X are suppliers are make little constantly vendors issues sure time. seeing we and it other it bit, with are we couple, among testing -- us more we getting will deliver they the

probably I haven’t it So say -- evolved of dramatically it’s over would last or at getting I two, worse. out. month kind the of is seen think it’s But that in kind I what leveled least it’s -- too. any dramatically

Tom Diffely

what Okay. That’s you drivers markets, the do in the look at nodes natural products when you? think market then, specialty And and advanced between those your quite you in long-term and news for is split helpful. your serve Mike,

Michael Plisinski

we of suite a out. time, continues, our balance now, AP I Right to be as right and we I’d new But expect Over around are stronger. where XX-XX the expansion metrology bit continue mark. specialty XX-XX, that to is to that are going think,

markets play are when new growing but packaging aggressively. I’d say and full maintain slightly products this that that tied because specialty, of a bigger and So, that’s to to in adoption we will years of advanced just have and going years, into we we split, new kind maybe fairly would four XX-XX way we the expansions, products these look quarter-to-quarter, from five out guess I the alternate that additional and that products more

Tom Diffely

Okay.

Michael Plisinski

around right level. that But

Tom Diffely

helpful. That’s Okay.

edge? say emerging biggest the to have would products year foundry leading all this next the that’s serve you that war the that over So perhaps the just you drivers, going

Michael Plisinski

the opportunities high market Not XD the IRCD just the aspect that, some but ratio metrology seeing NAND, metrology. also planer we the for new or for are aspect films of and

past. are we participate the to didn’t nodes up markets the we think advanced in an in opening some doors I

nodes, So us going have advanced I at same some outsized specialty. the advanced drive think on growth the that’s the growth to and well in as for packaging we time,

Tom Diffely

Okay. right. time. your for All Thanks

Michael Plisinski

Yeah. Yes.

Operator

Instructions] from David Duley we Next [Operator Securities. will of hear Steelhead

David Duley

on I first question. my taking are everything. involves, on you for you you my on of results, help $XXX congratulations TAM referring to guess, is and me Thanks this strong the with the Congratulations of question good retirement to? your can films and Steve, just planar business that new luck what

Michael Plisinski

of So that $XXX it’s -- about that. million

it’s about about So and films half and then films, some films was overall now of are the ultra-thin the into half more we planar suited planar our the overall of split planar some Remember, market. the for it standard films. right common critical films, really films better products

David Duley

And for either or help us how you in target, this with the an product have could you frame this you year or big do a revenue near-term? perhaps, it year of us is Okay. share next for opportunity

Michael Plisinski

I level gave some on hints we you So would you we mean, that? -- have how of Steve, momentum. frame

believe, the XX% half. would about So We said the of, million said be by we growing XXXX. talked I it about end goal in achievable $XX we second an

model. that end last that of momentum, So couple million the zero can are quarter you of with of at or you about maybe see the the year can of beginning -- the as trajectory at or we thinking see you the a can year start and if kind come first up probably in a

David Duley

that’s total expect… will XXXX might over you million -- what XXXX two $XX be and the over So or

Michael Plisinski

be… would That

David Duley

…in XXXX [ph].

Michael Plisinski

one of we could when pressed basis. what we quarters annual I on achieve -- said, we years. out achieve we would not what cumulative as a ago, year could look That’s or as we that’s two was It an was couple

David Duley

business, at you that much for as XXXX going look you far it could when year. us some prediction, that packaging up great Great. half back will growth the be how Okay. as gave the think of the the do statistics for be much business? of it -- what rate all then inspection was How And will, you advanced about to in you

Michael Plisinski

levels it I would out, last growing it but we grew we be XX% year break over would year. similar didn’t We -- be and believe this

David Duley

final additional question think, has then advanced on, do Congratulations four packaging orders. with business. to the And you mentioned lithography got I Okay. me for you

million Maybe slots kind XXXX, could are all $XX slots Can your year? share, can over you -- the a if be. this -- you the should through this so full full do if achievement. what of what So of your you think next your think are backlog you know this if you revenue and backlog mentioned or are you ship of and business you million great -- $XX execute is revenue potential how hit we you year will about

Michael Plisinski

Yeah.

XXXX. I We will as year just provide full. say, slots guidance for never slots the didn’t we said closer that I we say I get but expect were for to -- to I correction. it, a didn’t end the with full

build we backlog. are So the to continuing

this well open have ahead or expect -- for this next for year. slots backlog expected as back with the that we that the year close and as includes shipments to of plan end for out slots well year, Now the we we shipments the available of XXXX engagements

not closed they So yet. are

David Duley

if theoretically, revenue this I or do slots, your help frame can next the it lithography close then, should we think for at however how potential advanced you And either about business the point? year for -- all guess, Okay. this or us year the you

Michael Plisinski

million of a the we that do in all slots. then those the we of all bottom can $XX say if succeed consider and be above pretty that and filling Really at -- good. should I’d look estimate decent you

David Duley

your all production taken with that business reason you tools? core have that a is the moved off guess into sudden I is, this actual of got have multiple customers

Michael Plisinski

shipped just we the first Well, one.

into yes. multiple to production, have We customers planning move

David Duley

nice on again results. and you congratulations Thank

Michael Plisinski

Thank you.

Operator

call closing this over And there are Mike I any will Sheaffer or to for comments. no at additional back further the time. turn questions

Mike Sheaffer

Thank you, April.

wrap August we to the your and That on be the reminder, EDA Conference remarks the Innovation. call up Onto interest We’d XXth Needham a in in call concludes and on will Summit for and Riley August like XXth. Summer our the call. in Please for April. Semi Cap As for today participating everyone B. thank participating

Operator

for does conference. that participants. Thank all today’s you Again conclude your

may disconnect. You now

Onto Innovation (ONTO) 7 Aug 212021 Q2 Earnings call transcript