ONTO - Earnings call transcript Q3 2021

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Operator

Good day, and welcome to the Onto Innovation Third Quarter Earnings Release Conference Call. Today's call is being recorded. At this time, I'd like to turn the call over to Michael Sheaffer, Investor Relations. Please go ahead, sir.

Michael Sheaffer

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

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

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

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

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

performance. may future results go in can Mike? over as a ahead Mike call found reminder, the the basis, will factors Onto that financial Innovation's obligations XXXX unless that SEC. expressly on it reconciliation a that otherwise statements the ended XX-K report results financial cause not quarterly turn the And Today's to within are Innovation's in results be detailed non-GAAP described statements be However, to the as discussion our non-GAAP disclaims impact Onto forward-looking uncertainties of a that specified. company December to filings are recognized and earnings and Risk does statements Thus, results year Innovation these update materially. as can must and for any release. currently other range guarantees Form cautions GAAP today's between to of so. vary presented I of are actual well no these do subject now will Onto Plisinski. a be

Michael Plisinski

growth guidance a and you high both revenue thank Innovation's of end you, Innovation delivered our quarter operating team The joining and Onto Good everyone, afternoon, and quarter, Third strong exceeding Earnings Thank Call. for improving Onto Mike. margins. the

advanced growing chains XX% the supply the challenging, the with quarter. be starting demand third increase X% new from Smaller with to structures continue expect by to an intensity begin in grew transistor by are we revenue the over highlights let's quarter, and third to increase the While high-speed with geometries which XX%, quarter for fourth [indiscernible] spending XD But quarter. in optical creating in sensitivity, market, nodes metrology systems. high capital driven

as differentiator modeling As an applications example, support combination XX% than prior below for could proving the the these metrology powerful in Customers lines that of at structures. of quarter, investments software support FinFET much pilot transistor In is a applications. third revenue increase for more AI-enhanced X-nanometer. next-generation Advanced and sensitivity to structures structures our indicate as over be came to half greater Logic our in

volume is production customers metrology leading integrated production first next-generation ramp to share the six move and grow added year, to well manufacturer new already of to XXXX. expected onto integrated to metrology with DRAM metrology of next half are in This high-bandwidth starting we've another for strategy Our selecting progressing also year. each support integrated their memory

technology the to latest for the of demand nine due strong integrated the reducing over we've future our addition allows year system five line customers rework increased In this year, IMPULSE a while only This matching improves of tools XX angstroms. expansions, we maintaining by revenue existing further first required months proposition as is to CMP productivity and In CMP. being to sensitivity the XXXX. polishing capable those XX% value speeds capability increase seen positioned the period customers. increase from over in The in same below believe it

last largest our quarter than and year's comparable was customers the to and our to specialty XX% Revenue from packaging greater turning Now second market. third advanced quarter.

in technology IDMs inspection The continued support the our our top markets, the these demand from by over inspection strongest by leveraging heterogeneous customers. intelligence information and investments micro to XX%. our coming new straight We for for with technologies. challenges to augmenting these revenue packaging, is accelerate, actionable analytics, artificial advanced Within quarter, platforms increased to inspection provide bump TSV to second demand uniquely meet and our XD

in For find resulting example, detect into algorithms, of cracks leveraging issues, learning our die the cracks, have good critical DRAM shipping memory cracks By noise, but dier more the stacked when packages. solution costly able also robust potential been issues. process. challenged of stress single reliability defects while micro and or by by high-bandwidth overkill eliminating improved sawing especially nuisance These become in a several customers in sensitivity Increase defects would induced which thousands HBM yield. of the to the we're reliability machine resulted proven or die interest with can in

which for our to for demand solutions, In the represented sales in our third addition of and our software, combination record enterprisewide expanding helped the power markets, including of see tool-centric a quarter. enterprise business tool-centric in customers, the set revenue the stronger specialty we XX% The RF from new and enterprise device particularly applications quarter.

from services see software to customer-focused metrics. our more customer recurring an with productivity services traditional enhanced leverage enable the fleet for of aligned revenue we've break-fix the steadily installed performance contracted model our on services Since with to transitioning model We to been a merger, a emphasis business equipment. also

result each of efforts, a quarters. As of eight revenue contract the these increased last has

opportunities years, future XX% business. by our roughly Over about software business provide and today. services for believe XX% and several And has is software this our our grown revenue we leveraging of additional last growth the will

it's but progress of JetStep for platform the on made portfolio, lithography perhaps across being So our advanced areas our is quarter exciting packaging. latest several an most certainly exciting

commitments manufacturing heterogeneous our the for support We with installed has we tool facility received third our at been manufacturing for in first the The key quarter, tool expanding we're for the Wilmington six and suppliers. second in XXXX, slots our the order starting for commitments delivery panel-sized qualification mostly in shipped In process package technology. additional XXXX. and to capacity

over Now highlights. I'll Steve financial to turn discuss call to the the

Steven Roth

on Thanks, for Mike, this follow and QX good some quarter. the and my fourth provide guidance our details results I'll In our then afternoon, everyone. remarks with afternoon,

Let's get started.

and quarter markets, revenue was last the driven The had mentioned, logic by which the million, of sales, sales record our Breaking quarter-over-quarter, which and X% in up prior Advanced and increase our year last revenue represented quarter. third driven same the node to sequential our up market, strength quarter-over-quarter which of was XX% inspection quarter. quarter. quarter from That weakening advanced XX% over by sales period Mike XX% specialty Our by XX% by over previous mainly group, $XXX.X were XX% offset over packaging the software from and a grew the was continue sales increased increase in memory. quarter. market devices down

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

Higher Our performance, the offset compared second gross in quarter. software quarter-over-quarter increases improvement. margin chain quarter XX.X% the supply sales, its gross XX.X% and to increasing to and including margin the continued in drove revenues, stronger strong cost logistic

that primarily Third quarter, variable which our million decrease a quarter $X.X guidance. decrease were were $XX.X to plan which million, quarter than $XX.X operating expenses the recorded is adjustments, The in of quarter. in second lower second million in operating due and expenses compensation increased the from

the lower support the head our there increase in decreases stock-based quarter growth. count addition, Those quarter. to in offset an compensation expense revenue were were in In third by partially

since operating each operating third XX%, with continued published of long-term run $XXX margin We operating improvements achieving basis. quarterly merger on a margin our quarter quarterly the our quarter million model rate

income of margin in income quarter, between increased for third second In gross confident and the end $X quarter the operating at model, billion or $XX.X remain share. guidance. XX% per XX% in our and $X.XX calls XX% which also was per million reported We XX%. high or between million operating $X.XX we Net $XX.X margins our of net and and share the

a the cash from balance $XX sheet. million, of to position up ended QX. Moving million We $XXX the with quarter

free revenue, QX cash $XXX quarter, increasing year-to-date, days to million have XX in free remained flow was Our outstanding our $XX year-to-date, million days. and $XXX receivable we due increased generated and primarily or of Accounts of flow. million but over XX% at our the cash revenue to sales for

QX in as revenues deliveries the Our supply disruptions. chain to quarter for inventory of on against acceleration $XXX inventory hedge million and increased a higher planned

the turning fourth guidance. Now quarter

to between $X.XX be range Earnings of million. the share $XXX million anticipated We share. $X.XX be in per expect to per to $XXX will and be in revenue this range

be additional back QX $XX range in the with $XX the We quarter. anticipating also to like into headcount Therefore, our to gross increase between of to expenses in fourth currently and expect by for that I'd the XXXX. and million. Proper quarter XX%. million into expect margins XX% and Mike? will insight And we're recruiting were operating will turn the end call and that, Mike of the board expenses our that on be additional aggressively

Michael Plisinski

you, advantage innovation. and We chain I'll in proving first continue predominantly on logistics are onto domestic the in challenges cooperation enabling be see many year. with the to manufacturing including start We by suppliers next chain half risks Steve. believe through the likely Thank supply of U.S.-based our risk. operations commentary some and supply companies, impacting closer to an reduction

growing continue. and as better Therefore, we're visibility complex, We're our cooperation taking suppliers, they're extended solutions. are demand our see it's will our increasing with inventory and so as expect and overall, proactive to multi-tiered available, oversight we chains soon the support challenges we supply However, an are we and prepared vendors. sharing our for with

such guidance So in compound demand our growth, over of strongest these energy the assuming particular, last as at we've semiconductors the added and In and third-generation our consecutive demand suite we offer surprises now from charging no revenue In We customer quarter electric the all customers We planar silicon the overlay integrated solar our specialty see and stations enterprise XX% inspection, quarter inverters, to will from yields. so-called quarter. fourth and device from our result times our third metrology, ramp increasing growing solution up gallium X.X% chain, nitride, markets. connected fifth for software materials, supply packaging semiconductor power see with vehicles, in for through of midpoint coming the significantly storage the metrology, year, the range. reduce films serving to improve applications. carbide and

In than revenue in in roughly the the double sensor more RF power projected customers fact, revenue quarter. we system quarter, fourth image XX% overall of to from expect and representing growth

in offsetting and logic surge a see we essentially quarter. third DRAM, segment, node pauses advanced record-setting NAND, both in matching the the Within

last the many year customers for XXXX. We specialty record XX% and this current our and across markets backlog another optimistic growth expect we're traction by our devices. be of wafer supported lithography, exceed markets, increases will projections capacity twice and core success advanced expanding nodes year we XXXX to over size of for announcing industry, panel the the including and equipment time served fab With

also but innovation, to up acknowledging innovative part we and exciting approach for the spirit Innovation your to more team and like their importantly, front challenges. overcome anniversary products their team I'd call only new and the customers' of. in Finally, I'll we close line to second open It's the entire how on a truly that, demonstrated Onto And back the dedication not with thanking be our the by and an to turn produce, questions. inspiring for success

Operator

with from [Operator Riley Ellis Instructions] Craig We'll take Securities. our first question B.

Craig Ellis

software for It Yes, some I of and you in on on question made. strength real strong it sounds Mike, the results there's Congratulations like taking seems business it's start and comments by thanks to following wanted the the multipronged. up like the guidance. and some that

what talk you're to interest you more quarter-on-quarter just if because a eye-catching into that with or the the XX% something in that bit certainly go half little back you see episodic is was you gain engagement about software customer and more that's following can seeing really as the in XXXX? through as So respect whether

Michael Plisinski

make experiencing gains we specialty and Craig, that the we're seeing smaller systems rapid and we And talking more in can is going is especially several software demand we we've a because makers, a turnkey didn't for this What point and business or demand. they're maintain to or for rapid believe seen the growth need trajectory just to for quarter software They such mention companies, over trajectory. not deployment the do be X. sure No, this steady and device allow it's and OSATs, quarters, it rapid demand, long-term yields. last that a we're the a want

equipment deployment yield. drive rapid the So and the then to analytics resulting of

fabwide for we playing gave this this. equipment level. the of analytics, we our seeing monitoring things that. others, like both just the leveraging also and tool call includes equipment we're at solar other have fault we what automatic or example control also technologies So and several are factorywide centric, That's level. out that and process not but an And at There control

tool-centric leveraging capabilities predictive talked in group installed increase our people customer those spoke our capability and our services to of I by about that our third the success capabilities about just and equipment of services offering base. the augment value was we're business, predictive equipment control the providing analytics -- The

Craig Ellis

Got on follow strength thinking end, it we've something giving be rev shipments it. quarter, litho because is, the that that up that mentioned in your possible that, think is talked Got ahead panel a to I to it. about something question should Steve, you've that as Then panel fourth comments calendar strength for. the has with it what's The in seems And on-ramp from gross recently getting standpoint. as seems three that's margins wanted quarter. rec that like we the been I had look how litho? here. the on about from we that And you looking to shipment you been that's 'XX,

Michael Plisinski

possible standpoint, for So basically booked shipment a out capacity. what's we're from

So be I year a won't that record give it is, number sure. exactly but for would it's what --

So might eight Steve year to be rec. then record back, more than I that. so eight it'd think be And six shipped, prior -- let rev systems if you I'll about talk go systems

Steven Roth

a our is said we've second remarks, Mike model. From in of prepared as standpoint, Yes. his tool, shipped this this the but rec first rev

done now. the that the the because a of So would we're process to going tool fourth through end quarter. But be not it's I process expect calls by

where that we in be tools QX recognized this in the shipped probably looking will we're year So QX.

Michael Plisinski

case the us capacity seeing all and driving demand. it XXXX just clear, fill add In way the -- to actually to on demand wasn't that. XXXX Craig, the we're through that into is increase through

XXXX. see least we're fulfill online we at will have which booked demand or So the for to in actually increasing XXXX increased come capacity, and commitments

Craig Ellis

the Mike, extends way is that business? you just but across visibility Can the On parts the know you now. have across comment about in of the level I and it that advanced in Certainly, packaging portfolio on point, nodes. advanced [indiscernible] diverse and right business out, other of what

Michael Plisinski

we've access more about to following getting and important on going have certainly our visibility out discussions more customers, into a larger, become supplier year. expansions We as having the we're much earlier

on with demand. top of from secure chain and slots you is of in visibility Then just stronger being So definitely equipments that that. the concerns you to some our or increase high supply add able fairly and

getting an as we're discussion to added they have level equipment. customers want So that of ensure access to our

Craig Ellis

it. the helpful, and for that's guys, really Got luck, And thanks help. good

Michael Plisinski

Thank you.

Steven Roth

Craig. Thanks,

Operator

Patrick Our next question Stifel. with comes from Ho

Patrick Ho

terms you overall adoption seeing you portfolio are Got it. based color on of heterogeneous off, of driven integration. your Jet business. little Or application you type driver? a in Mike, product your quarter packaging of mentioned driving packaging in first fan-out. overall big across packaging nice Can broad the advanced different advanced your is by what's advanced of give being business, just and the portfolio, from Congrats terms the the outlook. maybe that and --

Michael Plisinski

would what a fan-out TSV driven we it's bump It's more we've lot say as in fan-out seen and XD lot it's whether wafer resurgence by type Overall, some I packaging, packaging, well. or structures mentioned. Yes. micro

design resolution precise continue the I'd the -- higher and which across as down that foundries, trying is and traditional more say packaging much seeing for investments systems, sizes OSATs playing business out we're demand driving well. large the wafer-level to the drives and support that and shrink, So seen RDL, much as the interconnect especially to more or IDMs certainly packaging nodes driving, we've in

Patrick Ho

supply with able keeping But gross are that and issues really [indiscernible] you've while you in a things And margins, strong those that helpful. mid-XX% of mitigate margins Steve, margin you past my given done near manage going in range probably how down. it. the challenging highlight to gross strong you to the these quarters few variables costs some follow-up environment, chain as the over are did overall, in maybe That's term Great. question, persist? gross How

Steven Roth

most that said over about Obviously, cost, and one from the has the has water the I've supply impact we the -- really going bring that as talk lead the on Obviously, people times. longer taking been the calls, part, for been most I costs is freight mean the longer previous some shipping chain. up. Well, there we stuff

those -- to done some around lead times. had we've So we've get longer expediting some

the offset, So we freight because, had we've product in margins. move but enough some to the increasing side. costs seen. of that bit of we and really I that pretty an have mentioned logistics kind little obviously, a margins was not strong

you orders. overall well suppliers cost we're the out purchase out for in that from Obviously, order the advance. As we got realize to increases with

very So increases got adding we've looking there are that new higher a and a But margins. keep the yet, numbers the risk but nice our coming strong think hit We've product obviously that's overall, material a we mix, a product product portfolio price strong I that's haven't with think therefore, seen any more got I margin. we out with products value, at. that

gain So continue as they traction. to

help they direction. might that in think negative the I the be wins any coming of

Operator

Our Bolton with next question & Needham Company. Quinn from

Quinn Bolton

outgrow allow you be I'll well. you maybe next growing look wondering just you picture XX% was the or offer you'll my sort able and year. about order WFE big congratulations as and as you And sort Mike your drivers I could to three that XXXX, top of of to Steve, WFE two outperform. rank confidence that into or hopes question, talked guess I

on the You've call. talked about of a lot drivers

about advanced talked packaging, integration. heterogeneous You've

you biggest going JetStep. into year? about What talked You've next are the of see some drivers

Michael Plisinski

happening here, numbers advanced we that we just the drivers in I of higher particularly end, we at of. thought see one the When some general. packaging is packaging, advanced at think biggest I more spending the smaller interconnects significant Well, in or the some of look see

-- both both in inspection. the that's the So driving

at So the it's wafer at but both panel the also level. level,

expensive. So you steppers those are as know, that fairly

So then nodes. such a business. of we backlog is that, a still beyond the see the lot impactful in to pretty, advanced pretty And strength

So that about rolling and from. we're across positioned expecting. think the pretty of the the for sub-X-nanometer That's intensity to we're driving adoption out more of a that of we something capital what the measurements, customers Atlas critical well was higher benefit several different talked also some we

positioned growth be for we've So also is memory. going some and in there. well always nice And to see next DRAM strength we been much stronger memory year,

will that talked we of So about. just nodes be advanced growth part that

also think I devices. and specialty the --

go which buckets, third is the at the think three different levels. I if be into continue would So -- specialty relatively devices, we some high

meaning relatively several peaks, years to compared meaningfully. pretty prior specialty back, So is devices growing

Quinn Bolton

Mike, Great. follow-up. some wanted integrated a metrology. the to ask just And wins with of specific you then sort highlighted new

dollars I think for gains? of be able might of start it is terms you year. Is opportunity a that us bit. across those Is mentioned in million little customers next tens six millions it you a size six ramp to of to if wonder I an that of share new customers. How big few dollars? that

Michael Plisinski

in the the that's step. WFE it's maybe customers relatively gaining. cost figure, important I seeing feedback exact the this have year. millions, definitely ahead and seeing, of first hard months XX% compared we're of year for of to of But CMP for tens you I compared on data of the And wouldn't it. it's in We're capability inexpensive very to the XX% in the traction we're year, growth the it's of process an think projections XX% nine importance positive give a mentioned the the the somewhere but of tool. well decision tool prior to the the tool because that orders our to it's It's range. obviously, mentioned significant I definitely or

a impact integrated. revenue So meaningfully having we're meaningful are gaining advanced the customers of traction -- on stream or the because definitely nodes and

Operator

[Operator Instructions] question our Steelhead Duley David from We'll with take next Securities.

David Duley

this backlog. the with Did backlog share it what you point? that mentioned record you I is guys think mentioned was? have us you a at what you Could

Steven Roth

backlog normally give the out actual number. don't We

a from in number. specific a we Mike put as double was year, out mentioned we've it where that think don't last point this prepared I his remarks at seen but

David Duley

last maybe at probably year-end. time you tell published just that's what was me the it, Steve, the backlog

Steven Roth

publish even didn't we Actually, anymore, requirement a it's not Dave.

don't So a -- that publish we long we -- haven't actually, don't time. backlog we in published

David Duley

Okay, okay.

to think, number Could shipped. now? JetSteps six us, I calls, in are you've got, for you last you you think that conference JetStep. that mentioned orders be us I the share many more the mentioned in Could how with few You remind backlog

Michael Plisinski

of are gave time, these an in would we it $XX with that. keep and Last top -- these we could around million, indication mentioned were this be be commitments. -- But on mind,

dollars reserve slot, purchase So some some the to them of are orders.

commitments. formal So

David Duley

into as to to tools any from started as activity are guys? guys or on And seeing starting creep ARM the those needle the to sort far -- the Okay. are that where hyperscaler any up type of starting purchasing? you Has move order

Michael Plisinski

speaking about generally? JetStep You're specifically or

David Duley

Just generally.

answer to JetStep, be want you that would fine. If on

Michael Plisinski

to you're generally, ARM who customer -- this, No, us. using obviously aware through going And large been I but with Apple going manufacture very think of I'm of architecture not That's that's Everyone's for sure Apple kind has doing where they're processors a those. latest exactly an their well.

definitely So that activity yes, seen we've regard. in

David Duley

reason I've new I the a chips, their coming some own them. market the are AMDs huge. and hyperscalers I of chips. of the to seen They're of of companies think, is asked some the and some, traditional pictures world, there's One developing

So activity these some ARM-based processors. area see the any I in was starting wondering to from lithography if of you're

Michael Plisinski

From packaging foundry we customers are our design, multiple supporting understand Yes. the logic side, customers.

microprocessors that we're seeing it. seeing So if it's they're reasonable that assume advanced developing to are we

David Duley

I in the Okay. up inspection And a for XX% business then you row. quarter your mentioned sequentially think was second

to inspection you've in that what QX, size will share of do could grow guidance XXXX? us And in business the Now you think you with given be your inspection XXXX? you for expect

Michael Plisinski

inspection talked se We cetera. specialty size. by don't about the nodes, advanced et out AP, break We per

on seeing specialty AP growing like be do by market from I inspection to mentioned, inspection So the customers But expect and than going of if grows that what to markets. device ahead more it the grow significantly. to we grow try and we're fairly we expectations next our would based is XX% tie year,

David Duley

expect So old inspection growth kind the there's is growth I you Nanometrics just then which combination the of JetStep the the guess, both recap, And Rudolph and which of your advanced the in business. is nodes, to business. business, in in Rudolph business, kind growth there's of the the

upcoming So kind of all are all buckets year? the -- in the growing

Michael Plisinski

the an lot shortages. I that there's and customers decent across and to There's impact guess, leading NAND, when demand the a demand, also of chip but solutions. seeing the that's, just Yes, not announcing for the our logic which MEMS trying DRAM and we right fill RF edge for expansions, markets and we're -- we're across serve, pretty power are automotive, seeing customers with semi and everybody compound demand and Yes, some and

David Duley

results, looks and Well, nice is to going excellent. as Congratulations be well. on future quite like bright the it

Michael Plisinski

so. We hope

Michael Sheaffer

Me too.

Steven Roth

Dave. Thanks,

Operator

Sheaffer, back session. will to this you today's concludes question-and-answer at the I additional or conference Mike closing for time, That any turn remarks.

Michael Sheaffer

wrap and That continued the for to today Onto for in in everyone ahead interest your up the participating We'd for call. concludes Innovation. call our the Please thank and remarks like call, David. go

Operator

This call. concludes your participation. today’s Thank you for

disconnect. now may You

Onto Innovation (ONTO) 7 Nov 212021 Q3 Earnings call transcript