Earnings call transcript Q1 2023

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Operator

Good day, and welcome to the Onto Innovation First Quarter Earnings Release Conference Call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Mike Sheaffer, Investor Relations. Please go ahead.

Mike Sheaffer

Thank you, Danielle, and good afternoon, everyone.

XXXX market financial closed. its shortly this issued the after Innovation first results quarter afternoon Onto

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

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

subject to meaning that this are the like contain forward-looking a of will Such call federal to statements made laws. by would vary changes, uncertainties I the of statements remind you within the securities actual materially. on risks the can that range management results statements and to cause

Innovation regarding information not to obligation these to more Innovation's our events. undertake results, forward-looking that would update light of statements the future For Onto may or review impact our Onto new does risk factors and information earnings the you encourage release in I filings. SEC

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

call go the Mike? and turn our to I will Mike now CEO, ahead over Plisinski.

Michael Plisinski

you, for joining thank Mike. and you Good today. call Thank our afternoon, everyone

was in from lithography from revenue delays mix increase chain. higher film an due first midpoint closed of came quarter of Innovation shift into near by revenue sliding gross tools two in the the aided guidance systems the supply Onto Iris near the million by impacted mix. of product and The second primary $XXX earnings while our end to guidance, with in margin high margin, quarter favorably

expanding development supply we're increasing chain engagements. few the Following initiatives focus our years, last on the growth strategic our and of

over in in XXXX chain to synergies $XX to savings expect our in the follow. supply We million investment with additional cost yield

to volume and and required in more migrate us into the earlier Expansion customers’ to This development. us production. insight ultimately allows solutions for participate our R&D time provides process development deliver engagements of our comprehensive

were contributions investments, honored the process we future by tied foundation pilot-line setting first quarter, R&D believe our across growth leader both the TSMC been Technology we XX% With year control. awarded our a front backend last of world advance exciting to or new In for to have quarter revenue Novel we're markets. to Award strong several over with Collaboration and for

So let's start flat from essentially advanced logic quarter for logic from and XX% was advanced our our was with represented Over the fourth the our of customers. nodes system highlights XX% nodes revenue below X-nanometer. revenue revenue. of applications advanced Advanced

incorporates nanometer lines. enable volume sub software in OCD modeling from fourth Atlas the two with earlier accurately speed earlier shifts frequent and to including without production. development, customers and associated XD our quarter of revenue years leverage the compensate with surprisingly, broader of process to line ahead of delays. customers Diffract exclusive reductions allows publicly roughly AI expansion an announced from technique consuming model process XX% the several latest capacity in memory Not metrology structures declined retraining. R&D This time adoption R&D Our We and now for

the platform valued and year. over XX% metrology applications. shipments Iris share These over agreement is The a implies Element our The we Echo metrology semiconductor estimates from second three Atlas at now qualified flagship also top OCD to systems our million, our adding systems jump was course, and by of films manufacturer. X% that believe XXXX and films and metrology includes in customer. a implies quarter, the of successfully over VPA some In agreement at purchase part this for metrology materials XX% volume are a of integrated films opaque and share current $XX covers confidence our of to for

development, our provide high volume we're customers. the that by metrology This of a demonstrates required of deliver speeds in better production. portfolio strategy to – and their able dimensional at importance working material to earlier our account By technologies together

we Similar must submicron designs. in to wide inspection for needed customers, our designs and nodes also chip for resolution inspection increase new These that of levels denser see interconnects advanced require provide systems of through an silicon in at engagements a XD for range chiplet metrology packaging R&D wheels stacking.

Integrated new Dragonfly technology. packaging manufacturer inspection EBXX a SoIC selected semiconductor selected System dragonfly Chips five stacking In by quarter, five the XD was for chip second for X.XD top inspection top A manufacturer on in applications. or implementing

devices convinced for dimensional first portfolio and Onto Several of was quarter customers of XX% our new of of process, support films these and high prior more three the and and the market. silicon power innovation segments to the purchase from in in Revenue products. a added metrology XX and year growth to technology inspection up went combinations over quarter gallium or product carbide systems nitride their the several power the

access the will technology. in the center customers’ wafers in over opened advanced XX% place, latest to our efficiently field have doubled, our allow In to and service Over us our facility customers in closing, our most training carried generation training hand than packaging happy our specialty systems growth. demo next to on serve facilitate work their second equipment. new to capacity experts Taiwan and paving January more announce equipment course more our offerings we our expanded way and significantly. to already ten future of to most are our to advanced have With is with engineers This cross-train

moving renewal XX%. exceeds improved the value leading we new pickup a contracts. for see Our opportunity the support rates increase In to support contracts service smarter software these by infrastructure and customers first annual five contracts, offerings quarter, to existing is productivity the recurring multi-year we the future, recurring solutions. of integrating support in to and had In

review I'll call that highlights. the financial And to over to turn with Mark our

Mark Slicer

good Thanks afternoon Mike and everyone.

above while and we of being after EPS of million, market is the of the midpoint EPS $X.XX, just first year the to coming range, our first the the revenue last driver As achieving of setting over off of closed the $X.XX decline impact highlighted, midpoint an below $X.XX memory of of fourth record our period the which $X.XX. biggest guidance with year. $XXX memory our quarter range of XX% The Mike revenue and quarter quarter guidance – down same this

moving year-over-year of on of million packaging Now, declined by $XX and and declined to revenue. the advanced XX% $XX Specialty of revenue represents million, advanced XX% represents devices revenue, achieved XX% nodes in X% and revenue quarterly market; year-over-year revenue.

services $XX.X Software X% year-over-year of revenue. was down and represents revenue of million XX% and

primarily XX% margin delays into exceeding two quarter we the stated supply gross the our to first of the Systems from second shift quarter our from XX% XX% for due As Mike the JetStep achieved range guidance of chain. to

$X level see quarter-over-quarter R&D million guidance drive First expected were $XX our quarter a investment of as initiatives, range. operating to several the strategic QX. the cost guidance exceeded maintained immediate well our in million down high-end drop the million, through growth as in we above priorities expenses higher range We $X didn't and as reduction

are the still committed to delivering million year. we reductions of However, $XX for million to $XX cost

was from compared Our the XX% revenue prior operating XX% the $XX for of income year. to first quarter of million

year share, for first range. quarter $X.XX or the mentioned of down income and above midpoint last was the as same per period net XX% $X.XX previously million our over the Our $XX guidance

the from short-term sheet; of up of with $XX delay cash year-end the continued year start ended million cash ended XX% in service driven operating investments of flow million receipt $XX our of representing quarter the the $XXX shipments of to balance as million, Systems Now to the JetStep parts we million, since Inventory million, an $XXX $XX the by moving and of expanded primarily well quarter base. the at the with increase on revenue. installed the two of first as

of have performance worked to we inventory. with our materials cash a returning to optimize to earnings declining our our existing continue XX%. XXXX. as to of consistent This range free XXXX – is by top will and flow million during inventory prior the to historical to stated call, burn Inflows of continue raw As for mid-$XXX our are levels over off of return priority contribute levels this to end will suppliers

Accounts nine days. days-sales-outstanding receivable decreased to our million XX increased and to million $XX in quarter the $XXX days

XX,XXX or our share under million to we of cumulative current repurchase just X repurchase During additional $XX shares million bringing shares program, of to return quarter the common the stock, over shareholders. an capital

existing under We million our million $XXX remaining $XX authorization. have

turning to the expect for Now, QX; outlook we quarter second million revenue plus currently for $XXX quarter first X our points. for percentage – be or minus to the

versus be a including quarter JetStep will mix XX% margins the down record the in expect between We QX due Systems. forecasted six XX% to to projected second gross

between expect million $XX to For we operating expenses, be $XX million. to

rate tax XX% XXXX, expect between For the effective year to we full to XX%. be our

to our and to be QX assumptions, diluted expect per shares. between be share on share $X.XX anticipate XX.X We for earnings these share. per we Based account our approximately million non-GAAP $X.XX

expect third we levels margin JetStep from back the our improving due Systems. to contribution the to quarter, to XX% ahead Looking be to gross

to OpEx full be this reduction the $XX first range cost move and benefit Together $XX result million of QX will as exceeding annual the quarter earnings our in in elements one-time compensation the past levels. million expect to we activities see We in of together.

discretionary manufacturing referenced supply $XX operational at in costs. driving the we reductions in call, and million, my of to earnings and includes I reducing February which staff $XX sites, and efficiencies our reduced are As million comments earlier costs our during range highlighted further chain

cost predominantly of in model move operating the permanent reductions into operating long-term returns. growth our and profit back these With margin metrics industry to expect gross we nature, when

I remainder for Mike? XXXX. over the And will QX that, of insights turn Mike to back into with and it additional

Michael Plisinski

you, Thank Mark.

that second only and in logic quarter specialty and Mark the uptick customers is continued reflecting memory weaker packaging As EUV Offsetting weakness the and wafer expect strong weakness from just power, projected the quarter. spending we manufacturing. advanced from mentioned slight first demand a in

the first with Collectively, the and the incrementally specialty half. second into markets second bottom we and believe reached growth in stronger solid quarter packaging our advanced quarter

in we the remains Although bottom uncertain. will of second advanced recovery believe quarter, the nodes rate

we're broader So projections we're very even expanding challenges with progress into new reflect making pleased new markets. and the while revenue market accounts

the grow in We're leading-edge our carbide. market. films share and applications and new logic, planar GaN We to continue moving Dragonfly submicron silicon quarter platform, power growing lab each to for including see our applications GX position we our in

to on more growing – recover, combined be once shareholder higher that efficiently With projected these demand ramping focus more for us We outsize this margins with our we our revenue for strengthen and production reflected markets to model, meet expect to expect greater customers again should serve semiconductors. to demand growth, which complex to initiatives returns. be the and growth the financial position wins when we expect in well

to over call the for turn now Danielle questions. I'll your

Operator

Bolton question Instructions] first the Please of Thank line Company. our from take go & We'll you. [Operator Needham Quinn ahead. with

Your line now is open.

Quinn Bolton

question. Mike, going the through business, guess, about in a understand ask contract Hey foundry/logic the on pressure that me Thanks I kind about $XX weak specialty. you guys. and you takes some quarter for memory letting the the the strength in talked in talked mentioned. puts But of and environment million second a advanced

for businesses weighted China I whole. the guys seem think be do the and the a I I'm half? half half industry second wondering to you in to relative see stronger mature nodes guess first second And

Michael Plisinski

say but expecting Relative the massive snap half. wouldn't I to the first second back in half, yes, a we're

Quinn Bolton

Okay. half growth half your consistent But with expectations? modest over

Michael Plisinski

the through the that, I where as see half. But the out. at recovery our most, the the in our nicely advanced – the least maintaining be furthest rate or nodes in to do And and strong mentioned, growth packaging – quarter growth a markets specialty the at let's the second advanced say right is we second fairly continue that Yes. least logic, advanced of growing

the second the really growth So we to see that strength half. in that's of carry going the

Quinn Bolton

Iris Got looks planar it. And or with I for see Thank segment you guess tool. to gains then share films in the guys question you continue that. strength like the

said year you about revenue. of million I think generated you $XX last

As XXXX, XXXX think you Do solution? do you and share there? in looked the with see what's you make at you that gains how can outlook Iris to continue

Michael Plisinski

top having Iris I the I that for do. by the exciting the semiconductor another first mean, Yes. manufacturer. three qualified definitely quarter, made of part was We highlight

we customers. So smaller had other had and several before one we

five Now in we fourth the quarter top we and manufacturers have the we another have – now. evaluations one, that as nearly mentioned of semiconductor all

are – that being momentum's impact two to the in this once proposition value And double-digits. see are the we carry of – we building, growth and the longer recovers have forward those really double-digits revenue. or industry positions win much expansions, and will I on tails, certainly year then our bigger the So broad-based is have record going think broader strong revenue momentum fairly proven,

Quinn Bolton

quick a the sort XX%. four you back you're in that quarter to of normalized litho to third margin that, range just of we Should back XXXX for it. gross JetStep if third Got then one quarter? more And assume roughly the Mark, run of you coming look a mentioned the systems rate to

Mark Slicer

Quinn, assumption. seeing. we're would with good Yes. Yes. I that would Yes, a – what that's I consistent that's say

Michael Plisinski

also margin to being the we this And with the improvements – did reaching that, throughout just the did sort of say add year through we fourth past were we target model. to reduction, that the litho quarter cost working in our in

half, And that lives also see those just tools. so of a as we the we'll move real on not number the second benefit as better well but into margins

Quinn Bolton

you. Thank Excellent.

Operator

Securities. question go We'll of ahead. from Please take next our line B. with Ellis Riley the Craig

line now Your open. is

Craig Ellis

for and level. you, Yes. taking questions make Thanks high and for one start with it just Mike the I'll

your line at versus do characterized off as growing, you shakes versus acknowledging and and the year you this industry performance often outgrowing think pretty now Where you've significant some cross expected either past the growth? or as in business we've got look in currents. industry but So out

Michael Plisinski

Where's the growth industry the a shakes of out. numbers I've lot growth different seen on right industry on, now where end-up?

deterioration provided. I that think we're upside see guidance. the guidance to hard actually to some with that. We're to We working any – drive previous comfortable don't that to we've

semiconductors, in see XD the which we're some on So power the coming engaged online. the and have you two-and-a-half are packaging we emphasis of technologies

well. or in IC process those the panel into with as or packaging process the business markets The control and litho then control subs bringing introducing

spend more to the those have is offer we where customers. So

And about so thesis we've to were outperform talked our remains perspective adding we the also going our was why some upside from films – for the growth.

we've you XX% look So we're wherever and if the said at fighting that. you market, above look us, expecting be for to we're least or down at

Craig Ellis

of stand Mark, then comprehended $XX $XX $XX is color deeper we third That's operating that to I we're captured So leave like the Got doesn't to want we the $XX in quarter? in because for And to dig and it realize back the we the be savings. much $XX full million that. the when real that at helpful. wanted million quarter? anything in benefit million on cost to in with the how to fourth will it. seem in what And I where million How provided you million first quarter, progressing for does of really understand expense

Mark Slicer

our we some. mean, we of so mean, QX. $XX to Yes. where OpEx, you rate QX No, I wanted a run were not I at coming some where million off when for did range did million, reductions, look in capture be certainly we of have low we $XX

I strong I that. capture the and coming mean, just think we're the year into to end trying pivoting drop, off certainly

that and we'll always the That's We QX. the will then see – kind why But have you'd QX see elements to million see lower the And were of at rates, of range think, in expense annual expect we we're operating in certainly confident $XX bigger it XXXX at range. out QX. than some million of that again, were the we in as I where we compensation $XX historically $XX to run we're that which benefit is have our – in spike we'll back million QX. topping into hit

Craig Ellis

the of some think not but So, third expense you the have? are through annual because perhaps you that a visible we've that the of with now it second really quarters you quarter, gotten saying increases second of

Mark Slicer

Yes.

Craig Ellis

When XQ at XQ? the remaining you look and and two-thirds

Mark Slicer

Correct. be the probably way put Yes, that would it. I would

Craig Ellis

would be some – said of of it then it structural. be you some would And

of how Mark. more it that we're how is temporal? just is So structural savings much and much Thanks, seeing the of

Mark Slicer

as want of mean, for it as I we're is what striving mean, when the is permanent. I see I would we that's to comes back. majority Yes, obviously say growth that

aiming obviously the be want to And that, back down. sales again, drive as and model managed model has items spend going So to consider profile I that where that come cutting there that into expense like leverage. up we structural those able to we're make get variable to you to back term. But we the wouldn't it's we're some like spend would come that be changes of mean, this I drop long growth, commissions far as expect, as things variable is we to want to see to going to that an through point get that's dictates. the second, the contribution going that

costs to other So degree the to answer variable as out question, taking predominantly and your then keeping can. out those spend and said, the we managing I those

Craig Ellis

Got it. Thanks guys.

Michael Plisinski

Thanks Craig.

Operator

Please Instructions] Jeffries. question Vedvati from of take the [Operator We'll with line ahead. our go Shrotre next

is Your line open. now

Vedvati Shrotre

question. taking my Hi, thanks for

you Could think had piece the expect of puts from opportunities. in the million just of of or JetStep it changed? in million XXXX. pieces two quarter step give about $XX panel from coming it? to this then I the the bigger like it. three more takes, was and and quantified jet portion were some The last piece Has So, panel next NovusEdge you you do $XX And or NovusEdge see

Mark Slicer

is panel I piece. power think JetStep not of the part panel

So, is where… pretty that established well

Vedvati Shrotre

I sorry, it. Yes. of thin the meant, I'm piece

Mark Slicer

Thin, the films? plainer

Vedvati Shrotre

Yes.

Mark Slicer

so there, plainer there. definitely see Yes, growth alluded we some we some films as to, of sort upside

the intent together of they by tied portfolio additional one our of our products and in benefits we from the our customers to what definitely seeing exceed are our we're based call going on or the products Power, Discover the selecting targets the expect targets them our realize new on also platform. we in we portfolio sell is We about as first expectation adoption of in software there. there and the exceed products to Enterprise quarter, can meet suite where a talked XX,

is, So that I nicely. momentum think, building

manufacturing, at release that were constraint. speed trying piece then the But is was you the up provided. I going to least to NovusEdge. that the which also we're other by maintain They mentioned guidance constrained And or

some $XX $XX think I it. can product, we will exceed, roughly million if not million, take more if release customers

Vedvati Shrotre

you. helpful. Got it. That's Thank

Operator

questions this closing are the time. call back Instructions] Sheaffer you for to further [Operator at no Mr. remarks. additional There any will turn I

Mike Sheaffer

Danielle. Thanks,

Just events. for about quick three everybody reminder upcoming a

the on June conference Stock First, Onto And participating on Boston in event Riley New X. B. will May And management, at Stifel hosting at XX. analyst at third, the be will participating we're Exchange be we York in the our on second, Conference X. June LA

to website Thanks again, our this be A is going on X:XX of for joining evening. replay everybody Eastern available us call Time today. the about

you would Onto continued call. Danielle, Innovation. the for to interest please We like your conclude in thank

Operator

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

now may You disconnect.

Onto Innovation (ONTO) 4 May 232023 Q1 Earnings call transcript