ONTO - Earnings call 4 2023 | Onto Innovation Inc.

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Operator

Good day and welcome to the Onto Innovation Fourth Quarter and Full Year Earnings Release Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mike Sheaffer, Investor Relations. Please go ahead.

Michael Sheaffer

Thank you, Rachel, and good afternoon, everyone. XXXX shortly and after its results year issued afternoon this the Innovation fourth full quarter financial Onto market closed.

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

on you Michael Chief meaning Joining this made management that and the the uncertainties Executive would I call today vary to laws. Financial Those to subject that risks results securities forward-looking federal on the Chief can statements of Slicer, Officer. call statements will like materially. Officer; cause actual are us are Plisinski, Mark to within changes, contain remind by statements rate and

review Onto update these that undertake results on risk unless new will be For more to results, the financial Innovation the otherwise information on future and obligation non-GAAP in statements financial to impact information regarding Today's our basis SEC earnings or does our events. release a you not specified. filings. I of light factors to forward-looking Innovation's would presented encourage discussion

non-GAAP a and reconciliation a can be earnings detailed between GAAP in reminder, release. found As today's results

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

Michael Plisinski

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

range. devices Dragonfly demand Innovation memory of for was may have projected quarter guidance to already end primarily logic a As than fourth you to systems due stronger for seen, had This AI year high support end our and of with Onto to the strong revenues inspection the applications. packaging exceeding

first increased as quarter. in the guidance for demand this We to our continue reflected expect range is

systems. generating resulted multi-quarter operations cash quarter, from still in XX% demand Dragonfly controls and the Financially, we're starting of benefit to operational over in the supporting efficiencies, while for the which surge tighter in from

in model long-term will the in expect with end us We back by bringing soon operating line follow, margins of improvements our year.

lifted revenue the customers record. XX% by from and begin over spending and and this quarter advanced quarterly the boom our AI specialty So consecutive packaging prior market with where let's a set

start device and advanced year, since revenue fact, grown the for the quarterly In of packaging has XX%. markets the specialty

year. growth annual have XXXX. revenues increased this the in XX% greatest, over to with our our million $XXX come top power growth, just markets for in partnerships Several they're XD $XXX this where architectures. most semiconductor including increasing and and manufacturers the advanced While have risen but in the basis, contributed consistent million long-standing investments XXXX solutions demand on including has an chiplet memory from to semiconductors, packaging, from

interconnect and architectures several the as these metrology process for more density, need next Over complexity new additional Dragonfly increasing steps years, applications. inspection create and we to expect the

our leading the OSATs in quarter, applications. shipped front-end and and metrology Aspect systems, films manufacturers several newer echo fourth packaging including metrology example, we to emerging for For of

system in the for additional availability our we and highlight To team customers panel quarter applications. the provide X for manufacturers, Another shipping and Firefly systems complement of supporting inspection mobile announced quarter. GX lithography high-performance latest lithography tools X was our panel our to the as leading-edge technology fourth planned compute

generation The expect the shares third integrated of as being GX packaging panel well This same our and tool's as all of yield high-performance third design. with metrology is -- tool capability inspection productivity the generation which software the qualify to substrates Firefly heterogeneous includes especially Dragonfly next technologies. targets, used of generation of this the help to reach panel customers accelerate panels. fully more and will traditional and capabilities our optical of their metrology for we glass solutions, It ability our is now

nodes. advanced the to briefly Turning

NAND was in and with historical revenue between reached split bottom. the declined believe and from has projected, the DRAM, we revenue performance, finally these we the fourth quarter, As nearly logic. Consistent it equally customers

of half light position was of in first received strengthening we likely optimistic for the deliveries in these XXXX. orders $XX We're continue overall, quarter, systems when XXXX. in of fourth occur lines. the that a placements million for and pilot all early orders we receive volume indicate approximately And to revenue gate Although additional for around ramps Atlas early Iris our

call Now I'll and turn first financial Mark performance our for the fourth over to to the the guidance quarter discuss in quarter.

Mark Slicer

and good afternoon, everyone. Thanks, Mike,

revenue midpoint advanced increased nodes million, in revenue the highlighted, we of XXXX, within our us in $X.XX, of quarter lower X% sequentially $XXX business our while XX% quarter EPS constrained to the and Mike year. revenue mark the As the within but a achieving services up revenue range exceeding quarter. fourth and guidance the Fourth a guidance with third exceeding milestone versus high by decline for the closed quarter high-margin our parts for

record Looking QX revenue over XX% revenue QX revenue over XX% of of increased represents XX% $XX at million, the revenue. markets, by quarterly with and Packaging nodes, $XXX and which Advanced of advanced declined had million revenue. Specialty and of represents device X%

Software X% range $XX operating and of were Fourth million, our $XX million of with to of services $XX declined expenses QX, of the representing at while million revenue. quarter guidance XX% $XX revenue end million. over low

in to actively earlier year and run levels. continue OpEx QX to our realizing We back 'XX our rate of the cost while in costs reduction put driving benefits place manage initiatives the

compared was million revenue the XX% XX% to income third for Our quarter fourth $XX the of for operating quarter. of

for versus Both the fourth third the of leverage operating income revenue net quarter $XX highlight performance versus XX% quarter income XX% third the our operating net was million, year. quarter. for the and improving income within Our

quarter quarter, million representing representing decrease cash of XX% $XXX record $XX a receivable million reduction ended quarterly with $XXX an within from million, the $XXX increase with million of We of of the achieving quarter million, year, beginning to a of operating cash the investments from lead do flow. expect the Dragonfly area revenue at inventory us flow procure with performance exceeding of million of days to further fourth the $XX moving XX% XX% million cash working increased the outstanding. quarter, long operating short-term flow our Accounts items, revenue. inventory and critical Inventory ended we of in for Now $XXX drive consistent sheet. reduction days and a balance remains optimization QX, inventory XX ramping and outstanding our as days Even to X capital to days levels days. time cash production, requiring increased in focus the to outstanding sales a $XX

quarter QX. between currently our to our be revenue the to turning million for for and $XXX first $XXX Now million. We outlook expect

our between taking quarter. hold historical business phases nodes gross expect chain in be experience XX% We to in will and supply the reductions as the lows advanced the continue initial of to margins we XX% only

taxes other expenses, operating to versus compensation due million $XX higher For reset be components. and QX, expect primarily annual we between million, to the of payroll to $XX

that year potential any year. expect the changes effective tax to legislative tax impact rate which occur full 'XX, during For not our assume to the for be between we XX% does may XX%,

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

to programs to area for our critical for model. to to improvements be targeted our continues return XXXX, forward focus operating operating necessary us Looking

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

Michael Plisinski

Thank you, Mark.

be of before AI will in AI bit gain We're our earnings for we during a strong AI hit for but to and market. started expected first first node our a up which way device through TSMC edge inspection the in business. a is for XXXX AI some encouraged Dragonfly for generative of healthy year. Broadly lows, CAGR in pick see production. the speaking, they their the In range quarter our comments leading to packaging, the for comparison, are than revenue especially the and we continued first historical to increases driver recent quarter reflects business inspection through larger node processors. guidance be By Our the Xx to expect application XX% is strength demand do support advanced advanced QX quarter year at by advanced call, spending the the in LLM forecasting the multiyear contrast, last from still systems devices

exciting the continuing steps number of and expect an in on greatly we the XXXX, XX% interconnects subdued similar number What by denser emphasis are DRAM, more is with expectation and as devices include layers meet billion and this devices, about addition chiplets will that process in will maintain CAGR. in developing content intensity also pace to phones package. in require era greater their We're of yield forecast production with and implement revenue they for semiconductor leaders require AI silicon the addition, in increase very only and outlook of a will that By find that targets. increased to neuroprocessing with innovation outlook In AI capital a increase of partnerships smaller The and is our be complexity. we we're increase the dawn and PCs. their increase interconnect of manufacturers they forecasting and AI a $XXX quality rate those provided begin technologies adding edge for stacks complexity growth and devices greater networking for the Gartner the of per exciting. control to market, is the

to second backlog -- Packaging extending with be of already a for AI the expect the driver backyard year. our strong We into half XXXX

of improving project technology we and see buys Based even the we nodes, incremental the magnitude of the low for as recovery growth business advanced strength in increasing. nodes recovery gradual AI double-digit our packaging and in the timing advanced on However, remains utilizations uncertain tool and the year.

open questions. we'll your Rachel, to call that, Rachel? the With

Operator

Shrotre [Operator comes Instructions] with Our from question Vedvati Jefferies. first

Vedvati Shrotre

the quarters, The $XX you going first momentum continues of we your of multiple go as you've that Is orders, million into kind seeing? quarter? for trajectory next so last you about about Could think, revenues. packaging the you're order that one that couple talked talk is -- -- I to

Michael Plisinski

yes. next -- is the into backlog the to -- Going X there so

quarters strong our in going into the increase will X the next and guidance. reflected in that's So be

but come the of as as got not some Lunar level, all we customers Year. the early, we'll and at backlog see they to half, still Chinese where our half, mentioned, that extends increase the same way we've Second start through New it's out second

Vedvati Shrotre

Right.

-- may And so a if second follow-up. ask my I

So the Could what for of contrast us what front-end front-end starting tools are on use to there versus metrology in you talked about get cases kind did application. tools compare side? inspection Dragonfly you the packaging and

Michael Plisinski

more metrologies of types complex. different and It's

TSVs the of looking things an that. line looking are that Dragonfly voids applications be could different but we does. for or pads, There that, well whether as you the the idea. some thicknesses gives well, at looking cases, bond of creation as the bumps bump other echo some applications And and like doesn't we're do you're -- metal stacking in or as metal metals for for in So there's that product

Operator

Next question comes Riley B. Ellis from the line Craig with of Securities.

Craig Ellis

you to great this, you One, Mike, to I you. start The Dragonfly. a year-over-year, the and on just then through the to and momentum ramped issues? has some doing meet the Advanced Any fulfillment question wanted given constraints, strength your given is business guide look talk first with how about of in as How second see quarter -- you manufacturing et the and up with are can that exists couple Packaging that quarter? robustly further in just cetera, Xx demand capacity?

Michael Plisinski

us. and one a in good resources I'm to from the factory and internally actually order question, with level concern, from our great again. that job meet a able it's That's with increase done another, California with very of team. but it we're suppliers, ensure from to our good impressed for working Minnesota working ramp even quality to They've customers that the instance, a expect moving to

talked of the again as capacity we the year for half first We're well. increasing about So QX. the

we has don't the outstanding we're done far, we team everything, overcoming that see so see. and job working an every So, -- hiccup through

Craig Ellis

Got it. Yes.

the on you end next how shipment and you to you use first pretty that second to through expect hear. into areas year about tool Okay. in the And accelerate. to other And you the the are Good go first activity? mention nodes that you to half expect pick talk Can did modest as advanced use layer half year? which the then see of areas increased secondly, up some would on end

Michael Plisinski

Yes.

and And I are DRAM. then by improvements. mostly followed these logic incremental think it's again,

a real think definitely But as half even -- some further I in maybe out. but I that see in early the lot be we're picking We've second of seen next volumes we'll there's improvements maybe up, lot into still NAND, mentioned, bit or a seeing incremental incremental uncertainty still year. improvements. some when will is little

Craig Ellis

impact cash Sure. just to is that gross for I flow. sneak generation in enhancements one And benefiting question on The could to record things then operating Mark, the Mark? if with hear like margin. efficiency cash are nice

here? You little the is for the the what's indicated the by back-end there? linear from in it you expect to it advanced the -- target from What's fairly be more help getting Is of contour model loaded a back year. really end with nodes? Or

Mark Slicer

as Certainly, working is perspective continue lot moving the just have higher-margin gross have. to that the But get mean, the It margin. that capital that certainly our in executing the is we was have show area model show comes chain management, advanced quarter-over-quarter Craig. things year, we Yes, It from to to year executing to operating for supplier supply a nodes for I we back in improvement. now management, really the initiatives mean did what similar at where of certainly we pricing to our in and there's cost what look we to need place control. that to executing expenses it in commodity, historically our down in previously. improvement price, right just with goal does still help again, and a I business.

Operator

question next from of Brian Stifel. with the Your Chin comes line

Brian Chin

expansion Maybe, it? what And And second Dragonfly needs the given capacity we Mike, expectations demand think right half that? kind you function and have half growth broadly, way when AI discussions that of AI about XXXX? being Is the in in customers, questions. shouldn't market about on second the think of in packaging? lead keep for to few a to of around ability more for times managed really stay talking where front the to your to are your A

Michael Plisinski

Yes, Brian.

world and So a short lead in forever, visibility, perspective, we build for had time always of packaging from to a the would very of course, we projection. forecast

somewhat high I sort given is times around for misleading, X time Dragonfly. the say the demand quarters but lead right lead would So of now

right question half The a expansion is second now.

another I more round certainty XXXX, in of think there's expansion.

to get last if given But books year QX, we've their and be need be if additional QX, in they at would to that enough and online they more them will XXXX need or capacity. through QX the that Our looking customers X half influx second bringing capacity now are have the order add they're to stronger indication a add. been they seeing the that quarters,

Brian Chin

for the in still like although you peers half a than Okay. Got you compare looking at on -- moment. at the XQ of half first second growth the guess one it a few second year, even have harder it. the full year. kind But the your maybe last like in commentary maybe guiding companies of your sort business, some though versus It about guide, I based looks looks overall half, you're have in you of pickup improvement with probably tempering it of see lot

Michael Plisinski

I'm tempering it the at moment.

Brian Chin

this for question Okay. but expect the to target year, margins. in additional calling big in that cyclically obviously, be moment in very Fair that not then a nodes back model yes, do the business gross the And Mark, and The of enough. follow-up model. maybe, -- on the at you're advanced pickup is depressed, you

of any prior the kind suggests levels, not model, even just sort advanced that be start it to sort up, even you target close you probably pick comfortable some it. get that but So really within should of of peak in pickup to nodes, exceeding when

Mark Slicer

from a that. certainly, we get cost now things doing standpoint to we're are Yes, that when operational absolutely. those up, numbers accelerate the I going back mean and

Brian Chin

on how Yes. level right advanced is And the revenue drag now? gross nodes depressed many in points of margins

Mark Slicer

that well the I average. And at we've business specifically that. just company above advanced comment company always wouldn't say, was was inspection would nodes on stated Yes. I average.

Operator

the Your comes next from Needham. Shi Charles with of line question

Yu Shi

it's did actual was $XX a beat ago, by think the want revenue be I number. I packaging quarter by be million guess, chip bit related one expecting was -- guidance your first in The the Mike, roughly up hear probably but you my what million, QX. $XX you over What really to little given AI would what XX% Because were the to number? question, actual

Michael Plisinski

Yes. sorry, of Charles. question, front But that me. don't -- have in That's good a I Brian number

saw of if all in However, the to AI it the of was quarter not tied packaging. nearly we the upside all

is that million primarily basically that. increase that So from $XX

Yu Shi

it. Got

it's adopted, aspect. AI being I seems question, aspect, think second packaging believe you I if systems like and the applications. The interesting When correctly, I color for? I at look for mentioned in for the it heard is you portfolio, kind OCD little your of that a top-tier used been interesting it's provide adopted Can exactly you a of where that's packaging. bit

Michael Plisinski

had it for I unique the some capability. Well, was measure -- holes NAND. to Remember, designed XD channel to

there's that And instance, sure deep is could product to high for that aspect the and that TSVs, some Packaging, is public big things big, you metrology much other to that Advanced ratio applied I'm customers. how applications NAND. our applications some imagine XD from not similar being in So for

Yu Shi

the Is application it the HBM more on logic or more packaging side?

Michael Plisinski

Yes. on think more Yes. HBM I it's right No, applications the now.

Yu Shi

Got it. it. Got

I So thanks all in in HBM I orders? the last you last customer from what's you talked status orders, provided ask customer? a becomes color started HBM seeing side about trend when quarter, this these of you customer the think for aggressive. primarily, you to AI want right, And year, the of to started see the the second really business. one the terms about you HBM then for

think it pick like status? third the The bit is the up when like guy still to orders? third a X Was muted. now later X you same that a was felt is going And little quarter the do

Michael Plisinski

guy third think We is the picking up.

technology unique that is game the X, up we X, them have help who. and and So also to picking But X, share think advantages. give they some shell is third now market the some going who's of not saying they in investing, think

Operator

from Securities. David comes line with Duley the of question Steelhead Next

David Duley

margins. first mute. I'm My on gross question on Yes, is sorry. I'm

it improve gross because mix you've or I cost in what sounds Is reductions accurate? that been of understand, Just margins like without so focusing and will volume on.

Michael Plisinski

Yes. Yes.

David Duley

Right.

far driven much GPU intensity? a infection as -- of your far this the think much help levels the you growth how business? revenue, And do could AI a by follow-up it you have -- do which as as goes, that, far rate greater is year? as inspection? -- business is As this it's understand inspection bandwidth to How much is of Is think whatever memory or piece and/or your as Onto the then units greater as you a high had by us you last driven does

Michael Plisinski

Thanks, Dave.

So I a ago, radar. on year really mean, I wasn't the

would the know I and wafers So of tied -- that you say to AI is number high. or volumes pure the not

So intensity. This to advanced these capital required of devices. complexity this yield the precise architectures is really much and really and how these metrology is is about about inspection

metrology, So I find something that shine. unique about knife think years Army capabilities and have for these advanced in Swiss applications, that's us levels we've both talked tends inspection, our always of containing Dragonfly driven really ever performance. been to customers The to that our clear greater

think As intensity far for higher logic, HBM is the as are mix but goes, there X capital players. I the

we've right So is what and half half. backlog was roughly said at our now, least logic. and

Operator

question Miller Next line Mark Company. Benchmark the comes of from with

Mark Miller

And new really chip this start become for production. all the gate just mentioned traction does Japan the that there. fully you're full by fab, it bloom? Is XXXX? and about also later new When internal wondering that some when Europe getting year does fabs, ramp? and funding around, U.S. to or You I'm

Michael Plisinski

Yes.

are that's clarity stronger XXXX, demand. question NX million-dollar really I So we like don't bet now, recently great to ramps, early seeing in have they're as is on read gate any all Right we there all signs, around some certainly when the know. there. far I as

up our make yet that in definitive maybe We to where another But that gate around way right as as we possible. pulls one not just ends ramping. have know we're sure a job is in. all strong or anything now So position seeing

benefit So can. we when than it can possibly does ramp, we

But in we've whether ramping and know on obviously, sure, around it's Japan U.S., the as taken these being don't the that and the European, far Europe, orders. taken know, yet. you world least. some I Japan, in As are already but very we've memory already those small, U.S., fabs are orders at aren't incented, for about fabs as the for just

Operator

Jefferies. Vedvati [Operator next Instructions] comes with Shrotre from question line the of Your

Vedvati Shrotre

Could on to seeing into starting So color there? weakness you to about provided Or markets, strong? XX% be you talk growing are see which XXXX? the this year. you're you the continue some are what Does power, specialty this

Michael Plisinski

No.

strong We specialty continue and XXXX. to a very packaging into device see going

So well over...

Vedvati Shrotre

piece I of just of well... the piece meant power this as grow the power that it

Michael Plisinski

Power to this could think of grow. -- opportunities it sorry. We're it No, there's expansions. and level, timing kind customers grow. more for with and working record with comfortable at We're of flat we certain their

being it's things -- output. the output process quality just tied these of the proposition value our isn't to benefit to that these expansions from One control of we is tied and the customers, of with

output So these of to have fabs and, yields improve some a lot expense. capital still of huge without improve opportunity therefore,

So traction a we're proposition -- some lot of seeing customers we're still talking to and value that are on there. focusing still

Vedvati Shrotre

I see. may that. And click if I on double

revenues So really of your China understood, as most power revenues. the far from I come as

talk So they you from each China the that's Is different or markets? -- how versus are could looking? the spend from non-China is X other it that and other in different turning each about

Michael Plisinski

different. don't I are No, they believe

including U.S. in so in as discussions -- well have We Europe, XXXX. activity China into as Japan,

any wouldn't from there's difference say So I that perspective.

Operator

the Your Securities. question David from with of line next Steelhead Duley comes

David Duley

more Mike, could questions during Yes. lithography A more tool bit you about me. a deliveries talk the couple little quarter. for the

of detail. think I missed some I the

systems more that these catch could I customers? Or they X customers. also are I think new if X to you current was bringing customers you tools said applications. was I there Are which online? wondering didn't are elaborate.

Michael Plisinski

Good questions.

pretty X and compute. it. much You are got applications, mobile high-performance There

there business. And existing are applications. customers, were so X repeat buying those So the primary

orders customers. So existing repeat from it's

David Duley

to adding think growth 'XX, you customers? that is how to base to see as going if new in we in would segment does expand? the this customers it should far or as current about -- that? continue customer it expect Or And Or from come grow, the

Michael Plisinski

for new a we've already we customer that about have glass. talked Well,

-- and the XXXX, be shipping that's mentioned business. think some sometime I then summer. customers business repeat tool but And repeat well as the more XXXX new well. will a that The see the new we'll as of customer, as we'll in be bulk So we in

David Duley

glass or... application logic substrate that customer Is for a

Michael Plisinski

so. I believe

David Duley

Okay. packaging grown about guess I'm in how sorry is XXXX? Final rate dramatically, has year. your be what think, mentioned me you for be revenue question would I Xx if talked -- for you would and segment growth your business to of that -- you already What do -- you it, the last

Michael Plisinski

I don't know specifically whole because how will much to of know with that be comment, I in don't was in speaking much. Packaging about digits. It's The particular. me. high I specialty I Dragonfly, double that pretty have were and Dragonfly Advanced continuing systems devices front segment, and grow

Operator

This I remarks. closing concludes the or back Sheaffer turn today's question-and-answer for any to Mike call session. will additional

Michael Sheaffer

the for joined the on X:XX call today. to will Innovation. everyone thank continued website would who interest Thanks evening. your Thank Eastern Rachel, in call like replay on of you I please you. our us be the again available to this A Time call. conclude Onto at approximately

Operator

concludes This today's call. your now participation, you for may and you disconnect. Thank

Onto Innovation (ONTO) 8 Feb 242023 Q4 Earnings call transcript