Onto Innovation (ONTO) 31 Oct 242024 Q3 Earnings call transcript

Company Profile

Participants

Sidney Ho	executive
Michael Plisinski	executive
Mark Slicer	executive
Brian Chin	analyst
Vedvati Shrotre	analyst
Edward Yang	analyst
Mark Miller	analyst
David Duley	analyst

Call transcript

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Operator

Ladies and gentlemen, good day, and welcome to the Onto Innovation Third Quarter Earnings Release Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Sidney Ho. Please go ahead, sir.

Sidney Ho

Thank you, Lisa, and good afternoon, everyone. Onto Innovation issued its 2024 third quarter financial results this afternoon shortly after the market closed.

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

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

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

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

Let the over CEO, call to Mike? Plisinski. Michael turn me our now

Michael Plisinski

Thank we and million the new well record for thank quarter you, at third executed in revenue for with coming in and us today. setting Good Sidney. $XXX afternoon, joining everyone, a inspection. Overall, quarterly you

double we're inspection In pace revenue nearly fact, our to on this calender year.

Mark lithography over projected of with revenue million. margin impacted and packaging in This resulted review outlook inspection X.XD packaging. high-bandwidth pushouts negatively million with led first, growth offsetting XX%. less $XX to in markets, $XX the where our logic QX, soon improved also operating highlights due our to which highlights, we'll needs. But generation than to packaging little gross starting was advanced in a our capacity the memory in from cash decline business AI third device specialty and customers' We quarter JetStep for discuss by and operations XX.X% margin record these will

the volume in front-end higher well yields. particularly to in for need systems, ahead, and metrology. for an see increase intensity Looking for complexity our increases capital This demand as address as for logic expect acoustic for metrology we growing to and packaging new control includes films process process

packaging with process inspection continue systems metrology quarter. Revenue and as sizes, largest devices to improvements, market of power the yield and even wafer larger temporarily control advanced customers business demand driving the fact, end set metrology record. from associated focus muted. was this semiconductor second transitioning our was from Growth our especially with on to for both markets In also power a quarterly came one challenges remains largest

this is the million with capability nitride surface earlier to below we focus expect of in used where new applications. We a annually technology subsurfaces, will X.XD wafer for a us, applications. packages for background defects carbide on on capability. and at core the is of as substrates with advanced believe technologies used silicon or with panel gallium announced technology inspection silicon us and buried technologies glass a scan to X and today. applications small allow will overlapping company of for be our and the detecting SAM glass Their XXX in unpatterned with very tuck-in and next technology will We been level revenue. Inspection Lumina rich and patented bottom our into continue clearly record nanometers inspection core least sensitivities a complementary in expect and carriers also top, strong residues simultaneously years. by and pattern no inspection expand $XXX are inclusion in laser-based has our And yield instruments XD the sustain important to important Lumina yield. expanding next this this inspection driver year This we're to result, defects, new emerging

experience to an Kulicke had with from tuck-in, talented and we addition With over we this we of team will Soffa. extend the Instruments, maps technology our acquisition and and In this [indiscernible], Based lithography and JetStep business of the incredibly believe issued more competitive to lithography contribute on lithography announced pending. the team XXX patents of Lumina XX road acceleration man X differentiation. years our

We revenue accretive up in expect within to in X years. and small be the million earnings months generate the next combination annual $XXX tuck-ins of these to to X XX

For reference, revenue today is negligible.

we and specialty the see advanced in opportunities from our strengthen markets, recovery a also advanced we nodes. While packaging the

growth we DRAM saw expected, the quarter. As in logic, in and NAND

we're pace position to our seeing markets, OCD solid metrology versus grow XXXX. in for This our addition year, these XX% with metrology. by films In traction strong film metrology to on we're over

over Mark the provide to highlights review guidance. quarter I'll turn fourth to and financial our call Now

Mark Slicer

Thanks, Mike, and good everyone. afternoon,

around more highlighted, quarter. due We another the operating [indiscernible] year. flow devices, straight we of the better-than-expected Mike last exceeded midpoint of operating end towards these EPS ranges million to flow As represents and the cash investments nodes for within advanced executing services achieved of in all of doubling yielded the our during software high and cash advanced packaging ad stronger period guidance, gate for record than same Operating XX% $XX second for cash quarter. the demand

and was the million versus revenue versus year. X% up quarter XX% the prior quarter Third up of $XXX second

prior X% to increased XX% versus The $X.XX the up third year. quarter sequentially and EPS

Looking quarterly the by markets. revenue at

from specialty represents devices Our remains and with million and of advanced revenue biggest packaging, XX% of $XXX which was market QX quarterly revenue. down slightly

$XX advanced increase and of sequential was XX% million revenue represents XX% biggest which increased of revenue. QX over had Our news,

achieved XX% at over XXX basis of our the high third QX the end year. since beginning with driving XX%, and than of quarter more over representing and over improvement second basis of increased guidance XX% the point for to the services range of Software revenue the million of margin $XX XXX point improvement quarter revenue. We XX% gross X% and

metrology R&D expenses to differentiation our XD quarter, expand investments million, in integrated product we $XX advanced ramp Third and packaging applications. extending as were the metrology operating technology within end our our the of our exceeding range quarter for high capabilities in guidance accelerated

XX% quarter of quarters the achieved point basis operating XXX income approximately second from the XX% quarter. operating totaling $XX a consecutive to improvement year. the of the improvement revenue start For million X We margin since for was with compared of quarter-over-quarter third

of supported performance Our XX% investment from also revenue income favorable our net was balance. income resulting cash from increased

flow to achieving at sequential $XXX We $XXX QX $XX quarters -- X ended income the of short-term our Now balance achieving the turning million million, of of Inventory and into ended of the the down operating decline. we operating $XX sheet. second third ended with cash. and investments sorry, and converting quarter cash quarter versus XXX% million. cash million quarter

of quarter inventory to We as reduction million [Technical for expect Difficulty]. million further $X $XX another the we fourth

Operator

This is the by. operator. Please stand

I you will we back experiencing technical on reestablish hold feed line. while are stand music difficulties. the We by. the place Please

may You continue conference, the sir.

Michael Plisinski

I remarks on Okay. is line, my Well, to thank and we'll Hopefully, will you finish prepared still the questions. everybody go and very much.

to we So new manufacturer bump inspection several wafer customer exciting positioned applications a and for metrology, which in diverse well portfolio void leading solve recently metrology and software to product to customers' and our summary, manufacturing we many high-value to aligned we're delivered bonding to ship we collaborations, of drivers, close leverage launches end market inspection we're problems. Through expect as that memory such XD year. this have

analysts. Combining In our the and enhance of outlook pursue. portfolio addition -- synergistic markets both recent technologies we our to with covering for the organically serving the solid further of questions XXXX. And in our product can concludes the developed for from that remarks. opportunities, our technology, Lisa, year we the open tuck-ins we're our another our new markets call growth expect prepared end that please

Operator

first our Stifel. from question And comes Chin with Instructions]. [Operator Brian

Brian Chin

back And break of have -- of off, there versus in have year, content. terms I here. you some TSMC that FYI, Anyways -- effectively Mark space I COOs ran the where a but very where footprint is left there high. The just expand on think of But demand picked so been might [indiscernible]. this does Mike, to its think out up may script

And visibility half when up on first from you around could currently see you moving for will confident do of that how show or revenue into all have when Onto combine timing first existing And further next curious, levels gate that you what as you so kind that was the with are activity quarter I year? pick again? expansion, of improvement

Michael Plisinski

growing that the lack And also we're to it's bit, expansions to year. question. confident. highly capacity mentioned server confident say, DRAM A I'd HBM next we of capacity all supporting We're just due by pick as revenues also here the move enterprise but the of not We're all from a to both up starting in growth. of driven seeing gate little good first we support half the but into around,

the have They capacity. the mention you [indiscernible] as we little muted not may see been AI -- is packaging So the adding we HBM have prepared may expect at mentioned what maybe in a fairly a fourth TSMC aggressive the the see perspective. -- or yes, the that We TSMC sorry, remarks the significant fourth increase, it the expansion. both. And while far while or from more an quarter made very that did out on as quarter the there to --

we remain starting to ad first capacity, be fairly find expect half. So they're ] that to in [ -- and base strong already the

Brian Chin

that's -- And it. Got helpful. Okay.

color that that behind customer maybe delay, earlier, like. so $XX customer-driven? sounds that been it of And readiness rescheduled standpoint then terms And that? And other equipment, lithography when a sort that to. take Any bit from was of to little in has million

Michael Plisinski

We're reschedule. not the clear on

based But it So was -- ready yes, The are customer-driven being needs. on that's was tools still it to discussed. go. their

Brian Chin

KLA customer on intensity, being high-volume its on kind it. process that strokes. in maybe upbeat of seeing shift TSMC at they're in sort Okay. question just to night Got control earnings last from pretty as production. one And broader call, more of addition

a We would also process WFE intensity higher they outgrow XXXX. confidence based on expressed the that lot control in of

much again COOs, you outgrow high packaging, both when intensity, look to that I HBM in how as process well in that like have you gate XXXX again, And control in so did expansions on as you around, confidence advanced maybe do WFE XXXX? feasibility guess all at for

Michael Plisinski

if Well, I this it then highly think most X% is we're of to in depends outperforming which where XX% be. on is to WF what landing, you're But the in expecting range, those consensus it's numbers. confident

well drive the talk the is of better or as for any expensive any as in control reasons, X.XD products same about AI yield yields. of did And the the the intensity, much loss. especially and very devices. increased to process These on needs the pretty issue area expensive going For I a process packaging, based complexity across are logic

as So yes, we're that And well. still process intensity. there's a they're control seeing lot And of learning. yes,

We customers find to sensors today working don't the So of solutions with sensors. capabilities see a metrologies lot the combine exist with our Dragonfly different any many and to of that the the other different and us tool.

that's going with the learning of lot on through a our there's So collaborations customers.

Operator

our Shrotre. And question Vedvati comes from next

Vedvati Shrotre

So nodes. quarter, I is, to wanted talked purchase agreements about the thing about or first for ask volume last you around gate had

million. a their date around think you that now I an Can us with some how facing of $XXX customers given sense that between give idea leading-edge roughly issues customers or splits they the out are of or transition. were

has your there conversation where So $XXX changed? that get changes not whole any Is VPAs those on million? may visibility you

Michael Plisinski

Not any degree. major No.

VPA, In relatively that the and still strengthen of fact, we look to for good continue and XXXX left a backlog to quite our bit work some continues off across board. there's

yes, I I customers, should our strong or say. some and growing movement no, strengthening, by would but there's that, remains certainly say position So some

Vedvati Shrotre

it? a because of about it the way being Is Is that foundry to think primarily customer strong? leading

Michael Plisinski

Yes, that's were look one, number still we X that strong. about we did and but customers both mention the talked

Vedvati Shrotre

Understood. Okay.

Teradyne piece Teradyne's on additions? maybe on could how be business of you a is of muted their could the out HBM kind ramp. capacity call, pointed Like into seeing goes for one next visibility the the the growth on capacity as HBM now business that year. HBM into HPM HBM of your sense next of So XXXX? have on be muted things the or the into year additions visibility the What trajectory revenues that [indiscernible] they're What's

Michael Plisinski

Logic in capacity Well, in my that quite HBM increase the a X.XD of an side. talked increasing. we're we from about also And doubling around last quarter, I remarks seeing mentioned

number So HBM. seeing increase movement latest then, And expansion said, yet. new of additional that each HBM an not new HBM we're alone intensity also let's for increase we would see, -- an around course, devices. That GPU on drive say, you for expected the have in additional of an the

major that's there remarks would prepared And not so I what to And would is still that going from, by the echo so players that. say, coming I know, my win, right follow muted I but in let's that's support is behavior clear expect logic and could the guess, to share but don't expansions. careful capacity they're we end HBM some who's guess board. My it's That's have kind of to from new what that the on mentioned conservatism be customer that all the seeing trying are with major of the but and some driver, that yet, understand now. expansion to still we

Vedvati Shrotre

board. your continue like be be side, what's we're disparity the power the power That's one on And versus to last help a great cuts fair. to revenues revenue What on inspection the was you could that you your revenues on provide semiconductors, the big of Right. us then it sort in downturn I strong CapEx the but you size would seeing you're continues had given that there? the drive and the auto seeing could market, across if opportunity for of

Michael Plisinski

Yes. and process whether yields. creates And or there's an control on some XX couple X-inch requirement a all process mentioned I last of the from driving yields or of from silicon X- control carbide higher moving it sort to transitions, capabilities. wafer additional That impact better quarters, for has it's mentioned X I yields and inch. to GaN going about it's

So pretty the that of general think we're high. that. And in it's seeing some publicized not then I are well yields that

-- focus for throwing want to on they output just and So to or adding capacity instead can customers of to prepare away. they if increased yield tend want increase output

actually when ramp. that them So profitable makes do more they

Vedvati Shrotre

of for the So how be the of you kind in about think the Or there opportunity would size business? should as color any helpful. we

Michael Plisinski

all packaging of our packaging advanced down AI we but it markets break top market. in the there, becoming Well, specialty don't it's X behind in and the

#X So I that think space. in is it

Operator

And to Oppenheimer. move we'll Edward question next with our from Yang

Edward Yang

drill Just XXXX. little into down a outlook deeper bit into wanted to your

WFE to and about this there. this and growth But XX%, you're grow well of much looking grew continued year, revenue a year. expecting multiple WFE. that's You're obviously, outpacing for how

the all you will are size can rate? decelerate takes And confidence what again? that So there run reasons things thinking you give about accelerate meaningfully any from why should the -- or confidence? your growth different 'XX puts or less up and you Are

Michael Plisinski

that nodes. we'd starting there would more sure. expansions, since And along and in a opportunity around I I we nodes grow, DRAM, bottom but -- would say, been said be now also driving to That's for meaningful gain advanced additional be bouncing would advanced the acceleration. see in there, all gate and about now capacity are growth talked we've confidence DRAM our and

significant nicely. The the and So for and we see that sure, around staying We'll -- growing is all the control it HBM. intensity with be If not? it see the growth packaging, happens what there volume there'll AI don't how stay there. opportunities. it doubles. see I essentially Does stay process quite if increases gate could is not, creating muted or some COOs think as I

these we levels. and then but least new which semi. exceed we sustain prepared set implies we'll levels we to said record talked power I that. And at about there, would that's the in expect record remarks would And see, So the in

be this for So would us. floor a

will that be look for us as so at we driver XXXX. And growth another

Edward Yang

do you XX% And I accelerate, just to off when of you mean revenue growth a clarify, say rate? accelerate mean,

Michael Plisinski

point. No, trying I'm No. imply grow Good to above Yes. we'd not XX%.

accelerate. So I word not should the use

Edward Yang

like any you space have bottleneck. And at seems book? with broader your Does loosing of bit. tools of packaging still speak this little in deal again, earlier customers up an OSAT It are a And Arizona your relevance this customers this month. signed the order one things to Is your an larger ability point? foundry advanced at place can to to

Michael Plisinski

up. loosening Things are

transfer some process. new deal, there's in But tools, and that coming qualify bring lines to in time which to to it's even signing cetera, et there's of and -- up. So capacity

there's of and So So And around the see Internal QX, in -- from that but There's purchase. for expect about actions been to big and mention the we it's healthy immediate well. as also yes, that in current right? we -- all did customer logic remarks, capacity. a there's all nice uptick not in packaging, first maintain by an Intelex prepared being breaking part half. sorry, discussions launch, like the [indiscernible] the the bottlenecks large I of the COOs the gate pretty taken my

Edward Yang

final that maybe the a extra a Or saw just is impacted I ticked there sequentially. a little good Mark. for question rate up any And And going quarter? forward? SG&A there bit spending in run the was that

Mark Slicer

better in goal OpEx than or I to I is think Yes. our QX. line total mean would hold

use have from I'd run remarks, might So that QX QX. prepared in abbreviated. rate into been my which

within drive to of offsets is goal QX. the to tuck-ins cost the Our

to can stay -- for is those or QX we our better. at goal So levels

Operator

move from Securities. Popuri Meyer from question to next B. we'll our And Riley

Unknown Analyst

for quarter. complexity to needs I'm it as in pickup packaging more package to actually to Is it's can picks the move fourth into But this packaging that do Craig we this if is And incumbent. Ellis. over with on related that the mentioned RDL-based continue of we increased RDL up kind just increase, you to expect that as a general volume trend is the do increases? with or LDLRDL-based

Michael Plisinski

from haven't the complexity they've is, things. about. But things new is -- a some is X think talked X been I improve. yields yes, -- couple they're processes to increases room have of introducing yields One that

can't yield looking fix areas could that So they're measure, can at impacting you and they see. what be so also how can't you

and so that's in data where So tool. can see to see we to what single any Dragonfly -- different and they combine order on see of see is inspection wouldn't and sensors the the it. And that's platform And how dynamic and you things on breadth that the metrologies have bear that of types capability play. then make to bring is in that can adjustments them also incredible impacting we mentioned -- yields fix help I

opportunities the new improve. provides yield to that insights So into

Unknown Analyst

right. Yes, a No, that's great Okay. answer.

a XD that kind flies, wanted on incredibly Do of these in have I who aspect Firefly. it and up see processes. the capable share? tools the customer you mentioned in know they're these So out you memory see XD you pointed how before capable metrology. for picking tools picking XD space. inspection X But I Obviously, question up? inspection they're Dragonfly the to Do inspection also you've really XD that

Michael Plisinski

was XD that's XD of is high early and XD, very ratio, So still is metrology. precision was early there's What that about applications. powerful, I that's aspect for XD capability, That bump the And localized -- we very stages. high which metrology. use part talking

how too much could be, it's So soon well in rate that to predict and how how do is or big The an we tool. evaluation on that depends tool we shipped adoption production.

that's based the now it we've and for the So exchanges on in to -- to tool we've production in probably the X facility, had they'll they want data the take to on revenue. and process. we them And hopefully, months to X site, outside our wafers start type all on X then see prove run now

Unknown Analyst

yes, All those right. Got about [indiscernible]. you. well. then goes That's volumes hope I that And --

Michael Plisinski

we the going in -- -- expect we quarter fourth say additional sorry, tools expect to ship customers was And do to do for valuation. we I to additional

Unknown Analyst

valuation And that's the on XD?

Michael Plisinski

Yes.

Unknown Analyst

some they forward? partnerships converting progress question, going kind these Great. there future. so convert we Is purchase terms agreements, the how of perhaps those forgot initial again, might kind who agreements asked was talk in about into there any in this about Okay. I talking last larger agreements but quarter. about exactly larger into volume of of there And were

Michael Plisinski

what I perhaps is might have on this. think are said right And year. working still revenue the expect they now, through that we I would additional

my towards of they was it, what -- I half half in -- that's to I need this, it going So not. if some see and we'll tools second will I'd the going then year. cut it got projection. I bias bias to happens they're the But additional to versus wouldn't in still through second the think

Operator

Needham. And Shi our next question with comes from Charles

Unknown Analyst

So of didn't you prepared hear. on the guys big remarks. actually got a cut the off We chunk

repeat of QX a this prepared us, for important the you your was So question. that think be kind can count doesn't what line, can because by inspection you if it's kind repeat I as maybe, Hopefully, guidance would Mark, great. remarks what line of

Mark Slicer

Thanks. Yes.

I'll out inventory. mean I So I'll start Charles, -- just add to start just out

inventory achieving So ended million $XX quarter of QX and -- quarters decline down X the at central sequential million, decline. versus $XXX

million inventory million peak $XX We we project XXXX, below be reduction as expect our levels. million million reduction will from of a exit as $XX we for to $X which to quarter of the XXXX another further fourth inventory be $XXX

the and we at we million As be to fourth the quarter, look between fourth currently million. for revenue expect $XXX $XXX quarter

We component delaying the continue margins still our will is in to ability this XX% existing inventory to burn be level, our expect we target reductions our With supply of above to the cut prioritize down XX%. cost chain as gross levels.

expenses, tuck-ins as announced we cost For million to look to $XX minimize R&D expect optimize earlier. impact better flat OpEx operating as hold $XX we QX we to of versus or between we be to the the million

For the be to fourth quarter, we expect between our effective XX%. tax to XX% rate

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

Charles, you your real question. ask can So

Unknown Analyst

Yes.

a it's it's lot unknown I be has CapEx those dots of I be X wouldn't sounds is the delayed really maybe and I'm maybe a I has that trying look quite customers. let's of say, which X could have, let's these we a over of that that earnings a know tied that coverage, potential downside you or do to with struggles cost to unfortunately year, some through. past Mike. the X -- there had Is X like because thinking the, connect -- mean, push your CapEx, in the So for news last pretty your customers. Am out here, going pressure The but the of to date, half, contributor out to X here to tough, quarter, customers dots for on leading-edge the sales quarterly right to I X like connecting have mean, months, say, been more [indiscernible], bit anything the tied -- the

Michael Plisinski

particularly you in know customers, So much. I which too don't and it doesn't matter have mind, X

if you this tool they that substrate market plays, supply was that manufacturers were the at I complained let's of lack bottlenecks server there a publicly by say, massive, where enterprise the substrates. think constrained several customers, lithography of about look -- with

really bit a high-performance And and aggressive into through then markets especially little expansion the maybe really, XXXX, for as XXXX, all so compute. there was we softened, know, a enterprise, really

so -- wafer the NVIDIA's And and big a and the now, on basis. is AI engine that's

in that reflected DRAM that little and driven hyperscalers that I to So enterprise -- picked made of warming we're of of excess comments is and bit kind be about And strength capacity can starting a DRAM, by low capacity up, that's pickup, base. and the the a you compute or some seeing we some see the up. still it's in and see enterprise but now

sure not what answers get not question, I'm at. but that your So sure I'm you're to trying

Unknown Analyst

Yes.

Okay.

having play So I rather figure structural. out. a the of X those to it structural the That cyclical than trying cyclical of you are that's pushout factor the probably anything at was problem. what I'm is than sounds think mean more probably more customers like problem

Michael Plisinski

more I -- it's Yes, Go think yes. ahead.

Unknown Analyst

Yes.

I thing AI want about packaging to other the is you business. to the So do really talk

QX. or what about And the you below HBM you sounds right combining year, talked first think -- HBM. and down to far like XX% But that it said, was the bit muted. maybe X.XD that but was downside still I a on see? do on based the number? HBM Is up, QX, second back half-over-half, to roughly coming is minus you last it half there what based more so number in this view little half any quarter, level, XX% you is X.XD okay, upside X.XD

Michael Plisinski

question. of course, cut it in which, good I But one half. did It Yes. That's say was prepared my in heard. a have it's that remarks, no to seems was --

have said XX%. half things decline down projected. goes. -- I of half the originally that It's about X% had as about far So the that now It's to we if as

Unknown Analyst

Okay.

level. half to question. because X% compared 'XX, the this half And roughly first -- It's first me the with allow down Okay. finish

still Based 'XX right half first You kind you the 'XX, half higher the of that do 'XX have can intake and still like about second they on will order you said year expect level. wait than first see exceed be the indications, on but based to that's higher like the second level. customer 'XX half half than you if feel

Michael Plisinski

packaging This is for AI specifically?

Unknown Analyst

AI packaging, yes.

Michael Plisinski

Yes.

going it's for relatively I to be think healthy. logic,

So I'd the check. to But HBM the is double question maybe mark have the same real level. piece. at

As we we muted expansion look expansion the mentioned, that X.XD though, to when expect hard see the now on on it's up. keep to right side, HBM at logic not we

Operator

the from question comes our next Company. Mark And with Miller Benchmark

Mark Miller

was give feeling and I you year. just wondering next China if you're expecting Korea us in a for what

Michael Plisinski

we and Korea, can say DRAM DRAM mentioned growth. I the

in I could would participate that. you expect So China, already that guess we Korea China. -- mean we're relatively in derisked

in in I that be well, to range, And would to yes, would that be same range. I range. XX% same maybe expect the to we're around XX% So expect

Mark Miller

of from to So XX% XX% sales next year? China

Michael Plisinski

Yes.

Operator

next question from Duley with comes David Steelhead our And Securities.

David Duley

market. question the first on is NAND My

customer Korean also plays HBM big Your that market. in

upgrade year-over-year. their there. in big layers. to of about about XXX% up a and sequentially SSD talking cycle they're number up move think the XX% business talking I Lam's being

a wafer wondering wafer seeing upgrade but not -- we're I big So new how we're was starts participate cycle. And added, just in you seeing might that.

Michael Plisinski

NAND XXXX. off very still a And it for very a But percentage look it's base. see impressive. growing of on us would basis, We in small

we see NAND recovering. So don't

AI and as AI high server I data. quarters ago, support it's to level, high probably, X farms, devices the we it's now NAND mentioned a really stack high-speed couple think the So --

that's So what see. we essentially

of control, far not the as a As much. as high lot stack our more and more the process mean layers then

in result. steps couple in, So say, But extra a let's there'll intensity aspect don't metrology comes the the increases into where our play. capital of will massive any a be see -- as and there, OCD that's we metrology

David Duley

of is I double highlighted a capacity. about of visibility, per chips when realize your market. think they think But you to high number question aren't customers when -- lot into second around expand my giving Hopper. memory you versus with I this, bandwidth the going kind And Okay. is probably Blackwell you've might the the GPU of I guess,

to from they're just You ramping think before I stack that Micron as day got you going also Samsung to X the XX. And and yesterday or them well. announced have close stacking agreement their with NVIDIA up, signing

positive kind more. I'm the and in the is could wouldn't a maybe -- end curious just much of all anyway, -- market be unit bit And you growth that given customers coming you elaborate but more more little there growth volume So about I online? why

Michael Plisinski

makes positive What is me orders.

the to doing position all our see I on XD trying expand activity metrology. with So the we're the I and position, and work like our we're

yet So going orders I we're seeing these qualified, as ramping say, I I'm customers. and If not they're in to may what all there's they with to yet. going more, But is share they let's not some think, share. much want after to against wallet each and them mentioned, how conservatism that other. expand is And sure share. serve earlier, that order have everyone know NVIDIA the working

What is I demand need. capacity orders, we do a yes, is So see confident. lot say, is model look don't or I that's X.XD "Hey, the can the get not that seeing start matching when and more going know we to guess. expansion a if just upgrade I'll at the But

to give. has something So

David Duley

expands. And you should all HBM the expansion COO capacity how mean that capacity highlighting keep

I think but elaborate I that? understand more little what a could saying, just you're on you bit

Michael Plisinski

everything increase like let's number in factor -- the X.XD Logic equilibrium. around a would going the to for if and required. going side, perfect was That's X.XD use. that we're just each Xx saying double the it amount were you X, That's say, the markets HBM is of that of be or equilibrium HBM increase, to and a if Logic in a Well, we're

have chain say, early well, in everybody added. to supply say, let's to, got you was now the So Not capacity some okay, NVIDIA cut on.

win, excess the to But some how going look like model be who's is I So us, try capacity, out. is capacity how mean expansion it we this, we at to required. there? this going much and no looks to matter

David Duley

Yes.

online this at TSMC. not for final of are question X Okay. going capacity the your online come come questions. tools? to HBM to And What And a is second lead is necessarily lot inspection co-op that's going times your

that's earlier capacity up as the out, packaging. partner CoWoS. Do benefit of If to think. expand from they're to you at you at about ASC, for as I same TSMC's degree to There's you would TSMC Amkor, expansions would from OSATs listen question capacity the years another couple as fast that X.XD expansions they ramping can benefit a Taiwanese but

Michael Plisinski

If they yes, process, run the determined. then exact yet same to that's be

we are So benefiting.

are seeing engagement. We

orders. the ramp. ramping -- they're right? mean you to no, getting also same now they're starting not just even to are as the I mentioned. they're yet, that Obviously, degree just right But not leader They're We

anyone remains So yields be that It's yields. seen. than going to I or say better hard But to is process again, TSMC. would believe yields better are to have

-- equivalent is least my process intensity. an capital control we'd see So guess at

David Duley

lead the And Okay. time.

Michael Plisinski

say But we Lead things time. But adjust bit months we're way strong build can looking was such to little a It's lead The a have now. we the up. forecast that out times. we answer to a would forecast has have are ticking But to demand good right anyway. as of because Well, data, at I extent always definitely increasing. the mentioned, X I not we've we going or so. gone volume

David Duley

capacity So with tools, want obviously, a that customer the in you kind have of and bunch of order? time, that lead if a to short meet came

Michael Plisinski

Yes. we and essentially hard yet to for I We output to year, Dragonflies done. this that's what no expected mean, the do. to we've capacity have sure one us work make double

serve outstanding we So our our customers. times, chain partners are yes, getting the we're cycle -- creative, teams and sure at reducing supply leveraging making

Mark Slicer

have we've the to do commented we And capacity before, manufacturing our that. as within

Operator

in And Chin take we'll last Stifel. Brian from with queue our question

Brian Chin

It was quarter And Mark appreciate the complete but I out going guidance. to suggest or Mark's Mike, commentary repeating going had if I just was fourth guidance. really question, what put that the ask, there to I maybe you is substantive wasn't after

I think pretty that. all we missed much

it So just repeating, there, something bother. if throw be But out was not, no wanted then to if that I there. there worth might

Mark Slicer

picked -- on up. one... Sure. was to be us we're his just yes, prepared I can to Brian, Give aligning cut where remarks

Michael Plisinski

Yes.

quite I said semiconductors essentially, packaging So control power gate AI had process and strong. demand all remains for around that

Specifically XXXX second projections, improvements prior see with mentioned. our I've over AI Packaging, already and we half this

is growth had pushout million So I offset the packaging mentioned helping $XX the that's that expected to that the I'll offsetting in And AI that from we skip. lithography. added

meaningful I in logic expansion servers beat. And more a of to then wafer not to a though market DRAM advanced Xx amount in the enterprise high-bandwidth see something significant growth recently again, Yes. is fact, support requires the to HBM or we support X.XD memory we investments in have benefit expect AI HBM announced the meaningfully a discussed. to first more for yet logic turn, this taken I has And we that that would expect capacity from in a roughly in which of doubling been would standard packaging half of hyperscale in recovery So the an mentioned next customers logic, DRAM mentioned by see memory in contributing capacity leader year, certain, from orders supporting improve also we XXXX. as this, in away capacity. and growth to

to I the that that's questions. tried message. some essential think of bring answered I when I all the in

Brian Chin

you able Yes, I ability of higher yes, your extent in stronger extent guess of HBM upwards flex upward have Maybe customer that. But know you that the were maybe you I period, of demand Do is you against have the kind -- where dictate to bigger, another some some in the footprint. COOs or timing. one or think alleviates case same that. modulation one To X on of the that. just and maybe sort that manufacturing? and question subside manufacturing output intake customers' to appreciate I may strong. to you manufacturing customer Okay. a terms incorporate your I can kind last of in I here guess, shipment quarter don't is whatever your No, that for pressure have is. the

Michael Plisinski

Yes, not alone even we third shifts, let absolutely mean do. shift. full I second we're running

increase alone, allow if that made no to we improvements significantly capacity. us would other So

I chain do. supply working partners. There's So on. working we're with mentioned absolutely other we things

more up partners and the free where technical and or some less skilled higher people. can up of the free we we're our moving that trained take So floor -- to some of off the subassemblies

the to more difficult So integration. focus on

to ability and So the as definitely they serve their yes, customers grow. the needs have we

Brian Chin

to one made. comment just you maybe clarify And

said to continues strengthen. backlog you think I

positive business. it So like sounds with orders you're the book-to-bill of a across running ahead revenue

Michael Plisinski

don't we has of in me. mentioned -- strengthened. backlog exactly the have front I Well, it I don't just

even So or continue in don't to around really we VPA. be we people concerned And the that How report and down. on VPA grow that it. about our that through being fact, asking work does knew worked we what But is mean? as backlog I would

on me, comment to not still areas So to focused just that was least indicate and see a much we the we're at right now. strong softening, demand in

Brian Chin

give -- guess even year? the portion does have a not VPA you next I'm that the HBM and I activity of on some that of some that comfort that And that is come that. fact is you still

Michael Plisinski

Yes, for HBM. would didn't to the go X. to even be think we on sure. X.XD I be just say is there. I the HBM have models still based supply demand it between could it and going stronger Logic the

quarter. can talk some upside about in [indiscernible] we So there's hopefully,

Operator

closing back I'd And Ho like or the now gentlemen, today's any for remarks. ladies and Q&A Sidney this call to turn concludes session. to additional

Sidney Ho

you. Thank

interest be to look replay available please our thank this of will investor call. Lisa, A for conclude of your the seeing participating website call forward of like a be throughout in quarter. the to this you We Eastern in conferences X:XX many approximately on We'd at Time number there. today you Innovation. continued Onto will We evening.

Operator

your today's ladies for participation. call. and concludes your And this and Thank you patience gentlemen,

You disconnect. may now

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