Summary of Onto Innovation (ONTO) 2025 Conference Call Company Overview - **Company**: Onto Innovation Inc. (ONTO) - **Industry**: Semiconductor Equipment Market Outlook - **2026 Growth**: Company is in discussions with customers regarding their expansion plans for 2026, indicating a focus on underlying growth waves rather than overall market trends [4][6] - **AI Demand**: Continuous growth in AI technology is noted, with no signs of slowing down [4] - **New Product Opportunities**: New products in 3D metrology and critical films are progressing well, with a significant market for critical films estimated at $500 million [5] Performance Insights - **Advanced Nodes Growth**: Company reported nearly 100% growth in advanced nodes, significantly outperforming peers [8][10] - **Revenue Drivers**: Growth attributed to expanding product offerings beyond traditional markets, including films and integrated metrology [9][10] Competitive Landscape - **Pricing Power**: Company is experiencing opportunities to increase prices due to advanced inspection requirements, contrary to typical pricing pressures [12][13] - **Market Share**: Company maintains strong market share across multiple HBM customers, with no significant share loss reported despite increased competition [27][28] Product Development - **Dragonfly G5 Tool**: The new Dragonfly G5 tool is expected to enhance market share in 2.5D packaging, with strong customer interest and impressive performance feedback [15][16][17] - **Hybrid Bonding**: The tool will address concerns over voids in hybrid bonding, presenting new opportunities for high-resolution inspections [19][20] Strategic Initiatives - **Semilab Acquisition**: Acquisition aims to enhance capabilities in surface charge metrology and materials characterization, with potential synergies expected [35][36] - **Market Growth in Materials Characterization**: Growing interest in materials characterization as advanced packaging and exotic materials become more prevalent [38][41] Financial Performance - **Gross Margin**: Current gross margin is below the long-term target of 56%-57%, with plans to improve through supply chain efficiencies and new product introductions [44][45] - **Capital Allocation**: Company prioritizes M&A as a key strategy for capital allocation, focusing on synergies and core competencies [53][55] Future Outlook - **Technology Transitions**: Company is focused on expanding its footprint across various markets rather than fixating on specific technology transitions [48][49] - **Packaging Investments**: Significant investments in packaging are anticipated, with a strong position in the market due to advancements in heterogeneous die and panel technology [50][51] Conclusion - **Investor Sentiment**: Company believes there has been an overreaction to competitive pressures, asserting confidence in its ability to maintain market position and drive growth through new product adoption [57]

Financial Performance & Growth - Onto Innovation's revenue reached $983 million, a 20% year-over-year increase in 2024[5] - The company's non-GAAP EPS increased by 40% year-over-year to $5.24 in 2024[5] - Operating cash flow was approximately $250 million, representing about 25% of revenue in 2024[5] - The company outperformed the overall WFE (Wafer Fab Equipment) market with a 70% growth rate[6] - Onto Innovation's three-year CAGR (Compound Annual Growth Rate) from 2021 to 2024 outperformed WFE[7] Market Opportunities & New Products - The AI packaging market is expected to grow at a 10% CAGR through 2028[9] - New products are expected to add approximately $300 million in Served Available Market (SAM) by 2026 in AI packaging[21] - The company launched four new products for packaging, expanding its growth opportunities in AI packaging[19] - The total films SAM (Served Available Market) is projected to reach ~$400 million, with an 8% CAGR for common films[44] - A new unpatterned inspection technology is expected to address a $250 million SAM in 2028[51]