Onto Innovation(US:ONTO)2022-08-10 03:13Financial Data and Key Metrics Changes - The company reported record revenues of $256.3 million for Q2 2022, exceeding previous guidance by approximately $8 million [24] - Gross margins for Q2 were 52%, down from 54% in Q1, primarily due to the recognition of lithography systems revenue [26] - Net income for Q2 was $64 million, or $1.28 per share, which was $0.02 above the midpoint of previous guidance [28] - Cash at the end of Q2 was $545 million, an increase of $34 million since the start of the year [29] Business Line Data and Key Metrics Changes - Advanced nodes revenue was $94.5 million, growing 47% year-over-year and representing 37% of total revenue [25] - Specialty device and advanced packaging revenue reached $117.3 million, up 28% year-over-year, accounting for 46% of total revenue [25] - Software and services revenue set a record at $44.5 million, growing 19% year-over-year and representing 17% of total revenue [25] Market Data and Key Metrics Changes - Revenue from the advanced nodes market was down slightly from Q1 but up 47% year-over-year [16] - Revenue from the Iris platform grew 49% year-over-year, with expectations to meet or exceed $50 million in revenue from this segment by year-end [19] - The company has a backlog exceeding $700 million, indicating strong demand across various markets [39] Company Strategy and Development Direction - The company aims to transform into a partner of choice for connected solutions across the semiconductor value chain [40] - There is a focus on increasing manufacturing efficiencies and leveraging supply chain improvements to enhance gross margins [11][12] - The company is actively working on expanding capacity to meet growing demand, particularly for advanced nodes and specialty devices [50] Management's Comments on Operating Environment and Future Outlook - Management expects stronger revenue in the second half of 2022 compared to the first half, driven by growth in advanced nodes and NAND customers [35] - There are anticipated declines in specialty and advanced packaging customers after a strong Q2, with expectations for recovery in Q4 [38] - The company is confident in its visibility and demand, with a book-to-bill ratio remaining above 1 [67] Other Important Information - The company is prioritizing M&A as a key strategy for shareholder value creation, alongside potential stock buybacks [89][92] - The impact of the US CHIPS Act and European funding for chip production is expected to create opportunities, although the timeline for order book impact remains fluid [87][88] Q&A Session Summary Question: Production issues for inspection systems in Q2 - Management acknowledged challenges with suppliers unable to meet demand, impacting $5 million in revenue, but expects to resolve these constraints by Q4 [44][45] Question: Future gross margins for JetStep lithography systems - Management indicated steady improvements in gross margins over the next six quarters, with expectations to return to 54%-55% range in Q3 and Q4 [46] Question: Long-term outlook for JetStep systems and backlog - The company has already booked full capacity for 2023 and is working on increasing capacity for 2024 demand [50] Question: Market share and size of the Atlas product line - Estimated market size for Atlas is $400 million to $500 million, with a significant share in high-end applications [80] Question: Revenue potential from increased capacity next year - Management indicated a backlog of $100 million and potential for additional revenue if supply constraints are alleviated [82] Question: Impact of the US CHIPS Act on order book - Management expects aggressive announcements from customers as funding rules are established, with a timeline of about a year for significant impacts [88]