Onto Innovation(US:ONTO)2024-05-10 00:03Financial Data and Key Metrics Changes - The company achieved first-quarter revenue of $229 million, a 5% increase compared to the fourth quarter and a 15% increase year-over-year [14] - Earnings per share (EPS) increased by 11% sequentially to $1.18 and up 28% year-over-year [14] - Gross margin for the first quarter was 52%, in line with guidance [15] - Operating cash flow was $57 million, representing 25% of revenue [14] Business Line Data and Key Metrics Changes - Revenue from specialty device and advanced packaging was $158 million, slightly up over the fourth quarter, representing 69% of total revenue [39] - Advanced nodes revenue was $27 million, a 45% increase over the fourth quarter, representing 12% of total revenue [39] - Software and services revenue was $44 million, a 4% increase over the fourth quarter, representing 19% of total revenue [39] Market Data and Key Metrics Changes - The company noted strong demand for high bandwidth memory and logic packaging for AI devices, contributing to record revenue levels [36] - Power device manufacturers saw a decline in revenue in the first quarter but are expected to see growth return in the second quarter [37] - The NAND market is experiencing increased demand driven by enterprise solid-state drives and high-density AI servers [19] Company Strategy and Development Direction - The company is focusing on productivity improvements and expects stronger metrology sales and improved gross margins in the second half of the year [18] - There is an emphasis on enhancing the Dragonfly platform to address new and emerging critical defects in ultra-thin wafers [8] - The company is optimistic about the adoption of glass substrates for advanced packaging, which is expected to be critical for high-volume chiplet architectures [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand for AI compute and expects the second half of the year to show incremental growth [44] - There is a positive outlook for 2025, with expectations for improved performance across advanced nodes and packaging [57] - Management acknowledged potential digestion periods but indicated that order velocity has improved, reducing concerns about significant downturns [75] Other Important Information - The company ended the fourth quarter with cash and short-term investments of $741 million [16] - Inventory at the end of the quarter was $330 million, with a focus on inventory optimization [41] - The effective tax rate for the full year 2024 is expected to be between 14% to 16% [42] Q&A Session Summary Question: What is the outlook for advanced nodes and NAND? - Management noted that every NAND supplier is using their tools, and there is a strong customer penetration in the NAND market [47] - For advanced nodes, continued adoption is expected, particularly in logic devices [48] Question: How is the demand for AI-related products impacting revenue? - The company expects AI-related products to maintain record revenue levels, with strong demand for Dragonfly systems [43] Question: What is the expected growth in the second half of the year? - Management indicated a potential mid-single-digit growth in the second half, with expectations for power semiconductors to return to near-record levels [30][56] Question: How is the company addressing supply chain challenges? - The company is implementing supply chain initiatives to improve margins and is optimistic about achieving historical margin levels by the end of 2024 [104][114] Question: What percentage of the backlog is related to high bandwidth memory? - Management stated that a high percentage of the backlog is related to high bandwidth memory and AI applications [101]