Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Onto Innovation Inc (ONTO, Financial) achieved a record quarterly revenue of $252 million, marking a 22% increase compared to the previous year.
- The company improved its gross margin to 54.5% and operating margin to 28%, contributing to a record cash generation from operations of $67 million.
- Onto Innovation Inc (ONTO) is on track to nearly double its inspection revenue for the calendar year, driven by strong demand in AI packaging and advanced packaging markets.
- The company announced strategic acquisitions, including Luna Instruments and the lithography business from KIC and Sofa, expected to be accretive to earnings within 12 months and generate up to $100 million in annual revenue in the next three years.
- Onto Innovation Inc (ONTO) reported strong growth in advanced nodes, logic, DRAM, and NAND markets, with a significant increase in film metrology expected to grow by over 50% compared to 2023.
Negative Points
- The fourth quarter outlook was negatively impacted by over $10 million in JetStep lithography pushouts due to customers' capacity needs.
- Operating expenses exceeded the high end of guidance due to accelerated R&D investments, impacting the company's cost structure.
- There is uncertainty regarding the rescheduling of the $10 million lithography delay, which was customer-driven.
- The high bandwidth memory (HBM) market remains muted, with no clear visibility on when capacity expansions will occur.
- Despite strong demand, the company faces challenges in aligning its supply chain cost reductions due to existing inventory levels.
Q & A Highlights
Q: What is the timing for TSMC's COOPS footprint expansion, and how confident are you in Onto's revenue growth in the first half of next year?
A: We are highly confident in revenue growth moving into the first half of next year, driven by gate-all-around and capacity expansions supporting enterprise servers and HBM growth. TSMC has been aggressive in adding capacity, and we expect a significant increase in the fourth quarter, with strong demand continuing into the first half.
Q: Can you provide more details on the $10 million lithography delay and its rescheduling?
A: The delay was customer-driven based on their needs, and the tools are ready to go. However, the rescheduling is still under discussion.
Q: How confident are you in Onto's ability to outgrow WFE in 2025, given the high process control intensity?
A: We are highly confident in outperforming WFE growth, expected to be in the 5-10% range. Increased process control intensity, especially in AI packaging, is driving this confidence, with customers collaborating with us to find new solutions.
Q: How is the visibility on volume purchase agreements for gate-all-around nodes, and has it changed?
A: Our position remains strong, with no major changes in visibility. We continue to work off the volume purchase agreements, and our backlog is strengthening.
Q: What is the outlook for the power semiconductor market, and how does it relate to the current downturn in the auto market?
A: The focus is on driving higher yields, especially with wafer transitions, which require better process control. This focus on yield improvement is sustaining our strong inspection revenues, despite the broader auto market downturn.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
