ONTO INNOVATION INC. Q4 FY2024 earnings call

• Capped off 2024 with sixth consecutive quarter of growth and new quarterly revenue record of $264 million.
• Specialty and advanced packaging markets grew 30% for the calendar year, with AI Packaging leading growth, including strong shipments for 2.5D Logic packaging.
• Metrology revenue in advanced packaging exceeded $50 million, more than triple that of 2023.
• New products launched aimed at strengthening opportunities in advanced packaging, advanced nodes, and power semiconductors, expected to contribute incremental revenues later this year and more meaningful revenue in 2026.

In the fourth quarter, specialty devices and advanced packaging was the largest market, with revenue of $170 million, representing 64% of total revenue and a 5% increase from the third quarter. Advanced nodes had revenue of $48 million, accounting for 18% of revenue and a 12% increase from Q3. Software and services had revenue of $46 million, 18% of revenue, a 4% decrease from Q3. For the calendar year, specialty and advanced packaging markets grew 30%, metrology revenue in advanced packaging exceeded $50 million, more than triple that of 2023.

• First quarter revenue expected between $260 million and $274 million.
• Gross margins expected 54% to 56%.
• Operating expenses expected between $69 million to $72 million.
• Full-year effective tax rate expected between 14% to 16%.
• Non-GAAP earnings per share for first quarter anticipated between $1.40 and $1.54.
• Outlook for advanced nodes includes growth from logic and memory, with DRAM expected to see significant growth in Q1, gate all-around demand to grow, and NAND orders increasing; in packaging, HBM orders picking up; power expected to have a seasonal dip in Q1 then grow.

• Forward-looking statements subject to range of changes, risks, and uncertainties that can cause actual results to vary materially.
• Concerns around tariffs and chip tariffs affecting the AI packaging market.

Q: Thanks for taking the question. I guess we'll start it off with HBM given the pickup in demand you're seeing there. Any more color you can on that front? And then just maybe given the robust growth in 2024 based on the industry capacity adds, how are you thinking about growth potential for Onto off that higher level in 2025?

A: So on the HBM front, as customers' end market demand becomes clear, we're starting to see orders and work with us on timing of shipments for the mid to second half year. Based on secular growth drivers aligned with, we would expect to continue to outperform the WFE numbers, well above 5% growth.

Q: Yeah. Thanks for taking the question and my congratulations to you and the team on the robust execution in 2024. I wanted to start with a high-level question. So the business starts the year with strength, really in all three businesses and some digestion in specialty, but then sequential growth. As you look at that and as you factor in the benefit from new products and you mentioned that may be more second-half weighted, how do you think Onto will stack up versus what some larger companies are saying might be 5% year-on-year industry growth?

A: Well, first, the new products will have an incremental effect on this year and a much larger effect on next year. Based on the position we've articulated in our prepared remarks, in the growth in the secular growth drivers we're aligned with, we would expect to continue to outperform the WFE numbers that have been talked about. Certainly, above 5%. Well above 5%.

Q: Hi there. Thanks. For letting us ask a few questions. So we get questions a lot about whether process control intensity for HBM will decline. It's been pretty high. These are early phases. I do understand that thinking, but I think what we hear, however, is that yields are getting more challenging when you stack twelve die or you move to HBM four. So are you actually seeing process control intensity really sustaining or maybe even increasing some of this expand SAM expansion. Is that also some of what Yeah. It's Twelve high die. HBM four. Is that part of what maybe is driving some of the upward thinking on the HBM demand profile into mid-year second half?

A: Yeah. I think you're exactly right. I do believe that process control intensity is increasing. And I think it's gonna continue to increase. Not just because as you're stacking, the risk of yield loss for, you know, the final layer is gonna cost significantly more. But also the complexity of shrinking and shrinking the interconnects and more dense interconnects means the interfaces between the interconnects is more critical, and that's gonna be a new set of new challenges for process control that some of our EkoScan and some of our new products, the 3D I, are designed to address.