ONTO INNOVATION INC. Q1 FY2025 earnings call

• Onto Innovation achieved a record revenue of $267 million in the first quarter, driven by expansions in advanced nodes and packaging. • Impacted by Trump administration tariffs, the company is accelerating strategic programs to install manufacturing capability in Asia, expecting shipments from the second half of 2025 and margin improvements by the second half of 2026. • Advanced nodes metrology business had record quarters for new products like Iris films Metrology and IMPULSE 5 Integrated Metrology. • In specialty devices and advanced packaging, expanding markets drive new tool requirements; a new inspection platform for better sensitivity is in development. • Progress in 3Di technology with 3Di bump metrology selected by OSATs and evaluation units shipped to memory manufacturers; EchoScan System for void detection in hybrid bonding is tested on production samples.

Advanced nodes had revenue of $93 million, representing 35% of total revenue. Specialty devices and advanced packaging had quarterly revenue of $129 million, representing 48% of total revenue. Software and services had revenue of $44 million, representing 17% of total revenue.

• Second quarter revenue expected to be between $240 million and $260 million. • Gross margins expected to be 54% to 56%, with up to 75 basis points headwind from inbound tariffs if not offset. • Operating expenses expected to be between $72 million to $75 million. • Effective tax rate expected to be between 14% to 16%. • Diluted share count for the second quarter expected to be approximately 49.3 million shares. • Non-GAAP earnings for the second quarter anticipated to be between $1.21 per share to $1.35 per share. • Q3 expected to be a low point for total revenue, with revenue growth resuming in Q4.

• Tariffs imposed by the Trump administration negatively impact incoming costs and export costs due to potential retaliatory tariffs. • Challenges in 3D packaging void detection for hybrid bonding applications, as no other technology currently matches the resolution needed for yield control.

Q: Can you talk about how things have played out in the last three months with high bandwidth memory?

A: For HBM, investments and product adoptions continue, with 3Di technology shipments to memory customers. The product gap in 2.5D packaging is being addressed with a new platform.

Q: Can you quantify the impact of reciprocal tariffs in Q2 and year?

A: Not seeing impact at this time, but better prepared with manufacturing strategic initiative.

Q: What drove the big sequential uptick in advanced nodes revenue in Q1?

A: Strong investments in first half, including memory staying steady, and wallet share gain from new product families.

Q: When you say Q3 is low watermark, is it total revenue?

A: Yes, total revenue.

Q: Which pieces of the business are down sequentially in Q2 guidance?

A: Advanced nodes are down a bit, impacted by memory and lithography.

Q: Update on lithography and CoWoS packaging?

A: Tremendous interest in wide-field, high-resolution optics; R&D ongoing with demos in PACE Application Center of Excellence.

Q: Clarification on 2.5D tool performance and ramp?

A: New tool is ground-up, customers engaged; testing and evaluation units expected in second half.

Q: Q3 being low watermark affects outperformance of WFE?

A: Depends on WFE, but likely market perform.

Q: Update on lithography and CoWoS?

A: High interest in wide-field optics; R&D in packaging applications.

Q: Clarification on 2.5D tool performance and front-end opportunities?

A: Existing tool didn't meet new requirements; new platform offers higher ASP and front-end opportunities.

Q: Split of advanced nodes revenue by logic and memory?

A: DRAM, NAND, and logic expansion; wallet share gain from new product families.

Q: Comparison with 90 days ago outlook?

A: Choppiness in middle of year, mostly due to 2.5D, but other areas trending in line.