Onto Innovation Inc. Q2 FY2025 earnings call

• Onto Innovation delivered a strong second quarter with revenue and operating margin exceeding guidance midpoint. • Announced acquisition of several synergistic product lines from Semilab, expected to close pending regulatory approvals, expanding inspection and metrology systems portfolio. • In specialty devices and advanced packaging, next-gen Dragonfly platform achieved milestones, demand for subsurface inspection and 3Di technology increasing, with AI logic packaging revenue expected to accelerate in Q4. • In advanced node market, memory markets remained strong, gate-all-around revenue slowed but new orders won, with expected rebound in Q4.

In the second quarter, advanced nodes revenue was $89 million, representing 35% of Q2's revenue. Specialty devices and advanced packaging revenue was $117 million, which is 46% of revenue. Software and services revenue was $48 million, accounting for 19% of revenue.

• Q3 revenue expected to be in range of $210 million to $225 million. • Q3 gross margin expected to be in range of 53% to 55% (includes 1 percentage point tariff impact; excluding tariffs, flat with Q2). • Q3 operating margin likely in range of 18% to 21% due to lower revenue. • Q3 EPS expected in range of $0.75 to $0.95. • Fourth quarter revenue expected to rebound to levels consistent with first and second quarters, driven by acceleration in AI packaging spend.

• Tariff exposure: Incurs tariffs on inbound components (90% of cost) and outbound parts; expect $2 million to $3 million in tariff expense per quarter. Need to monitor and adjust to tariff environment.

Q: Craig Ellis asked about next gen Dragonfly milestones with a key customer and new customer revenue opportunities.

A: Michael P. Plisinski said the milestone was significant as tests demonstrated optical performance and throughput, next steps include solidifying the system, and there are new customer revenue opportunities with increased demand.

Q: Matthew Prisco asked about next-gen Dragonfly timeline and growth potential.

A: Michael P. Plisinski said they are on track to ship tools this year, and Dragonfly, films market, and Iris products are growth drivers.

Q: Brian Chin asked about Dragonfly for subsurface defect inspection.

A: Michael P. Plisinski said it's for several customers across various applications like die stacking and 2.5D Logic.

Q: Blayne Curtis asked about AI packaging segment and acceleration in logic packaging.

A: Michael P. Plisinski said most is from existing main customer with orders from OSATs supporting 2.5D Logic packaging.

Q: David Duley asked about Semilab, HBM spend, and panel lithography.

A: Michael P. Plisinski said they plan to ship 2 steppers this quarter, HBM spend expected to be relatively stable, and panel lithography is moving to square substrates.

Q: Hoonshik Yang asked about Semilab growth rate and 3Di metrology.

A: Michael P. Plisinski said Semilab expected to have above-average growth, and 3Di metrology had competitive wins in various applications.