Onto Innovation Inc.

Good day, everyone, and welcome to the On2 Innovation second quarter earnings release conference. Today's call is being recorded. At this time, I'd like to turn the call over to Michael Schaefer. Please go ahead.

Thank you, April, and good afternoon, everyone. On2 Innovation issued its 2021 second quarter financial results this afternoon and shortly after the market closed. If you have not received a copy of the release, please refer to the company's website where a copy of the release is posted. Joining us on the call today are Michael Blazinski, Chief Executive Officer, and Stephen Ross, Chief Financial Officer. As always, I need to remind you of the Safe Harbor regulations. Any matters today that are not historical facts, especially comments regarding the company's future plans, products, objectives, forecasts, and expected performance, consist of forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These estimates, whether expressed or implied, are based on currently available information and the company's best judgment at this time. Within these is a wide range of assumptions that the company believes to be reasonable. However, it must be recognized that these statements are subject to a range of uncertainties that can cause the actual results to vary materially. Thus, the company cautions that these statements are no guarantees of future performance. Risk factors that may impact ON2 Innovation's results are currently described in ON2 Innovation's Form 10-K report for the year ended December 2020, as well as any other quarterly filings with the SEC. On2Innovation does not update forward-looking statements and expressly disclaims any obligation to do so. Today's discussion of our financial results will be presented on a non-GAAP financial basis unless otherwise specified. As a reminder, a detailed reconciliation between GAAP and non-GAAP results can be found in today's earnings release. I will now go ahead and turn the call over to Mike Plosinski.

Mike? Thank you, Mike. Good afternoon and welcome to On2Innovation's second quarter conference call. Across the semiconductor value chain, from silicon wafers to wafer fabrication and advanced packaging, Onto Innovation's products are contributing to the faster ramps and higher yields necessary to support the unprecedented global demand for semiconductors. Onto Innovation is broadly participating in this growth, from logic at 7 nanometer down to the 3 nanometer design nodes, to the latest DRAM and 5G communication devices, and out to the rapidly evolving advanced packaging markets where accelerating design shrinks are creating strong demand for more sophisticated and versatile inspection solutions. As a result, in the second quarter, we reported record revenue of $193 million, well exceeding the high end of our guidance, and we continue to see a stronger second half of the year. So let's begin by looking at the highlights from the second quarter, starting with our largest segment, specialty devices and advanced packaging. End market demand for devices to support growing work from home and high performance compute applications propelled revenue in this segment to increase by 45% over the first quarter and more than double the second quarter of 2020. Leading this growth was demand for inspection technology, which increased 24% over the first quarter and 65% year-over-year. Our recently released Dragonfly G3 system's improved sensitivity, speed, and integrated clarifying technology is expanding our position in the most demanding and sophisticated packaging markets, while also opening new markets, such as high-definition image sensors, where our growth continues ahead of expectations. For example, in the second quarter, we received orders from a fourth new image sensor customer, while a top three image sensor customer doubled their existing install base to support the ramp of their latest sensor technology. Another segment we see expanding our served markets is panel-level packaging. We believe this market represents an important inflection point for the industry, particularly for high-performance compute engines and large heterogeneous packages. Our newest lithography tools deliver high resolution imaging across a very wide field of view, which is proving to be a key enabler for next generation packaging technology for larger advanced packages. We've started shipping our backlog and have received an additional four orders for shipment in first half of 2022. Our total lithography backlog is now over 30 million, and we expect to close 2021 with several more tool shipments and a fully booked production schedule for 2022. We're working closely with our customers and suppliers to determine additional capacity needs for 2023. Revenue to support both power and 5G applications increased to over 24 million in the second quarter. This included demand for our inspection systems, new overlay metrology from our acquisition of InSpectrology, and strong demand for metal film metrology. This also included the addition of four new RF and power customers which we expect will contribute to our projected stronger half of the year. Turning to the advanced nodes, in the second quarter, we set a quarterly revenue record for our flagship Atlas OCD metrology platform. This record demand was primarily in support of expansions for leading-edge DRAM and logic devices, where our greater sensitivity provides essential metrology for a growing number of critical dimensions at speeds required for volume manufacturing. We expect demand for our Atlas OCD to continue to strengthen in the second half of the year, both to support additional investments in advanced logic and DRAM and an increase in the number of applications on our tools in support of higher yields. Even as demand for our core products hit record levels to support overall market growth, we're enabling future growth by expanding our position in new markets such as planar films and high-aspect ratio metrology for 3D NAND. We're also seeing revenue synergies in specialty markets as we introduce our metrology suite to these customers. For example, in the second quarter, we received orders for our latest film system from six new customers in the specialty device markets. These orders will ship in the second half of 2021, and including projected repeat orders from our first customer, we expect second half growth of our planar films to be over 50% from the first half, providing nice momentum into 2022. And finally, I wanted to also highlight our ongoing commitment to raising our corporate and social responsibilities by becoming an affiliate member of the Responsible Business Alliance. We're already actively committed to responsible environmental and social policies, but our membership in the Responsible Business Alliance is another important step forward. By joining our fellow members of the RBA, we will serve as an example to our suppliers of how the RBA Code of Conduct can create a more successful industry climate and a better world. I will now turn the call over to Steve Roth, who will cover the second quarter financial highlights before I provide some color on our third quarter.