Onto Innovation Inc.

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

Thank you, Justin, and good afternoon, everyone. On2 Innovation issued its 2024 second quarter financial results this afternoon shortly after the market closed. If you did not receive 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 Placinski, Chief Executive Officer, and Mark Slicer, Chief Financial Officer. I'd like to remind you that the statements made by management on this call will contain forward-looking statements within the meaning of the federal securities laws. Those statements are subject to a range of changes, risks, and uncertainties that can cause actual results to vary materially. For more information regarding the risk factors that may impact ON2 Innovation's results, I would encourage you to review our earnings release and our SEC filings. ON2 Innovation does not undertake the obligation to update these forward statements in light of new information or future events. Today's discussions 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. Now, let me turn the call over to our CEO, Mike Blasinski. Mike?

Thank you, Sydney. Good afternoon, everyone, and thank you for joining our earnings call this afternoon. Our second quarter revenue exceeded the high end of our guidance range, driven by better than expected demand of Dragonfly systems, supporting advanced packaging for AI devices. and Atlas and Iris systems for gate all-around investments in the advanced nodes. Financially, we are pleased to see progress from our inventory management efforts, resulting in a quarterly record generating $65 million in cash from operations. Margins also improved from the first quarter, and we expect to improve again in the third quarter, which Mark will address shortly. We will now review the second quarter highlights, starting with our specialty device and advanced packaging markets. where we achieved a fourth consecutive quarterly revenue record driven by AI packaging, which accounted for over half of the revenue in these markets. Advanced packaging has proven to be a key enabler for this new era of AI, and NVIDIA recently commented that it expects AI demand to outstrip supply well into next year, and we see the market attracting additional suppliers, each bringing unique requirements for wafer substrates as well as interconnect sizes and densities. By broadly addressing these needs, the highly versatile Dragonfly platform achieved another revenue record in the second quarter. In fact, based on our current visibility, we project our inspection business will grow by over 70% this year. And we continue to expand our capabilities. Last quarter, we released a new sensor to detect yield-critical subsurface defects in ultra-thin wafers, and based on market response, we already expect over 80 systems to be delivered with this capability through the end of next year. More recently, we announced the new 3D bump metrology sensor to address the need for bump height measurements of denser and smaller interconnects used in future high bandwidth memory and hybrid bonding applications where bump heights and pitch will be less than half the size they are today. Our new sensor uses proprietary technology, which we believe allows us to meet these new challenges at higher throughputs than alternatives. Though still preliminary, initial customer feedback has been positive, and we expect to ship several systems for production evaluations over the next three months. In addition to new wafer-level packaging technologies, we see growing interest in panel packaging technologies to support chiplet architectures and larger package sizes. We engaged early with leaders in this market, and to date we've shipped over 30 panel lithography systems to customers around the globe. In the quarter, we added a new customer to this list when we shipped our first fully automated JetStep X500 to support glass and substrate applications on a single tool. We believe the stability of glass will allow for smaller interconnects across larger package sizes, which is critical to many of our customers' packaging roadmaps. Finally, revenue from power customers grew significantly, nearly achieving a quarterly record set last year. We continue to expect demand for process control to remain strong throughout the rest of this year for the power semiconductor market. Now turning to advanced nodes, spending is picking up and we are seeing growth continuing through the second half of 2024 and into the next year. In the quarter, orders from logic customers represented nearly half of the revenue from advanced node customers. For gate all-around applications, we are seeing an increase in adoption of our Iris Films metrology in addition to our leading Atlas OCD metrology. Rounding out our optical metrology suite of Atlas, Iris, and Aspect is our integrated platform Impulse. In the second quarter, we closed volume agreements from two of the top four manufacturers, which we believe will represent greater than 60% combined share at these accounts. We've also successfully qualified multiple systems and logic for gate all-around applications below 2 nanometer, where requirements for speed and stability are increasing. Now I'll turn the call over to Mark to review our financial highlights and provide third quarter guidance.