Onto Innovation Inc.

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

Thank you, Rachel, and good afternoon, everyone. On2 Innovation issues its 2025 third 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 Mike Plisinski, Chief Executive Officer, and Brian Roberts, 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 onto innovation's results, I would encourage you to review our earnings release and our SEC filings. Onto Innovation does not undertake the obligation to update these forward-looking statements in light of new information or future events. 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. Let me now turn the call over to our CEO, Mike Plosinski. Mike?

Thank you, Sidney. Good afternoon, everyone, and thank you for joining us on our call today. Underpinning our financial results, which came in ahead of the midpoint of our guidance ranges, the Onto Innovation team made excellent progress with our strategic initiatives, including new product adoption, advancing our offshoring activities, and preparing for the close and successful integration of the Semilab transaction. We expect each of these efforts will enhance our leadership position in the exciting advanced packaging and advanced nodes markets and strengthen our outlook for growth in 2026. Market growth in 2026 is likely to include increased investments in advanced packaging to support the strong demand for AI compute. So we are very pleased to announce that our 3Di technology has successfully completed the full qualification process at not one but two high bandwidth memory customers in the quarter. Our 3Di technology demonstrated superior performance on smaller denser 3D interconnects, critical for next generation devices. Following these successful qualifications, we started discussions for volume orders with integrated 3Di and subsurface defect inspection to support next generation HBM devices. Another win for the 3DI in the quarter was an order from a leading OSAT to support 2.5D applications for AI packaging. To support advanced 2D inspection applications, the launch of our next generation Dragonfly system is progressing well with the first shipment expected in a few weeks, followed by additional systems in December. After last quarter's optical performance validation by a key customer, We have since completed successful in-house wafer studies for high bandwidth memory and hybrid bonding applications, leading to several more evaluation shipments to customers in the first quarter. In fact, the success of these demos has several customers adding the new Dragonfly to preliminary discussions on volume needs for 2026. Turning to advanced nodes, we remain on track to deliver a record year in advanced node revenue outside of China. Contributing to this performance is the growing adoption of our Iris films and integrated metrology platforms, both on track to set records for the year. Looking at the markets broadly, recent headlines continue to reflect strong and sustained demand for AI and high-performance compute. NVIDIA projects that global AI infrastructure investments could reach $3 trillion to $4 trillion by the end of the decade. potentially reshaping the semiconductor supply chain. At the core of this evolution are new memory and logic transistors and packaging architectures supporting chiplets for logic, 3D stacking for memory, and nascent co-package optics, all designed to increase device performance while lowering power consumption. OntoInnovation continues to play a pivotal role by working closely with our customers across this broad value chain. to develop and deliver the process control solutions required to support this AI era. In the immediate term, we expect revenue growth of approximately 18% at the midpoint of our Q4 guidance range. The greatest contributor to this growth is from 2.5D packaging customers, where we expect revenue to nearly double from the third quarter, driven by strong Dragonfly system demand. We expect advanced nodes revenue will also improve with increases in DRAM and logic spending. While discussions for capacity needs in 2026 are in early stages, our packaging customers are indicating the potential need for as much as 20% more tools to support expansions and new applications for our 2D, subsurface, and 3DI inspection technologies. While quarterly performance may show variation, we expect sequential growth in the first half of next year with more meaningful growth expected in the second half of 2026, driven by increased contributions from new products and potential capacity expansions. Supporting this growth is our aggressive ramp of our extended factories in Asia, and I am pleased to report in the third quarter, we successfully shipped over 30% of third quarter tools from these factories. Thanks to the incredible efforts of our operations team and supply chain partners, We are now on pace to be capable of shipping over 60% of our production demand from our international locations by the end of the first quarter of 2026. These efforts will enhance our competitive position, mitigate tariff impacts, provide greater manufacturing flexibility, and allow us to expand gross margins in 2026. Finally, a brief update on our pending acquisition of three complementary product lines from Semilabs. In October, in response to a second request letter from the Department of Justice, we amended the transaction to exclude a relatively small product line. We currently expect that the transaction will close in the coming weeks and be accretive to both revenue and earnings in 2026. And with that, let me turn the call to Brian to review our financial highlights and provide fourth quarter guidance. Brian? Thanks, Mike.