Onto Innovation Inc.

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

Thank you, Lisa, and good afternoon, everyone. On2 Innovation issued its 2025 fourth 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 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 Blasinski.

Mike? Thank you, Sidney. Good afternoon, everyone, and thank you for joining us on our call today. We ended 2025 on a high note with orders from 2.5D packaging for AI devices more than doubling in the quarter, contributing to a record revenue of $267 million. Financially, gross and operating margins both improved sequentially, and we set a record for cash generation of $95 million in the quarter. Overall, great momentum as we look ahead to the new year, where across the industry the surge in AI investments is projected to drive a powerful upcycle in the semiconductor capital equipment spending. For example, NVIDIA forecasts that global AI infrastructure will grow at a 40% CAGR over the next five years, while capital expenditures from hyperscalers are forecasted to exceed $600 billion in 2026. To meet this demand, industry leaders such as TSMC have signaled a multi-year expansion in CapEx, with 2026 spending increasing by more than 30%, mostly to support the addition of new factories. As a result, analysts project strong WFE growth in the range of 10% to 20% in 2026, with the pace hinging on how quickly new cleanroom space becomes available. Brought to innovation, these dynamics are incredibly positive. Recent discussions with customers are increasingly more constructive and include views into longer-term forecasts, with several extending into 2027. In fact, we were quite happy to announce a volume purchase agreement from one of our HBM customers covering Dragonfly 2D and 3D bump metrology demand through 2027. This agreement is valued at over $240 million, including over $60 million in systems for 3D bump metrology. This is an example of where our expanding portfolio of technology is putting us in a position to increase the value we deliver to our customers, serving this seemingly insatiable demand for AI. So let's continue with a deeper look into our advanced packaging business, which grew over 25% sequentially, driven by demand for dragonfly inspection and iris films metrology, and established to an FD application. For new and emerging applications, we're supporting four separate customer evaluations of our next generation inspection systems at the customer's facilities. While still early, preliminary feedback on system performance has been positive with customers acknowledging significant improvement in optical performance and higher throughput. The qualification efforts are in preparation to support our customers in 2.5D packaging and high bandwidth memory including next-generation hybrid bonding applications, where our current generation tools are already being adopted for process control and R&D. In addition to 2D inspection, 3D metrology is becoming more crucial as smaller, denser interconnects used in die stacking and fan-out packaging applications require more precision to ensure coplanarity across die and wafer. Our pipeline for 3DI metrology is expanding beyond HBM, and in the quarter, we received additional purchase orders from multiple advanced packaging customers, including an OEM requiring precise metrology for new panel-level process development. In fact, we see investment in panel-level packaging growing as enterprise server and AI device designers look for packaging solutions with greater economies of scale through large format panels. Our JetStep systems are well-positioned for the transition to panels, delivering the ability to print large packages without stitching at throughputs that customers need for reliable and repeatable high-volume applications. Customers are also adopting Firefly process control for applications in glass and panel fan-out, where yields can be improved by feeding process metrology into the stepper for shot-by-shot adjustments. As a proof point, we are proud to have been awarded orders for JetSTEP and eight Firefly systems in the quarter to support an exciting new large panel packaging facility. These orders represent the first of several potential phases of expansion to support planned demand. Finally, as large format heterogeneous packaging becomes more prevalent, concerns continue to increase about residual charge on dye causing yield issues when connected to another dye. The surface charge metrology technology acquired from Semilab is a powerful solution to this emerging challenge, and we were pleased to have received our first orders for this evolving market need. With this positive momentum across a broad range of our products in support of AI device fabrication, we estimate advanced packaging revenue to grow over 30% in 2026, resulting in a new revenue record for this market. Rounding out our specialty devices in advanced packaging markets, power semiconductor revenue was strong in the fourth quarter, but is expected to decline seasonally in the first quarter. For 2026, we expect power semirevenue to decline around 10% based on weakening demand for EVs and slowing infrastructure spending. Semilab will likely experience a similar decrease from our original planning as we work to pivot from opportunistic sales to longer-term market opportunities across our broader customer base. Now turning to advanced nodes, our revenue in 2025 more than doubled from a year ago. With less than 3% of revenue coming from China, this growth was driven by our strong position in OCD at leading global manufacturers in both logic and memory. Expanding on this position, our recently announced Atlas G6 is being adopted for new critical applications in both gate all around and HBM4 DRAM, which we expect will add to growth in 2026. Complementing our OCD technology, our films metrology and integrated metrology both achieved record revenue in 2025. Adding to this momentum in integrated metrology, we're expanding beyond the strong position in memory to now include two logic customers to support leading-edge processes expected to ramp in 2026. To summarize, with both advanced packaging and our advanced nodes businesses strengthening, revenue for the first quarter is now expected to be in the range of $275 million to $285 million. We expect demand to continue to increase in the second quarter with revenue exceeding $300 million. This represents a further acceleration in the core business for the first half of 2026 to 12% to 14% as compared to the second half of 2025. Our backlog has nearly doubled over the last three months to a new record level of approximately 2 quarters, adding support for this strong growth. We expect continued growth in the second half, and we are working closely with both customers and suppliers to manage tightening capacity and the gradual extension of lead times. With that, now let me turn the call to Brian to review our financial highlights and provide first quarter guidance.